Power of Suppliers
Another force is power of suppliers. Power of the suppliers is important as it will affect the industry. In airline industry, the power of suppliers is quite high since there are only two major suppliers which are Airbus and Boeing hence there are not many choices to airline industry. Nevertheless, the global economic crisis has limited the new entrant and also reducing the upgrade of planes in the immediate future. However, both suppliers provide almost same standard aircraft and hence the switching to Air Asia is low.The supplier of airline companies is the fuel supplier, food supplier, merchandise supplier and aircraft supplier.
Other supplier like foods supplier and fuel supplier, the term of the supply must be based on the market condition. Hence, the supplier cannot increase too much of its price or risk losing long term business with the aircraft companies. Besides that, Airasia has high switching costs. Most of Airasia’s aircraft are Airbus models. Previously, the company used Boeing models, which they lease it and the company had since phased out most of the models and replace with Airbus.If Airasia is to switch to Boeing again, then the cost will be high. This is because training cost for employees to suit the aircraft features must be provided.
Furthermore, the technology used by Airbus is the most advanced, thus Airasia must rely to the Airbus’ engineers to do maintenance of the aircrafts and seek advices. if the Airbus does not to cooperate with Air Asia, Air Asia will not have no suppliers to do the maintenance. nThus, bargaining power of suppliers is strong.