Getting the cost structure right will be the key to success of operating a low-cost airline in India, says Tony Fernandes, CEO, AirAsia, which is all set to launch a low-cost airline in association with the Tata Group this year.
“I cannot be clear on the launch. We are waiting for the No Objection Certificate and Air Operator Certificate, but things looks promising and moving in the right direction. Our hope is to start this year,” he told newspersons.
“It is a perfect time to enter India because no one has done it (a low-cost airline offering) right. Wait and see for two years,” he said, asked about the entry into India when domestic travel is shrinking.
“Our model is straight forward. We will charge as low as we can. If you want to add on things like bags, you will have to pay for it,” he said.
Fundamentally, theirs (other operators’) are not true low-cost airlines, he said. “I said that for a long time. The closest was Air Deccan, which had the right fare but wrong cost structure. So, it was unsustainable,” he said. Running a low-cost airline is a tough and hard business.
“People in India who started the low-cost airline looked at me, wearing a T-shirt and hat, said that if that guy can do it, we can do it. But it is hard and the key failure in the Indian aviation industry is cost management,” he said.
The project is not delayed but moving pretty fast.
Even the Tatas could not believe that the Foreign Investment Promotion Board clearance came so fast, he explained.
“The hardest thing is to convince you guys (the media). You are the most sceptical people,” he said.
Fernandes said the airline will start with three Airbus aircraft and add an aircraft every month. “I don’t know how many aircraft I will add,” he said.
The low-cost airline, however, will not operate in airports where charges are high.
“We do not have to go to all the airports. In some airports like Delhi and Mumbai, it is like going to a Taj Hotel, which the Tatas like while I like going to a budget hotel. GVK has got an expensive airport, and we won’t go there. It is too expensive for any market,” he said.
The airline will focus on South India, which will be the gateway for people who want to visit South-East Asia and Australia.
Most people in South-East Asia have deep links with South India and the airline would like to leverage this, he said.