AirAsia India would require 56-57 per cent load factor to break even in India, the Group’s Chief Executive, Tony Fernandes, said on Monday. “Once we have seven to eight aircrafts operational in India, we will reach a stable cost structure and, at that level, 57 per cent occupancy will help us break even,” he said.
In line with its aggressive expansion strategy, AirAsia India plans to start operations with three aircrafts and add 10 every year.
Following a strict cost structure across its network in India, the airline will focus on unconventional routes in the South.
Giving an example, Fernandes said there was a lot of scepticism when Air Asia started its services from Tiruchi to Kuala Lumpur. “Now we have launched three daily flights in the same sector. We are also starting a daily service from Madurai (100 km away from Tiruchi) to KL,” he pointed out. “We want to focus on the South and then slowly grow to the other parts of India. Our game plan is simple. We will have the lowest fares and a low cost structure. If we can’t get the right cost structure, we can’t be successful,” said Fernandes, adding that the fares of AirAsia keep going down because of growth in volumes.
Stating that the feedback from low-cost airports in India was positive, Fernandes said the Delhi and Mumbai sectors were not in the priority list. Responding to queries on competition from other low-cost carriers like IndiGo, he said: “We own our planes and owning aircraft is cheaper than leasing. They (IndiGo) are a good airline but this is not a zero sum game.”
Fernandes and the Group’s Deputy CEO, Kamarudin Meranun, are in India to meet government officials and interact with their India team and stakeholders.
Conceding candidly that other competitors wouldn’t want it to succeed, Fernandes said: “We are not here to take anybody’s market share. We are here to grow and stimulate the market.”
Speaking about ancillary revenues, Fernandes said unbundling of fares was the right way to go ahead. Like other airlines in India, AirAsia India would allow 15 kg of free luggage on domestic routes.
To encourage Web sales
He said AirAsia would match its sales strategy in India as per the market requirements and would push to encourage Web sales. In India, nearly 80 per cent of bookings are done through travel agents. However, most of AirAsia’s bookings take place on its Web site. “We keep receiving requests from other online travel portals like MakeMyTrip but we have a special partnership with Expedia,”' he said without divulging more details.
AirAsia India has hired 50 people in India.
“We already have 10 pilots and 16 cabin crew members for the India operations,” Fernandes said.
He said that most of the second rung for the airline in India had been hired and denied the hiring of pilots from IndiGo.
AirAsia India, a joint venture between the Malaysia-based low-cost airline, India’s Tata Group and investment firm Telestra Tradeplace, is expected to launch operations in the country by the end of 2013 with an initial investment of Rs 80 crore.
Answering a question about Ratan Tata’s role in the joint venture, Fernandes said he would be meeting him later in the day. “After the meeting we will have more clarity on that,” he said.