‘How can a low-cost airline not work?’

From music to aviation, from being in red to back in black, Tony Fernandes, group CEO, Air Asia, has done it all. He made air travel seem less impossible by offering fares as low as Re 1, being true to his mantra — “Now everyone can travel”. Conventions are not for this man and he has been proving this since 2001. While everyone flew to the metros, Fernandes started off with Tiruchirapalli and that’s what made all the difference in Air Asia’s India story. Fernandes is now expanding Air Asia’s reach in India. He talks to DNA about what the Indian aviation industry hasn’t quite figured out and what it takes to be in the business of losses and still make money. Excerpts:

What is the one thing the Indian aviation industry needs to learn from you?
I would say just stick with it. Don’t give up quickly. All I have heard in India is that the low-cost business cannot work here. People keep asking me how will you make it work, as India’s low-cost business is very different. There are a billion people here and most of them use trains everyday, so

How can a low-cost business not work here?
One major thing that has been wrong is that they all focused on metros and we went to Trichy first. People thought I must be completely nuts, but that totally worked. There are tonnes of routes in India that have never been done, tonnes of airports that are under-utilised. Paramount is one impressive airline, wrong aircraft I think, but right model. And then there are the flamboyant ones, who say that they will change the world. The difference is that they are not involved in running the business day-to-day. This business requires focussed attention and you got to manage it.

Is that the reason why you are part of your crew at times?
Yes. I cannot sit in my office and not get down to the floor. I know exactly what is going on with the people who carry our bags, and what are the issues with our cabin crew. I talk to passengers personally when I am around. The attention to detail in this business is immense. It’s a hard business. The hardest thing is the politics of the business, because you are competing against national carriers and for some unknown reason, they are untouchable, which is beyond me. They are given a demi-god status, and they should be anything but, because they are generally useless. So the road to take is the one less travelled, thinking unconventional. And none of the Indian carriers do that. They are hardly low-cost carriers.

What is a low-cost carrier then?
Re 1 fares. And we do it constantly — the average fare is substantially lower. I don’t think, in my experience, I’ve heard anyone say that we are going to Mumbai for the weekend, but we succeeded in doing that and that is success. That is a paradigm shift, when someone working in Malaysia and has a home in India can say that I can go home for the weekend.

The five-and-a-half hour journey. We have changed the way it’s done already and that’s what I call a low-cost carrier. I don’t think any of the Indian carriers have transformed travel or got people who travelled by train to fly. They are just going after the market that is getting richer and the market is growing and they are competing against each other. But the paradigm shift comes when you get people, who never thought of flying to fly, because the pricing is right. That is a low-cost carrier.

But Captain Gopinath was trying to do exactly that.
Yes, he was a smart guy, maybe too smart in some ways. He was a bit stubborn, and over-expanded. I told him two types of aircraft
were a disaster — turboprops and then he went for the Airbus recipe from hell. But he used the turboprops the right way — developing secondary routes, but the problem with Indian carriers is that they want to go to Mumbai, Delhi (metros), which is a disaster.

On your long haul flights (Air Asia X) you have a business class. What sort of tweaking did you have to do?
No, we call it paying for better seats — not business class, really. Just like you pay for food, extra legroom, you pay to lie down. There were no tweaks. Air Asia X is like Air Asia on steroids,  legal steroids. So that’s the key and it requires a lot of discipline to not change the model. We screwed up, we put up 386 seats and were one toilet short, so we went back to 377 seats. But similar aircraft operating on Jet and Kingfisher have about 250 seats — big difference.

Do you think India needs to open its skies more and make more bilaterals available?
Without a doubt... having less air links will cost a country more. It will impact the tourism business and businesses out of metros.
Air connectivity is the most important thing to augment economic development.

The cost per unit for Indian carriers is high, as they pay pilots higher salaries and fleet utilisation is low. How do you manage to keep your cost per unit low?
Ask Indian Airlines, who has an academy. One of the first things I did when I started Air Asia is put all the money that we made in building our own academy. From there we churn out pilots at our
cost level and culture. And you don’t have to import them, whereas India has always had to buy their pilots and they aren’t trained. For
a country of billions, the pilots per million is very small. Most airlines don’t have a training academy. And also our fleet utilisation is very high at 13 hours.

Consistently low fares and yet profitable, what’s the secret?
You just need to maximise your revenue. When your plane takes off and a seat is empty, that revenue is gone forever. It’s a volume game, we need to drive it up, be meticulous on cost and have a very strong and focused management. In this business, if you take your eyes off the business, you are gone. And sometimes your competitors wake you up and motivate you. Tiger Air has done me tonnes of favours by running me down in the press, which has given me the energy to drive them and make them a pussycat.