Malaysian carrier to start from the south, replicate ancillary revenue model here.
AirAsia, the Malaysian low-cost carrier, is ready to take the fight to the local carriers, offering aggressive air fares and replicating its ancillary revenue model in India.
“We will be the most aggressive we have ever been in any market, including Malaysia,” Tony Fernandes, CEO, AirAsia, said on Monday.
The company expects to start operations later this year.
Frenandes said AirAsia is looking to add 10 planes a year and will leverage the untapped markets rather than target metros like Mumbai and Delhi. It will initially focus on the southern market and gradually expand to other parts.
“We were told that 50% of market in India is concentrated in metros like Mumbai and Delhi. We will try and change that,” said Fernandes. “The airport taxes at some of the airports are crazy. We will start looking at markets that are under-served.”
The carrier also intends to replicate its Malaysian model for ancillary revenues.
“Unbundling is the right way to go. We want to give the lowest fares and there are lots of options that people may not want. So you have option of eating, getting more bags and having a better seat. So, at least we are giving a common man a chance to fly low-cost, without having to pay for additional services,” said Fernandes.
Despite the regulatory hurdles and increasing competition in the domestic airline industry, Fernandes is confident of giving a tough fight to existing operators.
“Of course, we are burdened by the fact that the Indian aviation industry has failed to deliver to the mass public the products that they can really use. But we can do it. There are a lot of ifs and buts. The opportunity is 1.2 billion population, which is twice the size of the Asean region. I think this is the right time for us to start now,” said Fernandes.
“There will be challenges, but honestly, we are focused on opportunities. I am not concerned about any external issues, I am concerned about cost management,” said Mittu Chandilya, the airline’s recently appointed CEO for India.
AirAsia already has a headcount of 50 employees and is looking to double the number by the end of this year.
“We own our aircraft and IndiGo lease most of the aircraft, so their cost of operations is much higher, as owning is a lot cheaper than renting. We are not here to take anyone’s market share. That’s not our style. We will stimulate market, create new ways of flying,” said Fernandes.
The airline expects to break even at a 57-58% occupancy once the cost structures are stable.
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