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India's aviation policies are still very constricted, says Benyamin Ismail of AirAsia X

CEO of the long-haul arm of budget carrier AirAsia Berhad, tells Praveena Sharma he has done enough homework for a long stay in India this time round, and that his sight would be fixed on profits and yields.

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CEO of the long-haul arm of budget carrier AirAsia Berhad, tells Praveena Sharma he has done enough homework for a long stay in India this time round, and that his sight would be fixed on profits and yields.
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In its earlier stint, Malaysia's AirAsia X had to abort its Indian operations mid-path due to viability issues. CEO of the long-haul arm of budget carrier AirAsia Berhad, tells Praveena Sharma he has done enough homework for a long stay in India this time round, and that his sight would be fixed on profits and yields.

Q. What's prompted you to re-enter India?
A. It's a great time to come back. Fuel prices are at their lowest levels. Indian (air travel) market is growing very fast and the GDP growth rate is 7-8%. Travelling has become a part of the disposable income of people here. Even if we tap 1% of India's population, it is quite a lot. Infrastructure is also a key. We have resources here in terms of manpower and staff because of AirAsia being here. We've already established a team to support the short-haul business, which Malaysia does into south India. The business case was clear. They are ready to support us and we returned. Our first flight was a success with 92% load factor and the return flight last night (February 3) was 88%. That's good, and the yield was also good. In the past, the yield was not good. We would fill up the planes, but it was at a highly discounted price. Now with the market up, yields are also up. Today, people are willing to pay those yields.

Q. One of the reasons cited by AirAsia X for closing operations in India was the high airport charges. Do today's lower fuel prices offset them?
A. Yes, something like this. But in life, you've got to accept whatever you can. The good thing about airports is, now, they are becoming more creative. What they do is that because they can't reduce airport charges, they provide market support to us. Say, we want to promote Delhi route, then we put in 50% and they put in 50%. They do things like that rather than reducing levies because if they reduce charges for me (AirAsia X), they will have to reduce them for everybody. So, that is not the right way to do it.

Q. What else has eased this time?
A. One of the challenges, before, was distribution. We didn't have a strong distribution for selling our tickets. Now, we do. India is massive. In India, we have online airline ticket portals but, of course, there are still your other areas where they are very reliant on agents. That is something we have now. In the past, we didn't. So, we work with all travel boutiques like the yatra.com, makemytrip.com and others. We work together and offer deals to the market, we didn't do that before. We are working with everybody but at the right price. At the end of the day, we are just a low-cost carrier. We are not full service airlines where we give high subsidies (commission) to them. For us, it is a relationship (with travel agents). It is a partnership. We try to see what is the right thing and work on that.

Q. How will you be impacted by the 5/20 rule? If it goes, how will things change for you? Will there be any sort of cannibalisation due to AirAsia India flying overseas?
A. They (AirAsia India) would start (overseas flights) but they will fly only on less-than-four-hour routes. For us, the way our brand works is; we have so many associates – Thailand, Indonesia, Philippines and others – they fly within four hours and we (AirAsia X) fly anything above four hours. Generally, that is the understanding. We make sure there is no cannibalisation. If AirAsia India starts operating short-haul international flights, it will help us as they would bring market to AirAsia X.

Q. Most foreign carriers have been complaining about shortfall of bilateral rights. How are you dealing with it?
A. It's a battle we have to fight. At the moment, all the bilateral rights are filled up. Delhi is the only capacity we have. Based on the (available) capacity, we can fly only four times a week. My wish list is we fly more than that. For Mumbai also, all bilaterals have been used up. It's a government-to-government thing. We leave it to them to negotiate.

Q. What are the signals that you are getting from the government?
A. We don't know. It's a very tough thing. The only way that I (AirAsia) could get them (bilaterals) is if an airline pulls out and the bilaterals come into the market. Then, I can apply for it. That's the only way. India needs to open up. That's what we need to come in.

Q. But India has been very liberal when it comes to its policy for the overseas players?
A. In the aviation sector, it (Indian policies) is still very constricted. A lot of it is still very government-driven. Fuel and airport taxes are very high. If you want to drive passenger traffic from train to aircraft, you need to lower your taxes. Then, it'll become more affordable for people to fly by planes. In India, we see it as a volume game. We can get massive volumes on planes in India. At the moment, you don't get that because it's still very expensive to travel within India. What I am saying is lower taxes will work (wonders) within India and across the border.

Q. What is the jet fuel tax rate that you pay in India?
A. We don't know. We pay a flat rate in India which is fairly high. Something we absorb and pass to the passengers.

Q. What is your strategy for India this time?
A. For India, we will make sure we become profitable. That's most important for me.

Q. AirAsia India, which has been around for over a year now, has not been able to make profit as yet...
A. For me, the focus is to make sure that the Delhi-Kuala Lumpur route works and makes some money. Looking at the first few months, we are looking good in terms of the loads and yields. Let's see whether we can focus on that and make that work.

Q. Are you here for a long haul this time?
A. I hope so. We have done our homework. I promised the whole world that I'll stay (in India) for a while. I will look stupid, if I don't.

Q. What could go wrong?
A. What could go wrong? Oh my God! I can't predict. It could be what the government decides tomorrow; they might decide to increase airport tax or increase this and increase that. Then, of course, the cost of travelling (by air) will increase, which may discourage passengers from flying. Increase in jet fuel prices could also add to the prices but the good thing about it is that it just doesn't impact me. It impacts other airlines too. So, it's something that we will have to battle together.

Q. What is India's potential for you?
A. The potential is great. People recognise that we are not selling point-to-point destinations. We are not selling a Kuala Lumpur (KL) dream, we are selling a network to Indians. We have a base in KL, from which another 100 routes are linked. Our work doesn't start in India, it starts in other markets too. What we do is, we are promoting Delhi from Sydney in Australia, where we know 10% of the Indian population is residing. That's our game-plan for India – to make sure that people fly with us via KL to Delhi.

Q. How will the Indian operation affect AirAsia X's finances?
A. We haven't been profitable for some time. The good thing is we are reducing our losses…

Q. Will India help you further cut losses?
A. India will help us, I agree. That's why we have to make sure that we are smart in the routes we pick. There's no point picking a green route where you know it is going to be tough to operate. But I was quite confident that India will be a success for us. So, yes, it (India) will add to our bottomline. At the moment, revenues from India is small as it's a small proportion of the whole network of AirAsia X. But it'll be big. We just have to make sure that we grow the yields, grow the fares and then you get more coming in.

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