Undeterred by expensive fuel and limited infrastructure, AirAsia Group CEO Tony Fernandes believes that the airline’s effective cost management strategy will allow AirAsia India to succeed, even if “the rest of the Indian aviation industry has so far failed to deliver”.
According to Mr. Fernandes, the airline’s Indian venture will start “more aggressively than any of the company’s previous ventures”, with operations starting hopefully before the end of this year. “We want to stimulate the market while charging as low as we can go, even if that means initially avoiding pricier airports like Mumbai and Delhi. We need less fat everywhere, we will charge for extra baggage, and not go in for decisions like code share agreements which just add to the fat,” he said, while addressing reporters here on Saturday.
The government in April cleared AirAsia’s proposal to invest Rs.80.98 crore in a domestic passenger airline that it plans to launch jointly with Tata Sons. Mr. Fernandes is here in India to meet key Union ministers to discuss AirAsia India’s clearance progress, which is at the no objection certificate stage, while “educating them on our business model.”
“If people say the market is shrinking, that’s because other players aren’t doing it right. Being low cost is in our DNA… other Indian players gave up too quickly. The key for us is in our discipline and focus. India still hasn’t seen a true low-cost carrier, even Deccan got the cost management wrong,” he added.
AirAsia India will initially start its operations with three aircraft, all Airbus, and plans on adding one plane every month. A large part of the airline’s strategy in India, according to Mr. Fernandes, will rest on the ability of the Indian market to adapt to AirAsia’s low-cost ways.
“Yes, the issues surrounding ATF will be a burden. But we will manage . When we started in Malaysia, there were no low cost terminals. That will develop here as people begin to think in this low-cost way,” he said.
Dismissing suggestions that the project was delayed by the government, he asserted that AirAsia India’s entry came at “the perfect time.”
“The government support system here is great. Even the Tatas could not believe we got the Foreign Investment Promotion Board clearance so fast!” he pointed out.
Fielding a range of queries, Mr. Fernandes pointed out that the ability to leverage upon the Tatas for distribution and insurance was the “cream of the strategy”. “ The Tatas are not the sole reason we chose India. But it is certainly helpful; our people are talking to each about insurance for instance,” he said.