AirAsia India, a joint venture between Tata Group and AirAsia BHD has managed to reduce its losses in the second quarter of calendar year 2016 (April to June) by 56% year-on-year to R20 crore from R46.8 crore on the back of additional capacity and increased frequency of flights from its two hubs in India. At present, AirAsia India is expanding its footprint in the tier 2 cities from its hubs in Delhi and Bangalore. As a result of expanding the capacity and network the airline’s revenues increased by 73% y-o-y to R1,889 crore during the quarter compared to R1,094 crore in the corresponding period last year. Amar Abrol, chief executive officer, AirAsia India, in a an interview with FE’s Malyaban Ghosh said that the airline would focus on profitable growth and expansion of market share. The low cost airline intends to increase its capacity to 20 aircraft by 2018. Excerpts:
How do you plan to expand the operations in the domestic market?
We have already started expanding as the seventh aircraft has already been added to the fleet. We have already started to connect Bengaluru with places like Guwahati with the help of the seventh aircraft. Also, we have started to connect Hyderabad with places like Kochi and Goa. The eighth aircraft is also expected soon. The intention is to get 20 aircraft by 2018. In line with that we are recruiting pilots, cabin crew and ground engineers.
What about funds that is required for the expansion?
The strategy for the next two and half years is to get 20 aircraft which has been cleared by the Air Asia investment board, AirAsia BHD and Tata Sons. Obviously we have enough funds available for the expansion. The investment that is required to induct the new planes and other expenses ( like marketing) that has to be incurred along with that has been made available to us. It is in multiples of millions of dollars, I can’t reveal the exact amount since there are some internal clearances that we are yet to receive. In another week or so we will get the exact amount and subsequently we will make a statement regarding that.
How did AirAsia India manage to significantly reduce the losses and increase the revenues in the second quarter?
The key for us was to rationalise the cost without compromising on the safety, security and other core aspects of business. As an organisation we try our best to keep the cost under control like the 25 minute turn around time which is the the best in the industry and have also significantly improved the On Time Performance (OTP). Since April our OTP has been at par with the best in the industry. In Bangalore we have been at the top position in terms of OTP. There are actions that have been taken by the management team on operating and other core aspects of the business. We have potentially the best CASK (cost per available seat kilometre) in the country. Revenues has increased as a consequence of our increased capacity and focus on the ancillary business. We have recently launched travel insurance with Reliance Insurance which is very different from the ones that are available in the market and has improved our red carpet offering. Also lounges have been started in a number of cities. So we have worked on a lot of things before the new aircraft is inducted. The ancillary business right now contributed to around 10% of the total revenues.
Will you continue to focus on the non-metro cities in the days to come?
It’s not a stated policy that we will never get to the metros. We are in Delhi, Hyderabad, Pune and will eventually get to Kolkata and Mumbai as well. It is quite a crowded market in Mumbai and Delhi and in that kind of a market I don’t know whether we would want to get in. We would want to get in when we can offer the right product at an appropriate price. From a longer time perspective there are 330 million population that can travel and out of that only 70 million travel by air. So there is enough latent demand in the market for respective operators to execute their strategy. For entering a market we have to see the competitive activity, demand for our product and whether it is economically viable or not.
Are the yields under pressure due to increasing cost and lower ticket prices?
Across the market there is a pressure on the yields as a consequence of higher capacity being added and other airlines reducing prices of the tickets. Industry as a whole I think could do well with better pricing. Every company would take a call on this based on their on an off flight economics. As far I am concerned I think prices should increase from where they are right now.