In 2013, Tony Fernandes, the Group CEO of budget carrier AirAsia, had pulled a rabbit out of the many hats he wears when he announced the launch of his no-frills airline in India with Tata Sons, at the Taj Mahal Palace—a contrast to the kind of airline he runs. But his euphoria of setting up AirAsia in India was short-lived as the Tatas, soon after, went ahead and announced the launch of the full-service carrier Vistara—a joint venture with Singapore Airlines, which, the industry opined, was a much better fit. Since its launch, AirAsia India has seen more downs than ups. The churn of its top management, rumours of tiff with the Tatas, and its struggle to make its presence felt in the Indian aviation market all made a dent. With a profitable third quarter that ended December 2017 and plans to launch international operations next year, has AirAsia India come out of the shadows? Amar Abrol, CEO of AirAsia India, says that the airline will open South East Asia for the Indian traveller like never before. In an interview with FE’s Manisha Singhal, he adds that AirAsia India’s strategy is to become a 60-aircraft airline within five years, and add at least 8-10 aircraft every year. Excerpts:
How has the strategy to connect tier-2 and tier-3 cities worked for you?
It’s part of the plan, a deliberate strategy and a perspective that is fixated on the Airbus A320 fleet type. We made a conscious choice to focus on connectivity to these cities and not to add more flights to the already well-served metro airports. We would rather go to areas where there is pent-up demand. We recently launched the Bhubaneswar to Ranchi flight—a 45 minutes of flying time, but a virgin route. We will continue to focus on intercity connectivity, stimulating demand in under-served regions. But we will not do UDAN-type of flights. Our focus is a single aircraft type fleet; we will not do mixed fleet with smaller aircraft.
What are your expansion plans for FY18 and FY19?
We will add more depth than width. We have 17 cities that we fly to currently, and by the end of March we will add four more cities. Our 17th aircraft will join the fleet next week, and by the end of this year we will be a 20-aircraft fleet airline that allows us to fly international. We will launch international operations from January 2019 onwards.
What are the major international routes you are looking to fly to? Any newer markets that will be opened up as your USP…
We will open South East Asia for the Indian traveller like never before. Phase-1 of our international operations is all about South East Asia. Choices for us in that region, for any destination within a flying time of 4-4.5 hours, are unlimited. We will look to fly to destinations other than Bangkok, such as Vietnam, Cambodia, Phuket and Langkawi. Currently, you need a three-hop flight to reach Angkor Vat, but we will offer direct connectivity to Indians and make them fly to these destinations where other airlines are not taking them directly. There is so much more we can do—we would offer direct flights from Kolkata to China and that would open up that market further for Indians. My USP is that my aircraft are not sitting in Delhi (both IndiGo and SpiceJet hubs are in Delhi), they are in Kolkata from where I can offer flights to all these destinations. We are very confident that once we connect Indians to these markets and open up India for South East Asia, there will be enough traffic from both sides as per our past experiences.
With such aggressive international expansion plans, but limited aircraft, how will you balance your international and domestic operations?
Our strategy is to become a 60-aircraft airline within five years, and add at least 8-10 aircraft every year, and hence deploy more capacity. Demand is huge in India. There are 350 million people who can afford to fly, but of these only 80 million are flying and that too mostly between the metros. Nearly 25% of our passengers are first-time fliers and there people fighting with us from cities like Amritsar to start operations. Domestic market is very important for us as it has a huge potential. But as we see it, both national and international destinations offer a significant opportunity for AirAsia to fly to.
The market viewed you as a non-starter airline and people feared, within AirAsia India, that you might end up being a fringe player…
We are not going to be a 4-5% market share airline. Our aircraft utilisation is 14 hours; we manage our costs much better than some competitors, and nobody is sitting still here. We are quite ambitious; we doubled our fleet and we continue to expand. We plan to become India’s second-largest low-cost carrier (LCC) within four to five years’ time. And we do not want to eat into anybody else’s pie. The pie itself is quite large in India.
What are the challenges you see to this aspiration?
For us, the challenge is not the fluctuating or volatile fuel prices—that is the same for everybody in the industry. Our challenge is to stay focused. We work hard to keep costs under control. Our cost per available seat kilometre is similar to that of IndiGo (the market leader). We have to constantly keep our eye on the ball and also keep everybody on a single track. We are growing so fast; we have 2,300 employees now, and to keep everybody aligned to AirAsia’s values and to offer low fares is tough. Low fares is all about keeping costs low. And that is our commitment to our passengers. But we do not compromise on quality, as you can see we are the only LCC that offers leather seats, food from Taj and also still serve non-vegetarian food where competition has withdrawn.
It was believed at one point in time that partnership with the Tatas is opposed to your DNA and it pulled you down from expanding fast and taking a quick decision. Will there be a rethink on this partnership?
First, I do not decide the joint venture partner. It is decided by Tony (Fernandes). And Tony has said that if the law of the land permits AirAsia to increase stake in AirAsia India, he is open to it. But for us there can be no better partner than the Tatas. You do need a stable, elderly parent, and that is the Tatas for us. We might be nimble and fast, but if you look closely, the Tata values and AirAsia values are a 90% match.