Competition tough in most tier II routes
Malaysian budget-carrier AirAsia, which said it will operate in tier II and tier III cities of India from Chennai, maybe forced to look at new routes as existing tier II routes from Tamil Nadu’s capital already has stiff competition.
However, among the top 20 tier II airports in India, seven have no connection to Chennai and they together handle 11.48 million passengers or 17% of India’s total air passengers.
?Though the competition is fierce in India, the country’s consumer base of more than 1.2 billion is largely untapped for AirAsia presenting significant growth potential,? said Sagar Shahane, consultant, Asia-Pacific aerospace & defence practice, Frost & Sullivan. ?With a young population and the expansion of its vibrant middle class, India is expected to achieve some of the fastest growth of any aviation market over the next 20 years.?
?AirAsia wants to be there to take advantage of this growth,? he added.
While flying to tier II cities, AirAsia would have to keep in mind the cities that have airports to handle Airbus A320 airports. Destinations such as Jaipur and Srinagar are popular tourist destinations, which are not connected to Chennai. The two cities have airports capable of handling A320s and combined handled 3.45 million passengers in 2012.
?Its strategy can possibly be to open up routes to tourist hot spots,? said Shahane. Commercial centres of Bhubaneshwar, Orissa’s capital and Nagpur in Maharashtra are also unserved from Chennai, even though they can handle A320s.
Chennai is the only city not to directly connect Bhubaneshwar. ?Kolkata has 35 weekly flights, Delhi 34, Mumbai 21, Hyderabad 14 and Bengaluru 7 to Bhubaneshwar and are predominantly connected with multiple daily flights,? said a Mumbai-based aviation analyst at a foreign brokerage firm. ?On that basis, the Chennai-Bhubaneshwar potential route may even justify a double daily operation.?
Apart from completely new routes, experts say AirAsia would also need to fly on existing tier II routes originating from Chennai to serve as feeder for its international operations.
?Destinations like Kochi, Coimbatore, Trivandrum and Vishakhapatnam which are close to Chennai, will have to be targetted by AirAsia India for feeding AirAsia’s international network,? said the analyst quoted above. ?The flipside is that they would have to compete with the existing players on all those routes.
Kochi, Coimbatore, Trivandrum and Vishakhapatnam all are connected to Chennai by Jet Airways, SpiceJet, IndiGo and Air India with at least a daily flight. “The competition will not mind playing a price war, but AirAsia would do well to stay away from giving out bare bone price tickets to gain market share ? a strategy that saw Air Deccan running into heavy losses and being bought over by Kingfisher,? said Shahane. ?Instead, AirAsia can leverage its expertise in running airline operations to keep out of price wars and strengthen its distribution network by signing up more trade partners across India.?