Why there’s more to AirAsia India’s leadership decision than meets the eye

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Mumbai | Published: May 5, 2018 3:26:54 AM

The resignation of Amar Abrol, MD & CEO of AirAsia India, comes at a crucial time for the young airline.

AirAsia India, air asia, aviation sector, aviation industryAirAsia is still struggling to get a stable leadership in place, given the conflicting management styles of the Tatas and Air Asia group’s Tony Fernandes.

The resignation of Amar Abrol, MD & CEO of AirAsia India (AAI), comes at a crucial time for the young airline.

Unlike its sibling, Tata Group and Singapore Airlines-promoted Air Vistatra, AirAsia is still struggling to get a stable leadership in place, given the conflicting management styles of the Tatas and Air Asia group’s Tony Fernandes, said sources in the airlines industry.
The first two CEOs of the airline were seen as Tony’s men, and the fact that the airline has not made any remarkable headway may see the Tata Group weigh in.

Presently, the operations are largely overseen by the Air Asia team, while finance and related functions are the domain of the Indian conglomerate. Therefore while the CEO is appointed by Tony, the airline’s CFO is hand-picked by the Tata Group. This may be one of the reasons for Abrol’s exit given his aggressive style of leadership and wanting to make fast-paced changes, which conflicted with the Tata’s style of management.

Besides, Tatas do want a say on the routes the airline flies, something that curbs operational flexibility of the Malaysian partner. Air Asia is known to disrupt the market by exploiting less flown or virgin routes, which it has not been able to do in India.
“Tatas want accountability of the revenues – how much comes to the joint venture and how much needs to be transferred to Air Asia in Malaysia, which was redistributing the traffic capacity back to India. Also the effectiveness of yields was closely monitored,” said Mark D Martin, founder of Dubai-based aviation advisory Martin Consulting.

The fact that till very recently Air Asia India sold 60-70% of its inventory at very low fares, just going into the month, did not help the bottomline much. However, with some changes to this pricing strategy, the airline posted its first profitable quarter since its inception in December FY18, with a modest profit of Rs13 crore.

“For AirAsia, which is used to passive financial relationships as it is funded by banks or financial institutions, managing an active financial relationship like Tatas is tough. Both the partners need to evolve a kind of co-existive environment,” Martin added.

Abrol’s exit comes at a time when the operations at the airline are just about achieving a semblance of stability. What’s more, the airline is struggling with staffing issues as important heads, be it commercial, marketing or ground operations, have either moved on or relocated.

For the new CEO, this can go two ways: one, it can be a great opportunity to build a new team, or it will lead to a struggle in managing operations without a second line in place. The fear is that the second scenario may create a temporary vacuum as it did when the airline’s first MD & CEO Mittu Chandaliya exited in 2016. It took nearly a year for Abrol to get into full swing. But then, the sector was new to him too. It remains to be seen if Air Asia will pick an airline professional this time round. Vistara did not have any of these issues as it has been run by airline veterans since its inception.

Aviation analysts say that FY19 will be a very crucial year for AAI where either it takes off or it just loses its grip on the market. “So far, there has been a significant downward bias as far as AAI’s performance is concerned and some estimates suggest that the losses might be a staggering `400 crore but this might not be just an issue of performance of the top leadership but also an issue of who is in control of the airline and who is actually running it,” said an aviation analyst not wanting to be identified.

Also the aviation environment has once again become very rough with fuel costs rising to over $70 a barrel and pricing volatility returning in ticketing. “Managing this environment of external risks and external challenges along with managing expectations of the stake holders is not an easy task for a new person,” said an aviation analyst.

Aviation professionals who have been watching AAI say that the challenge before AAI is to get the product as well as the pricing perception right along with the leadership. “It is very simple. If you see successful airlines in India, be it Jet Airways or IndiGo or Vistara, they are run by aviation professionals. AAI needs to get that right. There is no point of getting digital guys (as some media reports for the next CEO for AAI) when your passengers are not digital,” said an airline professional.

By Manisha Singhal

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