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AirAsia may avoid flying on the Mumbai-Delhi route and focus on smaller cities and the southern metros in a unique strategy to keep costs low and capture a larger slice of the fast-growing flying population in the rest of the country.
The Tony Fernandes-run budget carrier, which rattled the aviation ministry and some of the country's established carriers by announcing an airline venture with the Tata Group last month, will focus on Chennai, Hyderabad, Bangalore and northern cities like Jaipur, Ahmedabad, top airline officials have said.
The decision is surprising as Mumbai and Delhi are the most lucrative flying routes with all domestic airlines having a presence. But flying to these airports is also expensive as landing and other charges are at least 25% higher than other airports. The cities also don't have low-cost airports. "We are going after a pan-India licence and not a regional one," Suresh Nair, AirAsia regional manager — India, Sri Lanka and Bangladesh, said, explaining the group strategy.
"Avoiding Delhi and Mumbai doesn't make us a regional carrier because India is much beyond that. If we fly, say, Chennai-Ahmedabad or Chennai-Jaipur, that would mean national operations. We would fly wherever we can to keep cost of operations low," he added.
The move is in sync with AirAsia's disruptive strategy and its desire to grab a bigger market share of passenger traffic outside the two big cities. A section of the travel fraternity still thinks that AirAsia would be able to offer competitive fares not only by adopting certain practices unique to them and but also those not yet tried in India.
Having a domestic network helps cope with expensive airports but the costs involved in operating from Delhi and Mumbai will still be quite high for a budget carrier. Keyur Joshi, COO of Nasdaq-listed travel portal makemytrip.com expects the company to avoid some of the major cities, not just Delhi and Mumbai. "I expect them to avoid Delhi, Mumbai, Bangalore and Hyderabad to keep costs low. Indian airlines have not been able to negotiate with airport operators to resolve that. AirAsia may also prefer to add more frequencies on a route rather than going after many routes, something not yet tried in India," he added.
In a conference call with reporters on February 21, Tony Fernandes said the airline will avoid Delhi and Mumbai. "We will avoid certain airports like Delhi and Mumbai because of high charges and also because these airports are slot constrained. We will stimulate the market first with low-cost structure and later as the airports are being developed, we would also look at these newer markets. India is a huge country and we are confident that we will succeed," Fernandes had said.
It is not yet clear whether AirAsia will completely avoid these two cities, as in not ferry passengers from other destinations to the two top metros. Nair said the routes have not been finalised and can't yet make a comment. While AirAsia is entering the domestic market for the first time, it has been flying between several Indian cities and south-east Asian countries.
The experience so far has not been very good. The airline plans to pull out of flying between Delhi and Bangkok and rival IndiGo has responded aggressively by doubling services on the same route. High airport charges forced it to withdraw services between Kuala Lumpur and Hyderabad in 2010 while its long-haul arm AirAsia X pulled out of Delhi and Mumbai in January last year for the same reason.
"We don't know why airlines don't come together on these issues. Every rupee makes a difference. We also know that costs of a couple of airlines are very low but they are not offering that price to customers," Nair said.
AirAsia may also offer fares as low as Rs 1,000 to lure passengers when it begins operations in India though a successful replication of its South-east Asian model may be difficult due to the country's high-cost structure. The Malaysian budget airline will start fares at Rs 999 for flyers wanting to book months in advance and hopes to make early booking a regular habit.
AirAsia to offer fares as low as Rs 1,000; may skip Mumbai-Delhi route - The Economic Times
The Tony Fernandes-run budget carrier, which rattled the aviation ministry and some of the country's established carriers by announcing an airline venture with the Tata Group last month, will focus on Chennai, Hyderabad, Bangalore and northern cities like Jaipur, Ahmedabad, top airline officials have said.
The decision is surprising as Mumbai and Delhi are the most lucrative flying routes with all domestic airlines having a presence. But flying to these airports is also expensive as landing and other charges are at least 25% higher than other airports. The cities also don't have low-cost airports. "We are going after a pan-India licence and not a regional one," Suresh Nair, AirAsia regional manager — India, Sri Lanka and Bangladesh, said, explaining the group strategy.
"Avoiding Delhi and Mumbai doesn't make us a regional carrier because India is much beyond that. If we fly, say, Chennai-Ahmedabad or Chennai-Jaipur, that would mean national operations. We would fly wherever we can to keep cost of operations low," he added.
The move is in sync with AirAsia's disruptive strategy and its desire to grab a bigger market share of passenger traffic outside the two big cities. A section of the travel fraternity still thinks that AirAsia would be able to offer competitive fares not only by adopting certain practices unique to them and but also those not yet tried in India.
Having a domestic network helps cope with expensive airports but the costs involved in operating from Delhi and Mumbai will still be quite high for a budget carrier. Keyur Joshi, COO of Nasdaq-listed travel portal makemytrip.com expects the company to avoid some of the major cities, not just Delhi and Mumbai. "I expect them to avoid Delhi, Mumbai, Bangalore and Hyderabad to keep costs low. Indian airlines have not been able to negotiate with airport operators to resolve that. AirAsia may also prefer to add more frequencies on a route rather than going after many routes, something not yet tried in India," he added.
In a conference call with reporters on February 21, Tony Fernandes said the airline will avoid Delhi and Mumbai. "We will avoid certain airports like Delhi and Mumbai because of high charges and also because these airports are slot constrained. We will stimulate the market first with low-cost structure and later as the airports are being developed, we would also look at these newer markets. India is a huge country and we are confident that we will succeed," Fernandes had said.
It is not yet clear whether AirAsia will completely avoid these two cities, as in not ferry passengers from other destinations to the two top metros. Nair said the routes have not been finalised and can't yet make a comment. While AirAsia is entering the domestic market for the first time, it has been flying between several Indian cities and south-east Asian countries.
The experience so far has not been very good. The airline plans to pull out of flying between Delhi and Bangkok and rival IndiGo has responded aggressively by doubling services on the same route. High airport charges forced it to withdraw services between Kuala Lumpur and Hyderabad in 2010 while its long-haul arm AirAsia X pulled out of Delhi and Mumbai in January last year for the same reason.
"We don't know why airlines don't come together on these issues. Every rupee makes a difference. We also know that costs of a couple of airlines are very low but they are not offering that price to customers," Nair said.
AirAsia may also offer fares as low as Rs 1,000 to lure passengers when it begins operations in India though a successful replication of its South-east Asian model may be difficult due to the country's high-cost structure. The Malaysian budget airline will start fares at Rs 999 for flyers wanting to book months in advance and hopes to make early booking a regular habit.
AirAsia to offer fares as low as Rs 1,000; may skip Mumbai-Delhi route - The Economic Times
