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AirAsia India News -- Part 1
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The_Goat
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PostPosted: Thu May 08, 2014 12:31 pm    Post subject: Reply with quote

TKMCE wrote:
I know i am hijacking the thread away from Tony's Toys.


Monsieur Goat


Quote:
It was the British who introduced aviation in India, in 1932 to be precise.



Can you elaborate on this for my understanding???


I find history in general boring but Indian aviation history fascinating!!!

My research gives me this




We were talking about Indian operators, not foreign ones using India as a stopping point on their eastward routes (KLM or Imperial airways).

The first Indian aircraft operator (or the one who actually introduced the concept of Indian aviation) was the Royal Indian Air Force which was founded on 8th october 1932. The first Indian civil operator was Tata Airlines, founded on 15th october, 1932.
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TKMCE
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PostPosted: Thu May 08, 2014 1:06 pm    Post subject: Reply with quote

Thank you for the clarification.

Well I can say for certain that both Imperial and KLM carried pax from India. Yeah KLM had fifth freedom rights (Imperial ofcourse was the home airline).

Alexander Frater (of "Chasing the Monsoon "fame) had recreated the Imperial air route using scheduled services some years back and written a book "Beyond the Blue Horizon" Fascinating read- and it gives a lot of Indian aviation history as well including an account of his interview with JRD.

Now back to topic.


Any guess whatTony will start with??? Nothing prevents him from giving away fully free tickets as long as he pays the taxes. But my guess he is will start with a 999 one way all inclusive fare. DGCA had clamped down on the Spice Jet giveaways earlier in the year so Tony and Mittu may not risk a similar gimmick.

Also waiting for the inflight menu!!! Thairu Saadam and Alleppy Fish curry makes a nice combination!!!! Very Happy
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Spiderguy252
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PostPosted: Fri May 09, 2014 10:06 am    Post subject: Reply with quote

Airlines scoff at AirAsia's 35% low-fare profit claim

Quote:
NEW DELHI: The grant of licence to AirAsia India has set the cat among pigeons, with existing airlines flapping their wings furiously. The new low-cost carrier's (LCC) claim of offering 35% lower fares — and still be profitable — has led to disbelief among existing players.

SpiceJet COO Sanjik Kapur tweeted: "The Indian market. Rock bottom ... fares. Last minute fares that are too low, lower than ULCCs (ultra LCCS). That will change how now with new entrants?" Other airlines or their key management people did not come on record but agreed with Kapur's contention.

"The claim of offering 35% lower fares can be possible in two conditions: Either all airlines are making huge profits and can reduce those numbers through lower yields. Or, the cost structure of other airlines, especially LCCs, is so high that AirAsia India can have a drastically low-cost structure, offer 35% lower fares and still make money. Both the contentions are not true for the Indian market," said another airline executive. The airline industry pointed out that fares are low at the moment. Going lower than that, say all officials TOI spoke to, only means inviting the fate of Air Deccan or Kingfisher.

According to the Centre for Asia Pacific Aviation, the accumulated losses of Indian airline industry over the previous seven years had risen to $8.6 billion on March 31, 2013. The industry debt on that date was $12.6 billion. About 40% to 50% of full service carrier debt was related to working capital. In addition, there were close to $2.4 billion worth of outstanding payments to vendors. LCC debt was just over $750 million and most of this was aircraft related.

"This is the financial reality. In FY-14, domestic air travel grew less than 5% over previous fiscal. Domestic air travel is not growing fast enough to sustain all the existing and the two new entrants - Tata Sons JV with AirAsia and Singapore Airlines. There are going to be some casualties, with one existing player in a critical financial condition almost like Kingfisher," said another airline official.

Many industry insiders, in fact, quizzed what fare levels did AirAsia India have in mind when it spoke of 35% lower rates.

"The range of domestic fares on any sector is usually 10 times, which means if fare buckets for a flight start from Rs 1,500, then the highest level can be as high as Rs 15,000. So, saying 35% lower does not make sense till the level is also specified," said another airline official.

However, AirAsia India CEO Mittu Chandilya exuded confidence that his airline will offer lower fares and still make money. "We are not in charity business. Our groups will see if we are making money or not. I am sure that we will give a great product to consumers that will be profitable for us," he had said on Wednesday after the airline got the flying licence from DGCA.


http://timesofindia.indiatimes.com/business/india-business/Airlines-scoff-at-AirAsias-35-low-fare-profit-claim/articleshow/34848444.cms
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HAWK21M
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PostPosted: Fri May 09, 2014 2:45 pm    Post subject: Reply with quote

Interesting to see how they achieve that Smile
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abhijith16
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PostPosted: Thu May 29, 2014 3:01 pm    Post subject: Reply with quote

AirAsia India (I5) will commence operations from June 12th, with initial routes being twice daily BLR-MAA and once daily BLR-GOI. Although, bookings have opened only for October 2014, the official announcement will be made tomorrow.

Also, BLR maybe the 1st base, with the rotations being BLR-MAA-BLR-(7 hours rest)-GOI-BLR-MAA-BLR...

More details expected soon...
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Nimish
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PostPosted: Thu May 29, 2014 3:04 pm    Post subject: Reply with quote

What's the website for bookings? Have online bookings commenced yet?
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abhijith16
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PostPosted: Thu May 29, 2014 3:07 pm    Post subject: Reply with quote

Nimish wrote:
What's the website for bookings? Have online bookings commenced yet?


Yes, but only for the month of October 2014.

AirAsia India is offering some mouthwatering delicious dishes for sale on their flights!

1) Hyderabadi Veg Biryani
2) Vegetable Pasta in Tomato Sauce (YUM!)
3) Roast Chicken with Sauteed Vegetables
4) Chicken Chettinad
5) Idli, Vada Sambhar
6) Assortment of Wraps and Sandwiches

God, this is more exciting! Very Happy
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747-237
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PostPosted: Thu May 29, 2014 3:27 pm    Post subject: Reply with quote

AirAsia India Opens Reservations for Flights from Oct 2014

AirAsia India is set to launch operations, based on the airline’s latest web booking update. At time this post goes to press, AirAsia India has opened reservations for travel between 20OCT14 and 25OCT14, with 2 daily Bangalore – Chennai and 1 daily Bangalore – Goa service. However, AirAsia CEO says AirAsia India will begin operations on 12JUN14, with reservations fully open on 30MAY14.

The airline’s IATA code is I5.

Bangalore – Chennai
I51211 BLR0555 – 0655MAA 320 D
I51217 BLR1835 – 1935MAA 320 D

I51212 MAA0730 – 0830BLR 320 D
I51218 MAA2010 – 2110BLR 320 D






Bangalore – Goa
I51320 BLR1510 – 1625GOI 320 D
I51321 GOI1655 – 1805BLR 320 D





Screenshot is taken as of 0855GMT. The airline’s “all-in fare” on one-way basis as of 0930GMT has lowered to 1821INR for Goa and 3488INR for Chennai, for travel between 20OCT14 and 25OCT14. Note initial operations remain subject to change. This post will be updated on regular basis, which may not be reflected in the daily email delivery, as reservations for travel during this period may be suspended in the next few hours, until the airline “officially” opens reservation on 30MAY14.



Source: Airlineroute.net
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PlaneLover
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PostPosted: Thu May 29, 2014 5:02 pm    Post subject: Reply with quote

Are these really low fares?
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himmat01
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PostPosted: Thu May 29, 2014 5:07 pm    Post subject: Reply with quote

What's the website for domestic flights?
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ameya
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PostPosted: Thu May 29, 2014 5:11 pm    Post subject: Reply with quote

So the aircraft would be based in BLR and not MAA !
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Spiderguy252
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PostPosted: Thu May 29, 2014 5:22 pm    Post subject: Reply with quote

Wait, 14K to get to Bangalore from Chennai? Rolling Eyes
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himmat01
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PostPosted: Thu May 29, 2014 5:25 pm    Post subject: Reply with quote

Why would anybody pay 28K for MAA-BLR-MAA? MAA-SIN-MAA would be much cheaper.
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himmat01
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PostPosted: Thu May 29, 2014 5:26 pm    Post subject: Reply with quote

And these are advance fares for October and not last minute fares for tomorrow.
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abhijith16
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PostPosted: Thu May 29, 2014 5:37 pm    Post subject: Reply with quote

himmat01 wrote:
And these are advance fares for October and not last minute fares for tomorrow.


They'll give full details tomorrow... This is just temporary...
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PostPosted: Thu May 29, 2014 5:49 pm    Post subject: Reply with quote

Spiderguy252 wrote:
Wait, 14K to get to Bangalore from Chennai? Rolling Eyes


I think those are just dummy figures for test-running the website.
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PostPosted: Thu May 29, 2014 7:00 pm    Post subject: Reply with quote

BLR-MAA and BLR-GOA are so underserved that we need one more carrier to fill the "huge" demand on these routes Wink Wink

For passengers through one more treat of another round of fare wars. May the bloodbath begin.
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PostPosted: Thu May 29, 2014 7:02 pm    Post subject: Reply with quote

747-237 wrote:
The airline’s IATA code is I5.


Is I5 a take on "Hi(gh)-Fi", as 6E is on Sexy ?
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ameya
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PostPosted: Thu May 29, 2014 8:17 pm    Post subject: Reply with quote

The model CEO would soon say that they are actually competing with trains on BLR-MAA
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airbus340
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PostPosted: Thu May 29, 2014 8:32 pm    Post subject: Reply with quote

iah87 wrote:
BLR-MAA and BLR-GOA are so underserved that we need one more carrier to fill the "huge" demand on these routes Wink Wink

For passengers through one more treat of another round of fare wars. May the bloodbath begin.


Fares to GOA and BLR from MAA have been dropped even before Air Asia open reservations .

Starting 12th June SG is selling GOA return for about 4 grand and MAA return for around the same price .

Let the fare wars begin !!
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PostPosted: Thu May 29, 2014 10:00 pm    Post subject: Reply with quote

747-237 wrote:
747-237 wrote:
The airline’s IATA code is I5.


Is I5 a take on "Hi(gh)-Fi", as 6E is on Sexy ?

I noticed that too Smile
I won't be surprised if that is the case - there has been some sort of friction between the two off recent, as Twitter suggests!
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Spiderguy252
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PostPosted: Thu May 29, 2014 11:53 pm    Post subject: Reply with quote

The_Goat wrote:
Spiderguy252 wrote:
Wait, 14K to get to Bangalore from Chennai? Rolling Eyes


I think those are just dummy figures for test-running the website.


Heck I hope so. Else it's daylight robbery!

ameya wrote:
The model CEO would soon say that they are actually competing with trains on BLR-MAA


Which is correct. It takes a lot to sway the regular rail passengers into a flight on this sector, seeing the choices, punctuality and quality of trains on offer. I'm one of them and prefer the train everytime I travel, and not just due to price reasons.

iah87 wrote:
BLR-MAA and BLR-GOA are so underserved that we need one more carrier to fill the "huge" demand on these routes Wink Wink


If anything, MAA-GOI could do with a flight; I suppose the only one is the AI 320 heading onwards to KWI.

Speaking of trains, there is just one train on MAS-Vasco too. Smile
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PostPosted: Fri May 30, 2014 7:45 am    Post subject: Reply with quote

Quote:
If anything, MAA-GOI could do with a flight; I suppose the only one is the AI 320 heading onwards to KWI.



Paramount and SG have tried this route and failed. I guess there are not that many pax who want to go to GOA from MAA, may be they will at rock bottom (but money losing for airlines) fares. Even Air Asia is not trying this route now, it is looking at BLR-GOA first.

Indigo flies this with a stop in HYD at decent fares. AI's flight is primarily meant for international, domestic is an added bonus.
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PostPosted: Fri May 30, 2014 1:38 pm    Post subject: Reply with quote

Twitter is abuzz that the first flight will be BLR-GOI with a all inclusive fare of INR 990. Even SG has dropped their fares to INR 1499 in anticipation of this
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PostPosted: Fri May 30, 2014 3:04 pm    Post subject: Reply with quote

Tickets sale will start at 9:30 pm IST tonight on http://www.airasia.com/in/en/home.html - happy booking!
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PostPosted: Fri May 30, 2014 6:19 pm    Post subject: Reply with quote

AirAsia's first flight from Bangalore to Goa at Rs. 990

http://www.hindustantimes.com/business-news/airasia-india-may-trigger-fare-war-first-flight-from-bangalore-to-goa-at-rs-990/article1-1224345.aspx
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PostPosted: Sat May 31, 2014 1:05 am    Post subject: Reply with quote

Booked MAA-BLR for a grand total of 619 INR!! Smile
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PostPosted: Sat May 31, 2014 3:01 am    Post subject: Reply with quote

CEO hints at AirAsia India HQ moving out from Chennai

http://www.business-standard.com/article/companies/ceo-hints-at-airasia-india-hq-moving-out-from-chennai-114053100279_1.html
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PostPosted: Sat May 31, 2014 3:03 am    Post subject: Reply with quote


AirAsia India to fly to 10 cities by end of fiscal

the airline plans to add 10 cities and 10 aircraft by the end of this fiscal.
The second aircraft is expected to come to India in another two months.


http://www.financialexpress.com/news/airasia-india-to-fly-to-10-cities-by-end-of-fiscal/1255802
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PostPosted: Sat May 31, 2014 4:20 am    Post subject: Reply with quote

[quote="747-237"][i]CEO hints at AirAsia India HQ moving out from Chennai[/i]

http://www.business-standard.com/article/companies/ceo-hints-at-airasia-india-hq-moving-out-from-chennai-114053100279_1.html[/quote]


For a CEO of an airline that is yet to fly, that sure is an awkward thing to say. Safety-not sure what he is talking about. Not getting enough sops, are we? To sustain the extremely low cost model?

319, all inclusive, for a one way ticket between MAA and BLR. Fine print says no free baggage; maybe they will charge for carry on too?
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PostPosted: Sat May 31, 2014 8:57 am    Post subject: Reply with quote

AirAsia India to launch on 12-Jun-2014. The LCC's greatest test or its most lucrative opportunity?

An Interesting Analysis By CAPA


30-May-2014 10:30 AM
AirAsia India has announced it will launch service on 12-Jun-2014. in this extract from the CAPA India Aviation Outlook Report 2014/15 we review the challenges and opportunities for the airline in this potentially massive market.
AirAsia India is the first start-up JV involving a foreign carrier to receive a licence in India in more than 20 years
When Jet Airways launched as an air taxi operator in May-1993 it was backed by foreign carriers. Gulf Air and Kuwait Airways equally shared a 40% stake in the fledgling airline, the maximum foreign direct investment permitted at the time. This strategic investment undoubtedly provided Jet Airways with a number of benefits including access to expertise and international feed, as well as the ability to wet lease aircraft when required.
However, in 1996 the Government of India declared that foreign airline shareholdings were not in the interests of India’s aviation sector and would no longer be permitted. Ostensibly this was because private carriers were still relatively small and the concern was that foreign airlines would control their development in such a way as to feed their offshore hubs, relegating the Indian carrier to the status of a regional carrier. But in reality it was a move designed to thwart the ambitions of the Tata Group and Singapore Airlines to jointly launch a domestic carrier in India.
This decision in 1996 was a reflection of the negative role played by vested interests in India’s regulatory framework. The industry paid a high price because it prevented the entry of strategic investors with expertise that could have supported the development of a more corporatised and professional sector.
In Sep-2012 the government finally overturned this restriction and allowed foreign airlines to invest up to 49% in Indian carriers. Six months later AirAsia was the first airline to respond to the opportunity and announced plans to establish a start-up JV LCC to operate under the brand AirAsia India. AirAsia was to hold the largest share at 49%, while two Indian partners, Tata Sons (30%) and Telestra Tradeplace (21%) would hold the balance.
The regulatory challenges faced by AirAsia India were in line with CAPA’s expectations; and reminiscent of the obstacles faced by Tata-SIA in 1996
When the JV was announced in Feb-2013 CAPA welcomed AirAsia’s decision and the involvement of Tata Sons, but cautioned that the process of obtaining regulatory approvals would be very challenging. That has certainly been the case.
A very speedy clearance by the Foreign Investment Promotion Board, just over two weeks after the venture was announced, raised hopes about the possibility of a launch date some time between October and December 2013. But the review of AirAsia’s license application faced unprecedented rigour. It took an unusually long 14 months to clear the Ministry of Civil Aviation and receive an Air Operator’s Permit, which was finally issued in May-2014.
The regulator’s process for reviewing the airline’s application for an AOP included some unexpected steps. In Jan-2014 the DGCA announced a 30 day period calling for any public objections to the planned launch of AirAsia India. This was done under Schedule XI of the Aircraft Rules Act of 1937 (updated 1965) but this is understood to have been the first time that this process has been followed. It is particularly unusual for this to occur at the AOP stage which should primarily be a review of the carrier’s technical preparedness. Any public representations should normally have been raised at the earlier No Objection Certificate stage. Air Costa, the last airline to receive a license did not face this step.
This diversion from the standard process and the extended delays in the award of a licence to AirAsia India are reflective of the unpredictability and lack of transparency in India’s regulatory framework, which continues to be the greatest strategic challenge in the market.
It has been a tough journey for AirAsia with Group CEO, Tony Fernandes in an interview with Economic Times in Mar-2014 stating that “I have never experienced this in my life, where the entire aviation industry has tried to block us”.
Regulatory scrutiny was primarily focussed on whether the government intended to allow foreign airline investment in start-ups, and on the issue of ownership and control
The two central issues that almost prevented AirAsia India from securing a licence were firstly, whether foreign airline investment was permitted in start-up airlines and secondly, the question of ownership and control. Dr Subramaniam Swamy and the Federation of Indian Airlines were the key protagonists.
When the government gave the green light to foreign investment it was stated that the aim was to encourage the infusion of capital into India’s heavily indebted incumbent airlines to support their recovery. There was ambiguity in the Department of Industrial Policy and Promotion’s note to the Cabinet as to whether investment was also permitted in start-up airlines. The issue was debated at the FIPB meeting in Mar-2013 and the quick foreign investment approval granted to AirAsia India appeared to provide clarity in favour of greenfield carriers on this issue. However the legal challengers argued that at the time that the Cabinet decided in favour of foreign airline investment, the Ministry had expressly stated that the intention was not to award licences to start-ups.
The other major issue of contention was that of ownership and control. While AirAsia’s equity stake of 49% is compliant with the foreign investment cap, and Indian investors hold 51%, Mr Swamy alleged that the airline would be controlled by AirAsia. He stated that while AirAsia is a minority shareholder, it is the single largest shareholder and has other business relationships with Telestra Tradeplace such that they may act in concert.
And despite Tata Sons holding the Chairman’s role in AirAsia India and being the largest Indian shareholder, they have largely come across as silent investors. Apart from initial meetings with the Minister of Civil Aviation when the venture was first announced, neither Tata Sons nor Telestra Tradeplace have been very visible and the perception was created that AirAsia was the prime mover of the airline.
For these reasons AirAsia India’s application was subjected to the highest levels of regulatory scrutiny. Although further challenges may still arise, now that the DGCA has issued an AOP, we do not expect them to have an impact on the airline’s operations.
Delays to the award of airline licences due to questions about ownership and control issues are however not unique to India, and in that sense it is not surprising that legal challenges were raised.Virgin America’s licence was held-up for a couple of years due to concerns that it was controlled by foreign interests by way of the 25% equity held by Richard Branson’s Virgin Group. Meanwhile Jetstar is facing challenges to the establishment of its Hong Kong franchise in which it holds one third of the equity, with Cathay Pacific contesting the licence application arguing that the airline will be controlled from Australia.
AirAsia India announces launch date of 12-June-2014; a tactical surprise that may catch the competition off guard
The timing of the award of the AOP on 7-May-2014 meant that AirAsia missed the opportunity to take advantage of much of the summer holiday peak season which occurs during the months of May and June.
Launching during the monsoon in July and August is not ideal both for commercial and operational reasons. It is traditionally the weakest period for travel demand and is prone to weather-related disruptions to operations, which can be challenging for a new airline trying to bed down its processes.
That left AirAsia with two options. To launch as soon as possible in Jun-2014, or wait for the monsoon to clear and commence services in Sep-2014, in time for the next peak travel period which occurs during the festival season between September and December.
A September launch would have allowed the airline to use the time until then to focus on strengthening its preparations, particularly in areas such as distribution, recruitment and training of additional staff, logistics preparations such as securing slots, and promotion of its network and schedules, all of which will be key to its success. And perhaps more importantly greater clarity will emerge by then on the policy direction of the new government, particularly on the critical 5 year/20 aircraft rule.
Instead AirAsia India announced with just two weeks notice that the first flight will depart on 12-Jun-2014. This tactical surprise may have caught the competition off guard as they were expecting a later date. AirAsia must have concluded that having had a longer than scheduled pre-ops period and with an aircraft sitting idle on the ground they were ready to go. During the initial phase, operations are expected to be modest in scale with just one or two aircraft as the carrier tests the waters.
Competition will be aggressive; Indian carriers have a track record of engaging in unsustainable fare discounting and an unusual willingness to bear losses
AirAsia may have under-estimated the capacity of Indian carriers to pursue irrational pricing. The incumbents have shown a regular tendency to discount heavily to generate cash, gain market share, fill excess capacity or simply to respond to competition.
This is also a market in which full service carriers offer fares similar to LCCs, and sometimes lower. Airlines continue to price below cost despite their huge accumulated losses and weak balance sheets. It is very difficult to operate in a market in which your competitors seem to have an almost insatiable appetite to lose money. Over the last seven years Indian carriers have lost a combined INR594 billion (USD10.1 billion), or an average of USD22 every time a passenger boards an aircraft.


The promoters committed to provide USD30 million of start-up capital for the Indian operation. We estimate that close to USD10 million has been spent to date on pre-operational expenditure. Salaries are one of the largest cost items as the airline has approximately 250-300 staff on its payroll, including pilots and engineers.
Given the high cost environment and intense competitive dynamics in the market, AirAsia’s remaining capital of USD20 million may be too conservative, especially if the carrier seeks to achieve its target fleet size of around 30-35 aircraft within five years. And the decision to launch during the weakest quarter is also likely to result in further cash burn during the first three months.
With Tata Sons having stated that they will not infuse any further equity above the USD9 million already committed, the remaining shareholders will need to identify other sources of long term funding should additional capital be required.
AirAsia’s experience in yield management is likely to see it focus on developing advance purchase sales which will be positive for cash flow. However, the carrier may need to look at generating liquidity from sale-and-leaseback transactions in the early stages even though it has indicated that it does not plan to do so in India.
The discounting triggered by AirAsia's entry will create problems for some of the incumbent carriers
The intense competition which is expected to greet AirAsia’s entry will increase financial challenges for all operators and place great pressure on some of the incumbent carriers which are struggling and whose holding power may be tested. Jet Airways and SpiceJet posted record losses in FY2014 and the industry as a whole is expected to report a combined full-year loss of approximately USD1.5 billion.
India’s carriers combined have cash on hand of around just USD500 million on annual industry revenue of close to USD10 billion. Some carriers are in a precarious state, with cash balances equivalent to less than one day’s revenue.
The carrier’s base and network strategy continues to evolve; the first hub will probably be Bengaluru rather than Chennai
AirAsia had originally announced Chennai as its initial base with plans to focus on routes to non-metro airports with limited competition. The company’s senior management has been stationed in Chennai during pre-ops as is its first aircraft. Chennai has great potential as a travel market with a strong economy and diverse drivers of traffic including VFR, leisure and business. AirAsia Malaysia already operates twice daily service to Chennai from Kuala Lumpur.
However, we expect that the first hub will be switched to Bengaluru which is an attractive market. It is a large, cosmopolitan city, with a strong corporate traffic base, and a young, tech-savvy demographic that is well aligned with AirAsia’s positioning. The private airport operator at Bengaluru is more likely to be willing to work together with AirAsia and accommodate its requirements than the AAI at Chennai.
The likelihood that the state government will reduce sales taxation on ATF at Bengaluru from 28% down to 16% and possibly even 12%, compared with 29% at Chennai, is likely to have been another factor. And with a major terminal expansion having just been completed in Dec-2013 the airport has both spare terminal and runway capacity, whereas Chennai faces airside congestion.
In convincing AirAsia to establish its hub at Bengaluru the operator has beaten off strong competition from other airports in South India. This switch should also serve as a wake-up call to the AAI that it does not have the appropriate commercial skills to compete for airline services.
We also expect a revision to the earlier stated position of concentrating on under-served or virgin routes. Market research is likely to have revealed that there may be a limited number of such city pairs that can sustain daily or higher frequency narrow body services.
The recent statement that the airline will operate to Delhi (although perhaps not in the first phase), despite earlier ruling it out as being too expensive, is in line with CAPA’s expectations that AirAsia would have to connect the capital if it had ambitions of being a pan-India carrier. In due course, and subject to slot availability, we do not rule out the possibility of AirAsia operating to Mumbai.
The actual network that the airline operates may be very different to that which was stated in its licence application. From a competitive perspective that is a wise strategy as submissions to the regulator are notoriously prone to being leaked.
If implemented, the proposed new Route Dispersal Guidelines will be yet another handicap for all carriers except Air India
India’s regulatory framework includes mandatory Route Dispersal Guidelines (RDG) for scheduled carriers, designed to encourage air connectivity to remote and less developed regions of the country. Under the current regulations airlines have to operate the equivalent of 10% of the ASKs deployed on certain designated trunk routes, to such regions. In the early stages, with a fleet of just 1-2 aircraft, AirAsia will likely be able to remain off the major trunk routes in order to avoid any remote route obligations.
However, under the new proposal raised by the Ministry a few months ago - but yet to be implemented - airlines would need to operate 6% of their total domestic ASKs (and not just their trunk route capacity) to remote regions. The definition of remote regions has also been narrowed making some of the relatively more attractive destinations ineligible.
This will be a challenge for most carriers other than Air India, but could particularly impact AirAsia during the early stages because a small fleet allows for less operational flexibility. In addition, if AirAsia operates a South India focused network as it has indicated, this places it at a disadvantage in terms of accessing some of the remote regions with the greatest traffic potential which are located in the North and North East of the country. Within the southern region there are just two airports which qualify under the RDG, Port Blair (which has a viable market) and Agatti (which is too small to accommodate AirAsia’s narrow body aircraft).
The RDG will be subject to review by the new government and could be revised. However, if implemented as proposed they may force a restructuring of AirAsia’s network plan.
AirAsia’s proposed pricing strategy is unlikely to allow the carrier to achieve break even within 4 months as targeted
AirAsia has indicated that it will offer pricing that is consistently 30% lower than the incumbent airlines, a proposition which was designed to generate media attention. But at this stage it is difficult to read too much into such statements, as we have not yet seen the fares.
Based on the established behaviour of the incumbent carriers the competition will respond aggressively to AirAsia's entry with tactical fares intended to erode any price advantage that it plans to offer with the intention of presenting AirAsia's proposition of a 30% differential as a myth. SpiceJet has already introduced special discounts in response to AirAsia's announcement of its launch. In the ensuing low fare, high cost environment, it would be remarkable if the start-up was able to meet its target of achieving break-even within four months of launch.
With the strategic pricing that is expected to greet AirAsia's arrival it will be a case of which airlines can sustain these levels. In such scenarios the lowest cost - or deepest pocket - wins
The question that remains to be answered is whether AirAsia can achieve a sustainable and significant cost differential from its competitors. There are likely to be certain areas where AirAsia could generate cost advantages, but it is difficult to see how it can develop a transformational business model that will allow it to reduce costs by up to 30%.
Given the very high prevailing tax rates and the weak Rupee, fuel accounts for close to 50% of the operating costs of Indian carriers. There is little room to move on this front. Any savings therefore will have to be generated from the non-fuel costs.
Seat density is an important driver of costs, but AirAsia will have no more seats than India’s LCCs on an equivalent aircraft. IndiGo and GoAir are both configured with 180 seats on their A320s.
Airport charges across the country have also been increasing in recent years, in some cases steeply. And while AirAsia may have been able to negotiate attractive packages from airports in other parts of Asia in order to incentivise services, this may be more difficult in India.
The state-owned Airports Authority of India, which manages more than 90% of the operational airports in the country, is not permitted to extend preferential charges to one airline over another, nor does it pursue a commercial strategy of proactive air services development.
Meanwhile private airports, which account for the majority of traffic in the country, are able to offer incentives, however such concessions are to be adjusted against their permissible rate of return as fixed by the regulator. And it will be difficult for them to offer preferential rates to what at this stage is a relatively small start-up.
AirAsia is however likely to benefit from lower aircraft ownership costs due to the competitive pricing that the airline would have received from Airbus at a Group level given its combined in-service fleet and order book of more than 550 aircraft. And the carrier has indicated that it does not plan to engage in sale-and-leaseback transactions for its initial aircraft transactions in India which should provide it with a further advantage. This financing structure is widely used by Indian carriers and tends to increase the average lease rate.
AirAsia India is also likely to target some savings from a greater focus on direct distribution and efficient work practices, as well as from economies derived from shared services at a Group level (e.g. maintenance and training). But as valuable as any reduction in cost is, the magnitude of these savings is unlikely to be sufficient to drive a downward step-change in the cost structure.
That leaves one major lever, namely aircraft utilisation. AirAsia is reportedly aiming for average utilisation rate of 16 hours per day. This compares with a maximum of around 11-12 hours being achieved by the leading performers in India at present. But it would also be significantly higher than the 12.1 hours being achieved by AirAsia in the ASEAN region. Best practice utilisation globally for a narrow body operation is around 13+ hours so this target is very ambitious; in India 12-13 hours is likely to be the structural maximum for a domestic operation.
Without a significantly higher aircraft utilisation rate it is difficult to see how AirAsia India can achieve a competitive cost advantage over IndiGo, which is the market leader at present.
AirAsia India's reported operating targets appear optimistic in the Indian environment; but if 16 hours utilisation and 20 minute turnarounds are achieved it will set a game-changing benchmark
For a purely domestic Indian network a daily utilisation target of 16 hours appears unachievable. Even with 20 minute turnarounds – which would be tough - with few domestic sectors being longer than two block hours, this would require aircraft to be operating a schedule of close to 20 hours a day. That would mean domestic flights arriving and departing in the early hours of the morning.
Red eye domestic services have not been successful in the past in the Indian market except on a couple of routes such as Mumbai-Delhi and Bengaluru-Mumbai, and that too primarily to connect with international flights. Sufficiently low fares might stimulate traffic to some extent but unlikely to the level required to support such sustained high levels of utilisation across the entire fleet. It might be possible with 1-2 aircraft but it will be difficult to maintain this as the fleet expands as there is not enough demand for night time flights.
Similarly, 20 minute turnarounds are very ambitious in the Indian airport environment. Whilst it is possible to achieve that at non-metro stations, it would be very challenging at the larger metro airports, especially if Delhi is included in the network, given airside congestion issues. There may also be problems associated with securing slots at the precise required times.
However, if AirAsia is successful it will set a game-changing precedent which will force other carriers to re-look at their processes to see if it is possible, particularly 20 minute turnarounds at metro airports.
Abolition of the 5 year/20 aircraft rule will therefore be critical for AirAsia: the scalability of their operations is dependent upon it
The only way that AirAsia could conceivably achieve utilisation rates approaching 16 hours would be by operating back-of-the-clock international services to the Gulf and Southeast Asia. However, it may be difficult to structure a network that can support such rates across an ever expanding fleet. But if it can be done, AirAsia will establish a new benchmark and will have continued their tradition of re-writing airline business models.
Current regulations in India prohibit start-up airlines from launching international routes until they have completed five years of domestic operations and grown to a fleet size of 20 aircraft.
Regional international services on sectors up to four hours are a natural – indeed necessary – next step for AirAsia. In due course long haul LCC operations could also have very strong potential. AirAsia X has found that sectors of up to eight hours have worked best for its model. From India such a range would encompass most of Europe and Asia.
Management strength may need to be reviewed to induct greater operational expertise; a proven COO is key
The structure of the senior management team at AirAsia may need to be reviewed. In particular, given the importance of high utilisation and fast turnarounds to the cost base and business model, the carrier may require an experienced COO. At present the CEO wears a dual hat which includes responsibility for operations. He comes from a non-aviation background, which can be very positive for out-of-the-box thinking when it comes to leadership and strategic issues. However, in order to achieve the very ambitious operational benchmarks that are necessary for the business to succeed, proven expertise is required for the COO role.
Establishing operational excellence is never easy. But it is particularly challenging given the constraints inherent in the Indian environment. India’s airports, airspace and suppliers are not yet set-up to support the highly efficient, fast-moving and responsive operation that AirAsia India seeks to be. They can and will learn over time, but it may require an experienced, specialist COO to drive change and to maximise what is possible in the interim given the ground realities.
The Chief Commercial Officer role is also very complex as it encompasses critical elements of the business such as network planning, pricing, revenue management and distribution. This will require a specialist CCO unless the core of these functions will be conducted at a Group level. Apart from the C-level positions, the key will be to recruit staff with sufficient skills and experience in the supporting roles below them.
Tata Group is unlikely to continue as a shareholder in both AirAsia India and in a JV with Singapore Airlines
The Tata Group is a 30% shareholder in AirAsia, but six months after the venture was announced, in a surprise move it announced that it was also taking a majority 51% stake in a JV with Singapore Airlines to establish a full service airline. There has also been some speculation that the Tata Group would be interested in taking a stake in Air India (an airline which they originally founded in 1932 and ran until it was nationalised in 1953) should the government consider privatisation.
Initially it was argued that AirAsia and Tata-SIA would pursue two distinct business models serving different markets and hence there was no conflict. The Tata Group it was stated are very familiar with segmentation, operating high-end brands alongside low cost ones in other industries such as cars and hotels.
But there is increasingly limited price and product differentiation between FSCs and LCCs in India, and more recently there appears to be an acknowledgement by the promoters that some cannibalisation between the two carriers is inevitable. It therefore remains to be seen whether the Tatas will continue their involvement with both ventures. Should they decide to exit, as is possible, AirAsia India could lose some important leverage given the positive relationship that Tata Sons enjoys with the newly-elected Prime Minister.
AirAsia has the potential to introduce innovation in network development, marketing, commercial strategy and work practices, which could rub off on other airlines
India has not seen a serious new entrant to the airline market in eight years. Much of this period has been characterised by huge losses and a challenging operating environment and these difficult conditions appear to have curtailed innovation rather than stimulating it.
AirAsia has the potential to reinvigorate the sector provided that it is willing to experiment as it has in other markets with new routes, products, pricing, distribution channels and revenue streams. However to realise value from such initiatives may take some time in India.
AirAsia could lead the way in tapping into ancillary revenue streams and show the other carriers how it's done
Ancillaries remain at a nascent stage in India. Other carriers have tread relatively softly in transitioning to unbundling, afraid perhaps to make the first move. They would be keen to see AirAsia remove the free baggage allowance on the cheapest fares (LCCs currently offer 15kg) so that they can follow suit. Establishing zero baggage allowance as the norm will re-set the ancillary potential in India to a new level.
Strong ancillary revenues will be necessary to support a low base fare pricing strategy. CAPA estimates that there is potential for carriers to generate an additional USD500 million per annum through this channel to be developed over the next two years. However it may take some time to grow these given that it will involve driving behavioural change amongst passengers.
Yield management, distribution and work practices will be areas where AirAsia could differentiate itself so that is not just yet another airline in India
Indian carriers have not been successful with yield management. Fares often decline as the day of departure approaches. Airlines have inadvertently encouraged passengers to adopt a late booking profile. AirAsia will need to bring a new dynamism to advance purchase fares to encourage early booking.
Online travel agents have become the dominant channel in the domestic market, accounting for more than 50% of LCC sales. While AirAsia will need to work selectively with online and offline agents, CAPA expects that it will seek to retain greater power over its distribution by placing a strong emphasis on direct sales via its website rather than being captive to third parties. This will require strategic use of traditional and social media to develop effective marketing and promotional campaigns.
Work practices may also come under review, including multi-skilling of staff to improve efficiencies and the questioning of perquisites such as chauffeur-driven transfers for pilots and crew which other airlines tend to offer.
AirAsia's characteristic approach of pushing the envelope may encounter some resistance at first, but is ultimately likely to benefit the entire industry
Another, less tangible but extremely important characteristic which AirAsia can bring is that of intellectual honesty in dealings with government. In a heavily regulated market such as India, where the government has an active role in the industry, airlines have often been reluctant to speak out against regulatory distortions to avoid any impact on their own business.
In other markets across the region AirAsia has not shied away from highlighting pointless or discriminatory regulations. And often, through persistence, it has succeeded in having them overturned. Such an approach does not always go down well in India and at first AirAsia may be a lone voice. But over time it may give other stakeholders the courage to voice their opinions and if that happens it will benefit the entire industry.
India undeniably represents a huge opportunity for AirAsia, but it may also be its greatest test
India has been both a field of dreams and a long night of nightmares for many. The Indian market may yet provide AirAsia with its greatest test, but the opportunities are probably also the greatest of any.
The sector is subject to numerous policy, regulatory, fiscal and operational constraints that hinder its viability. This is compounded by the fact that market actors include a national carrier whose commercial decisions are not limited by a bottom line, and several private carriers that seem unusually willing to bear losses. To compete effectively AirAsia India may need to increase its war chest and strengthen its management ranks.
AirAsia Group is currently reviewing its growth rate amid intense competition across the ASEAN region; this has led to a decision to defer some aircraft deliveries for the next 4-5 years. Their financial performance has been challenged in all of their markets. In 1Q2014 it reported a sharp drop in profits at its Malaysian and Thai subsidiaries, a swing to a loss in Indonesia and at AirAsiaX, and widening losses in the Philippines. With issues to attend to across the region the challenges associated with starting up in India have the potential to become a distraction.
Recent statements that AirAsia only intends to ‘dip its toes’ in India to begin with may be an acknowledgement of the difficulties in the market. A slower ramp up may be sensible to preserve cash, although it is difficult to make much impact with the proposed two aircraft operation. If the government does abolish the 5 year/20 aircraft rule, the urge to ramp up operations will be strong.
With a new government now in place, AirAsia is entering India at a time of renewed confidence in the prospects for a resurgence in economic growth. A market of 1.25 billion people with increasing aspirations and ability to travel is one that cannot be ignored. In this context the carrier’s entry is an exciting development which will be welcomed by passengers in particular.
If AirAsia India can meet its targets for 16 hours utilisation and 20 minute turnarounds, combined with aggressive performance on ancillaries and yield management, and the introduction of more efficient work practices, it will set a new paradigm for airline operations in India.
At the very least, the act of striving for these ambitious targets, even if not met, will push the sector to perform better. This has the potential to deliver wide-reaching benefits not only for its own bottom line but for consumers and the industry overall.

The short notice startup in AirAsia's joint venture - including 30% shareholder Tata - has surprised competitors and could gain the airline the advantage of the early mover.
AirAsia's experience across the region could well lead to the introduction of new norms into the Indian market; but speedy introduction of changes to the 5 year/20 aircraft rule will be necessary to securing the success of the airline in the medium term.
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747-237
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PostPosted: Sat May 31, 2014 9:01 am    Post subject: Reply with quote

^
In the time it would take me to read that, especially in it's given format; Air Asia India might go bust !
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Spiderguy252
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PostPosted: Sat May 31, 2014 10:42 am    Post subject: Reply with quote

justbala wrote:
Booked MAA-BLR for a grand total of 619 INR!! Smile


Which day of the week did you try? I just booked a ticket for a Monday morning in July for the same sector and it cost me INR 990/-
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HAWK21M
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PostPosted: Sat May 31, 2014 8:19 pm    Post subject: Reply with quote

Hopefully the price war does not go overboard and destroy the Industry.......
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iah87
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PostPosted: Sat May 31, 2014 8:37 pm    Post subject: Reply with quote

747-237 wrote:
^
In the time it would take me to read that, especially in it's given format; Air Asia India might go bust !


Agreed. I dont understand why new airlines are starting in the Indian aviation market where all the airlines but Indigo is losing money and that too huge amounts. Not a single major or most mid major route is underserved, there are a few minor and mid major routes which can use more services, but that will not be enough for an airline to make a profit.

If you look at the US market, I now see the value in capacity discipline, the US carriers in the past have lost money for many years and had to declare bankruptcy many times (the US bankruptcy laws are very lenient to the airlines or companies which declare bankruptcy). We see AI and Jet still serving meals and offering free checked in allowance despite losing Rs. 5000 crores and Rs. 2000 crores +, which are additional costs to the airline. There is no huge incentive to fly frequently on one airline in India.
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lavence7
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PostPosted: Sat May 31, 2014 9:44 pm    Post subject: Reply with quote

747-237 wrote:
AirAsia's first flight from Bangalore to Goa at Rs. 990

http://www.hindustantimes.com/business-news/airasia-india-may-trigger-fare-war-first-flight-from-bangalore-to-goa-at-rs-990/article1-1224345.aspx


Quote:
CEO hints at AirAsia India HQ moving out from Chennai


Hope they don’t distort the market the way deccan did. Hope that Mittu has some sense in him. We don’t need another carrier to lead by lowering fares but need one to create a benchmark in quality and service, like TATA- SIA.
The two extremes won’t work together and it will eventually tilt towards the low fares side which will result in service deteriorating, especially on fsc’s.
And it looks like air asia team don't keep up to what they say. From the time they made their announcement here, they only spoke of Chennai, being its hub and opening up new thin routes, not touching existing dense routes. But then their birds will finally be based & fly from blr, because “the govt was more friendly there” : I




*---Looks like all south based carriers are confused when it comes to the concept of “HUB”, be it KF or the other regional carriers. They call one city hub when majority of their operations, overnight parking & maintenance is carried out at another city. Only 9W & 6E truly stick to the concept of a HUB.---


Air Asia’s main claim when launching here was to open new markets through low fares, but don’t know now how true is that.
DEL is now suddenly on its radar, when all this time it was a strict no-no by Tony. They say something and do something else. Won’t be surprised if they’ll be flying x15 daily BOM-DEL , two yrs from now.
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justbala
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PostPosted: Sat May 31, 2014 10:04 pm    Post subject: Reply with quote

Spiderguy252 wrote:
justbala wrote:
Booked MAA-BLR for a grand total of 619 INR!! Smile


Which day of the week did you try? I just booked a ticket for a Monday morning in July for the same sector and it cost me INR 990/-


Saturday... it was a 390 fare with food (200)and convenience fee for credit card.
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The_Goat
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PostPosted: Sun Jun 01, 2014 1:48 am    Post subject: Reply with quote

lavence7 wrote:
747-237 wrote:
AirAsia's first flight from Bangalore to Goa at Rs. 990

http://www.hindustantimes.com/business-news/airasia-india-may-trigger-fare-war-first-flight-from-bangalore-to-goa-at-rs-990/article1-1224345.aspx


Quote:
CEO hints at AirAsia India HQ moving out from Chennai


Hope they don’t distort the market the way deccan did. Hope that Mittu has some sense in him. We don’t need another carrier to lead by lowering fares but need one to create a benchmark in quality and service, like TATA- SIA.


Air Asia's Malaysian parent isn't known for its quality, unless you are talking about the number of sardines in a can.

I'm sorry but I don't see how they are going to have a profitable operation with such fares in India.

INR 619 for a one way BLR-MAA is only about INR 200 more than what the likes of Sharma Transports charge for their excellent service on Volvo buses. And Sharma's input costs are way less than what Air Asia's are going to be.
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basheer1211
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PostPosted: Sun Jun 01, 2014 2:43 am    Post subject: Reply with quote

Cool down guys. The low cost is just the hype they create to bring all attention. Its just very few seats which are being sold at that price. They are very well known for their market strategy. Though Malaysia and India is not same market, they must have done better homework in the past one year unlike SG and 9W.
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rutvij
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PostPosted: Sun Jun 01, 2014 3:26 am    Post subject: Reply with quote

basheer1211 wrote:
Cool down guys. The low cost is just the hype they create to bring all attention. Its just very few seats which are being sold at that price. They are very well known for their market strategy. Though Malaysia and India is not same market, they must have done better homework in the past one year unlike SG and 9W.


SG was selling ultra cheap tickets couple of months back in its FARE SALE similar way, with very few seats per sector. Still it got pulled up by DGCA/MoCA for predatory pricing.
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