Southeast Asian budget carrier AirAsia Bhd will fly into India by the last quarter of 2008 with tickets as low as $100, or a little over Rs4,000, for a Chennai-Kuala Lumpur round trip, excluding taxes. The cheapest tickets on the route currently go for about Rs12,500 each, excluding around Rs2,500 in taxes.
AirAsia also plans to bring to India its budget hotel chain affiliate, Tune Hotels, which started earlier this year, as also a money remitting service, branded Tune Money.
Tony Fernandes, chief executive of AirAsia, the first discount airline in Asia, said he expected AirAsia X, the company’s long-haul carrier, to be “quite deeply penetrated in India” in the coming years. The trump card the airline will operate its India service on its core plank of affordability, Fernandes, who is visiting India, said in an interview.
“I am not appealing to Vijay Mallya (the flamboyant chairman of the United Breweries group whose interests range from liquor to airlines). I am appealing to the guy who doesn’t have had the chance to fly,” Fernandes said. “(The flights) may not be as comfortable as Singapore Airlines or Jet Airways; we are going to sell food, charge you for in-flight entertainment, you may arrive at unsociable hours. But, our fares will 50-60% lower than anyone. Whoever is the lowest, we have to be cheaper than that, otherwise there is no point in being in the business.”
To begin with, AirAsia X will look at cities such as Amritsar, Thiruvananthapuram, Kochi, Goa and Kolkata. “Mumbai will not be a natural start. You don’t want to go to a crowded airport. We are going to do it differently and try and find an airport outside (the metros) maybe,” said Fernandes, whose father hailed from Goa. He used the example of an airport AirAsia is going to fly to about 90 minutes drive out of Shanghai. “My passengers don’t mind taking an hour and half drive to their destination,” the former Virgin Records and Time Warner executive added.
After the Gulf and US routes, Southeast Asian destinations hold the most potential for airlines given the large non-resident Indian populations in the region. Yet, only Air Sahara, branded JetLite under the Jet Airways Pvt Ltd since an April acquisition, and Air India, with the domestic state-run affiliate Indian, fly to Southeast Asia—mainly Singapore.
Air India Express, the only budget international service from India, does not fly to Kuala Lumpur currently but has plans to start its service to the Malaysian capital and could come under pressure with the AirAsia plans. Other regional budget carriers such as Nok Air and Tiger Air are planning India flights.
“We will also do some short haul flights from Thailand to Kolkata,” Fernandes said, adding all his flights to India will be direct without hops. Fernandes and AirAsia officials declined details of financial investments.
Since its start early in 2002, AirAsia has grown to be the leading budget carrier in the region. It flies about 18 million passengers a year—a load that is more than half of the total passengers who flew in India 2006—across 75 destinations.
Until now, AirAsia has restricted its operations to the Southeast Asian region using 65 Airbus Industrie-made A320 planes. But with the first of the 15 A330s ordered arriving in September the airline will start long haul flying.
The airline has ordered another 200 A320 aircraft of which 150 are firm orders and another order for 10 more A330 planes is being negotiated with Airbus. AirAsia plans to start flights to Shenzhen in China from mid-July.
An analyst warned AirAsia could run into problems with India’s inadequate infrastructure and landing slots at ariports and the high cost of jet fuel in the country. “A short-haul, low-cost operation is much different from long-haul, low-cost flying. (Fernandes) hasn’t explained how he would do that.
It’s not easy and not as simple,” said Torsten Hohe, managing director of German consulting firm Airpas Aviation AG’s Abu Dhabi division.
AirAsia concedes it won’t be easy. “No one has ever done it the way we will do it. It may not work. Who knows?” said Fernandes. “When we started AirAsia, in my first press conference, they asked me—will be you be here in three months time? I said I don’t know, come and see me (after that period). We will certainly give it (India) a good shot.”
AirAsia is in talks with infrastructure companies to bring Tune Hotels to India and these would be mostly located in leisure capitals such as Goa. “I started a budget hotel (Tune Hotels) which has an average fare of $8 (nearly Rs330 a night) and Tune Money, a cheaper form of remitting money, is serving people who never dreamt of investing, having insurance etc. But they are a big hit today,” he said.
With such hotels, he said, AirAsia would provide connectivity to a passenger who wants to travel from Goa to, say, Kuala Lumpur and then to Bali and stay there. “The beauty is that like airlines they (hotels) don’t require parking space and no oil. It’s a symbiotic relationship. So you could see them here much earlier than my airline flies in,” he added without specifying the name of the players he is in talks with.