BackWill disclose Tata’s advice when I write my book: Tony Fernandes
Regarding AirAsia’s business plan, Tony Fernandes says it is to ‘put cash in, make profit’
Premium(S. Kumar/Mint )
Tony Fernandes, founder of AirAsia Bhd, and his team are on a visit to India to meet chief ministers of a few states and Union ministers to garner support for its AirAsia India airline venture with Tata Sons Ltd. Fernandes was in Mumbai on Monday to meet Tata Sons’ chairman emeritus Ratan Tata and Cyrus Mistry, chairman of the Tata group. Fernandes also met reporters to introduce Mittu Chandilya, chief executive of AirAsia India.
In April, India cleared AirAsia’s proposal to invest ₹ 80.98 crore in a domestic passenger airline. Fernandes spoke about AirAsia India’s plans and how the proposed airline will be different from other low-fare rivals.
Edited excerpts from an interview with Fernandes, group chief executive officer at AirAsia Group:
What is the most critical thing that you should get right for AirAsia India?
If we cannot get the right cost structure, we will not be successful. India is no different from Malaysia, Thailand, or Laos. We are already operating in India, so we are aware of some of the problems that exist. You cannot have the right cost structure, when you have two planes. But as we get to 11-12 planes, you will see where we are.
But jet fuel costs are higher in India?
State governments handle aviation turbine fuel, so this is an educational process. I have the best template to talk to state governments. I ask them to look at domestic travel and look at how many dollars you can earn with increased connectivity. I show them my success in Malaysia done by independent research.
What was Ratan Tata’s advice to you?
I will tell when I write my book.
In the past, AirAsia had pulled out of the Mumbai airport.
The charges were crazy. The airport tax became as much as our air fare. We had to pull out from Hyderabad too. They hiked charges to 300%. We did not think our passengers should be paying that. So we invested somewhere else.
There were reports that you were paying more salaries to pilots.
Of course, we are going to pay what the market pays; otherwise we will not have a low-fare airline product. Our salaries are the highest in Asia. It is about productivity. It is about whether the pilot cares about the company, whether he tries to save fuel. You can tell a pilot a thousand things to do. If he does not want to do it, he will not do it. Then, 40% fuel cost goes to 50% fuel cost. That is why the culture is so important. This is how we work at our airline. If they don’t have it in their heart, if they don’t believe this is their company, they will not do it. We may pay higher, I did not know, to be honest, but we get more productivity.
Are you forced to come to India as you have to take deliveries of planes from plane maker Airbus SAS?
We buy aircraft based on what we know today. So, when we placed our order, India was not on the map. So we may need more aircraft.
Do you believe that secretly all the airlines in India want to see you fail, and then they can say, I told you so?
Of course they do. Let us not kid ourselves. They must hate me right now. But that is normal. There is always competition.
What kind of seat occupancy do you need to break even in India, considering the high cost structure?
About 57-58%, when we’re at a stable cost structure. We should get that at about seven or eight planes.
You are very optimistic about the domestic market at a time when most airlines are talking about international revenue.
Well, I started an airline three days after 9/11. We have been through SARS (severe acute respiratory syndrome,a viral respiratory disease), bird flu, tsunamis, earthquakes, yellow shirts, red shirts (rival political factions in Thailand). We have had a credit crisis, high oil, low oil. India’s got 1.2 billion people and there is so much to see. I have been in so many markets so much worse than India is right now—I think we thrive when things are not good and we have an ability to change our position. So I’m not a 100% sure, but I feel that the market is ready for AirAsia right now.
Will you fly to airports of Mumbai and Delhi as you are keen to skip high-cost airports?
They need to build a new airport, one that is not built by GVK and charges a lot of money. We can wait; patience is a virtue.
What went wrong with your Japanese airline joint venture All Nippon Airways?
We were bad partners. They are a high-cost airline and we are a low-cost airline. Rather than persevere, we just went for a quick divorce. The lesson: I will never ever work with another (premium) airline in my life.
What is the big Indian opportunity?
The population—1.2 billion people. The major opportunity is that everyone wants to come to India, but it is not easy to get here; another opportunity is the huge talent pool that enables you to grow quickly.
What have you learnt from Vijay Mallya and his grounded airline Kingfisher Airlines Ltd?
Focus. This is a tough business.
People saw me running around in a T-shirt and a cap and thought they could do it too, but it is a very tough business and needs meticulous focus. AirAsia’s model had been the same for 11 years. Vijay (Mallya) went from a low-cost to a premium to a short-haul to a long-haul to buying Air Deccan to turboprops (propeller-sriven small planes), but it was all mixed up. A bad biriyani. So, focus was really the key. AirAsia’s model is single-type Airbus A320 aircraft, 180 seats, up to four hours (average duration of flight), that’s it. But I did not need Kingfisher to tell me that.
IndiGo, which started small, is now the country’s largest airline—they’re trying to cut costs and struggling to do so. What will you do to keep costs down different from IndiGo?
One is, we have a lot of size and we own all our aircraft. IndiGo leases their aircraft, and so their cost of operation will be much higher. Owning is cheaper than renting. Airline leasing companies are like loan sharks, they charge a lot of interest.
In simple terms, what is the business plan of AirAsia India?
Put cash in, make profit.
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