Tuesday, 19 March 2013

AirAsia India needs right cost structure to boost Indian market

MUMBAI: AirAsia India needs to get the right cost structure to stimulate the massive Indian domestic market to fly, AirAsia Group chief Tan Sri Tony Fernandes said.

Although AirAsia had a respected brand, Fernandes knows that price would be the main differentiator in the Indian venture and would be the main selling point for the start-up.

"Let's not kid ourselves, the main thing that will drive passengers is price.

"We have a strong brand loyalty, a good distribution system and Asian route network but the key is the right cost structure so we can offer the right fares to stimulate the massive Indian domestic market to fly," he told Routes News.

AirAsia India is a 49:30:21 joint venture between AirAsia, Tata Sons and Telstra Tradeplace of Indian investor Arun Bhatia.

Fernandes acknowledged that AirAsia has had a tough time in India in the past but this proposed expansion into India's domestic market has been something that has been discussed internally for the past three years.

"It has been tough for us to develop a low-cost structure to compete effectively in India, but we now have the recipe to achieve this," he told the magazine.

This is where the carrier's partnership with Tata Group comes into play.

Fernandes also acknowledged that although it has the operational expertise it would have to rely on its joint-venture partners to provide the insight into the Indian way of life and travelling habits. India, he said, offered huge opportunity.

"If you add up all the aircraft in India, it doesn't match the number currently in Malaysia, yet the population is around 50 times larger.

"This is a huge opportunity but requires change. We haven't jumped in quickly. We have done our homework and go into the domestic market with our eyes wide open," he added.

Fernandes believes that a number of failures in the Indian market have been due to cost levels, and therefore fare levels haven't been low enough.

"We looked at all the cost structures of the existing Indian operators but felt growing organically with our own partnership was the stronger option. This is primarily what we have always done," he noted. - Bernama

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