AirAsia on the aggressive, CEO Fernandes says to add 10 aircraft each year in India

Tony Fernandes, Group CEO of South East Asia's largest low-cost airline, AirAsia - which will soon enter India in partnership with the Tata Group - on Monday said that of the 25 aircraft it will add to its global fleet annually, 10 will be deployed in the Indian market.

He said Air Asia was targeting an October launch of its India venture and was awaiting regulatory approvals.

Fernandes, currently travelling to different Indian cities to explain his low-cost model to Indian authorities including civil aviation ministry officials, said he had almost finished hiring even the second line of the management team which would run AirAsia India.

In June, the airline had announced the appointment of Tata Group heavyweight S. Ramadorai - former head of TCS and currently advisor to the prime minister on skill development - as Chairman earlier along with Mittu Chandilya, a Singapore based consultant, as CEO.

"Fares in India are not low enough as the Indian market is not stimulated enough," said Fernandes.

He declared that his strategy while offering the lowest fares in this market will be to create more connectivity for under-penetrated regions. He will offer new routes to help small and medium enterprises develop their businesses and tap the migrant workforce which often travels home and back.

Fernandes said he would be able to manage his costs and revenue structure well in India and offer fares lower than the Gurgaon-based IndiGo, currently the largest airline in the country, as Air Asia will save substantially on  aircraft acquisition costs.

"We own our aircraft but IndiGo leases them all. Aircraft leasing companies are loan sharks," he said. AirAsia India, if it leases aircraft from any Malaysian company, can do so at a significantly lower cost than IndiGo and at an interest rate of little as three per cent, explained an AirAsia company official.

"We are not here to eat into the market share of other airlines, we will create our own market," Fernandes said.

He is known to have successfully stimulated and developed less connected regions as major routes in Malaysia where he is based. Fernandes also said that in India he would not only partner with travel agents for ticket sales but also try and for online sales.  

Nearly 80 per cent of the airline's inventory is sold through the Internet in Malaysia, but the reverse is true in India.

Fernandes said his airline would offer 15 kg of free baggage to passengers in India but would still target 100 per cent earnings in ancillary revenues. He gave no details of how he would do so, considering other Indian carriers have struggled to get significant returns on ancillaries.

Chandilya, who was also present and interacting with the Indian media for the first time, said the brief given to him for the India venture by Fernandes was to start making money from day one. "We are concerned about cost management and have to get that right," Chandilya said.

Asked if his consultancy background would not be a hindrance, since he lacked close knowledge of the aviation sector, Chandilya promptly dismissed the charge.