AirAsia plans 'zero fares' to take on competition, gain foothold in India

Maverick business tycoon Tony Fernandes-led AirAsia plans to make a splash in the Indian market as it launches this October offering schemes like 'zero fares' and other promotional fares to gain foothold in the country, which is likely to set off a fare war.

The airline, which plans to begin its stint in India with three aircraft, followed by ten in the next year, will target tier 2 and 3 cities in south India to begin with, Mittu Chandilya, chief executive, AirAsia India, said in an exclusive interview.

"India is an exciting as well as a challenging marketplace to be," says Chandilya, a former model and aviation consultant who will operate from the firm's office in Chennai. "With just 60 to 70 million Indians travelling by air, the opportunity is big. But the challenge will be to keep costs within control."

The Indian skies have seen low-cost carriers like Air Deccan and the likes of Kingfisher Airlines lose their plot and either sell off or shut down operations.

"In this market, you have to get your models and cost right," says Chandilya. "You need to drive home a culture of being low cost in everything you do."

Malaysia's AirAsia, which planned the Indian foray after the government opened up the aviation sector to foreign direct investment in September 2012, holds 49 per cent in AirAsia India while the Tata Group owns 30 per cent. Arun Bhatia, the owner of investment firm Telestra Tradeplace, owns the remaining 21 per cent.

Aiming to encourage more people in smaller cities to fly, AirAsia plans to keep its fares very competitive weaning away travellers from road and railways.

"I can't offer a fare equivalent to a third class in trains, but something like a first or second class can be done easily," Chandilya said.

Asked about issues like high airport charges in metros like Delhi and Mumbai and rising aviation turbine fuel costs, Chandilya said that he would hold continuous talks with the government on these issues and try to bring about a change.

"There is only so much you can do. First, you start with your own house, get the cost structure right without compromising on the security. We hope to lobby to get our structure right. The benefits should go to the entire industry."

Chandilya said that AirAsia will not operate to New Delhi and Mumbai airports due to the high airport development charges. "Moreover, air congestion at the Mumbai airport is extremely high making landing time-consuming. This is not the right time for us to go through this," he said.

In association with Mail Today