AIRASIA INDIA IN TALKS TO LEASE 10 NEW AIRCRAFT

Tata Sons’ focus on ramping up low-cost carrier biz has raised airline’s confidence

Tata Sons-owned Airasia India is charting its growth, with the issues related to ownership now behind. It intends to add 10 new aircraft to its fleet, and has sounded off aircraft lessors for the same. Tata Sons believes there is a necessity to increase business in low-cost aviation, which has lent confidence to Airasia India.

Tata Sons-owned Airasia India is charting its future phase of growth, with the issues related to ownership now behind.

It intends to add 10 new aircraft to its fleet, and has sounded off aircraft lessors for the same.

These are over and above the three Airbus A320neo planes that it plans to induct by June next year as part of its fleet and network expansion.

Tata Sons believes there is a necessity to increase business in low-cost aviation, which has lent confidence to Airasia India to chart its growth strategy.

Airasia India currently has 33 aircraft in its fleet. Of these, seven belong to Airasia Berhad, which are likely to be returned.

“There are firm plans for growth lined up. There are discussions with lessors to find A320neo aircraft. With rates in the leasing market now low, this is the right time to acquire those with favourable terms and conditions,” said a person aware of the development.

The newer A320neos will help the airline reduce its fuel and maintenance costs.

Tata Sons recently took firm control of the airline, increasing its stake to 84 per cent from 51 per cent.

Tata Sons also has a call option on the remaining 16.33 per cent. People aware of the development say the Tatas are set to exercise the right, which will give a total exit to Tony Fernandes-owned Airasia Berhad by mid-2021.

Besides Airasia India, the Tatas hold 51 per cent stake in Vistara (a joint venture with Singapore Airlines), and are also looking to acquire 100 per cent stake in Air India.

While Tata Sons plans to reorganise its aviation business for simplification and consolidation, the management at Bombay House strongly feels that to be profitable in Indian aviation, there is a need to be present in the low-cost aviation business, said people privy to discussions.

“There is absolutely no doubt that low-cost carriers (LCC) are going to dominate — not only the Indian but also the

Asian market — in the near future. Hence, this fact cannot be overlooked when the group lays plans for its aviation business,” the person said.

Since their introduction during the early 2000s, LCCS have seen rapid growth in the Indian domestic market. Market share of legacy carriers such as Air India and Indian Airlines decreased substantially, giving rise to fierce price wars among carriers. Kingfisher Airlines and Jet Airways became a casualty of this full-blown price war.

Experts say full-service carriers — which depend on business travellers for better yield — will find it much harder to make money in the post-covid world, given that corporate travel has seen a substantial decline.

The consensus is that in 2021, business travel is unlikely to revive to even 40 per cent of 2019 levels. This would mark a decline of 60 per cent in business revenues and yields, which may make many routes serviced by wide-body aircraft unviable.

LCCS, which have their fleets dominated by narrow-body aircraft, could be well suited to the new environment in Asia once travel restrictions ease, said aviation consultancy firm CAPA in an analysis.

“Domestic and international short-haul demand will recover faster than long-haul routes, but traffic will still be down, thus making smaller aircraft preferable to in the immediate future,” CAPA noted.