Co re­vis­ited routes, ser­vices and hubs while wait­ing for nod, says In­dia CEO

The Economic Times - - Business Of Brands - ANIR­BAN CHOWD­HURY

AirAsia In­dia re­worked a large part of its net­work plan, dis­tri­bu­tion strat­egy and even hir­ing in the months that led to get­ting the fly­ing per­mit for In­dia op­er­a­tions, the air­line’s chief ex­ec­u­tive said re­cently.

“I tell you the one ben­e­fit of go­ing through the en­tire process through the year is the chance to re­visit and re-eval­u­ate cer­tain net­works, cer­tain routes, cer­tain plans, cer­tain ser­vices that we may be of­fer­ing or may not,” Mittu Chandilya told ET in a re­cent in­ter­view. “We have relooked at net­works, we have relooked at hir­ing per­son­nel and which ar­eas we were putting them in, our turn­around times; ev­ery­thing,” he added.

Some of the plans — such as set­ting up a sec­ond hub at Kochi — were dropped early. The de­ci­sion to in­clude Delhi as part of its net­work took much longer. AirAsia had ini­tially de­cided to drop Delhi and Mum­bai from its net­work but later de­cided it was im­por­tant to its aimed pan-In­dia pres­ence. This in turn will lead to some more route ra­tio­nal­is­tion, said Chandilya.

“If you take Delhi-Chen­nai, the flight takes two and a half hours. Go­ing by our air­craft util­i­sa­tion model we can only do four flights of that du­ra­tion, which means we have to ra­tio­nalise some other routes,” he said.

Early May, AirAsia In­dia cleared its last reg­u­la­tory hur­dle and is now giv­ing fi­nal touches to its launch date. The launch of the air­line, glob­ally fa­mous for its ag­gres­sive fares, is looked at with some anx­i­ety by com­peti­tors. Chandilya has claimed the air­line will price its tick­ets 30%-35% lower than the aver­age of­fered by ri­vals. And yet break even in four months.

The air­line has al­ready piled up a to­tal cost base of $5 mil­lion and is still spend­ing $30 a minute as its air­craft re­main grounded and its 277 em­ploy­ees are paid salaries.

Some costs can’t be touched. The govern­ment, two years ago, al­lowed In­dian car­ri­ers to im­port ATF, but AirAsia doesn’t plan to do it, said Chandilya. “It doesn’t make busi­ness sense for us. The lo­gis­tics of im­port­ing fuel is sig­nif­i­cant. The cost is sig­nif­i­cant and un­less you have scale — say 20-30 planes — it doesn’t make sense,” he said. In In­dia, only one low-fare car­rier In­diGo has started im­port­ing ATF. SpiceJet un­der­took pi­lot projects but hasn’t started im­port­ing. Sim­i­lar plans of na­tional car­rier Air In­dia are also on hold. World­wide, one of AirAsia’s main rev­enue en­hance­ment tac­tics is via un­bun­dled fares, some­thing Chandilya said the air­line won’t im­me­di­ately be able to make full use of in In­dia. The In­dian govern­ment last year al­lowed air­lines to charge for other ser­vices such as seat se­lec­tion separately than the fare, but capped the num­ber of seats that can be sold thus. “On commercial terms, there are cer­tain charges you can’t levy. The un­bundling of fares has hap­pened but there are a lot of things very much in the works.”

Also, the air­line has had to tie up with ev­ery ma­jor travel in the coun­try, some­thing it keeps to zero or very min­i­mal in its par­ent or other sub­sidiaries. Chandilya how­ever main­tained that he has been “pedan­tic” about low­er­ing costs. “We have scru­ti­nised ev­ery cost that we have. Ad­min­is­tra­tive costs, fa­cil­i­ties cost, clean­ing sup­plies cost. We have looked at ev­ery cost: elec­tric­ity costs, trans­porta­tion costs, how much fuel I am burn­ing to ferry my crew around..” Also, the air­line is not mak­ing any com­pro­mise on food. “Food is some­thing I am in­vest­ing quite a lot in. Be­cause as In­di­ans we love food. We want warm food, a menu that's lo­calised. We may bring in some in­ter­na­tional cui­sine too. I be­lieve in food so much that I put in an oven (aboard flights) And these ovens are heavy. As a low cost air­line, it means you are burn­ing more fuel and more cost. But I be­lieve just be­cause you are fly­ing a low cost car­rier doesn’t mean you don’t get warm food.”

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