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