AirAsia India: A game changer

A favourable decision on improving the sales tax structure on ATF in India will significantly add to the profitability of airlines, says Vishal Bhadola, Associate Manager, CAPA India.

With AirAsia India coming in, how do you perceive will the Indian aviation scene change?

When it comes to AirAsia India, they have got the approvals. However, about the strategy that they are talking about on commercial decisions, it remains to be seen whether we have enough freedom in Indian

India is a big market but it remains to be seen if the cost structure helps the airlines to make a sustainable model out of it. Currently the operating costs are very high as the airlines are pricing below their cost

Vishal Bhadola Associate Manager CAPA India

aviation for the airlines to decide themselves what they want. We don’t see any major issues as such when it comes to them taking a specific strategy to come out with their ancillary plans. It is well perceived in the industry that AirAsia India will come out with

a game changing ancillary revenue strategy, which is also their forte in some of the other markets. We have seen that some of the things that airlines in India are trying to do in the last few years AirAsia might just change that game and that might help them differentiate their product and offer a cost or a price base in India which is substantially different from others. It could be a very good strategy for AirAsia India.

What are the most pressing needs for which decisions are needed on an urgent basis?

Decisions are needed in policies, not just in terms of aircraft purchase, but also in terms of ATF. It’ll be a huge relief if a favourable decision on improving the sales tax structure on ATF in India is taken and that’ll significantly add to the profitability of airlines.

With new players coming in, how do you expect the Indian aviation sector to change?

For a good 6-7 years now, no national license has been given to any airlines. There were only regional licenses given. Recently one big group has got the license and another one is on its way to getting one, and there are regional players who are willing to start operations. India is a big enough market for more number of players but it remains to be seen if the cost structure helps the airlines to make a sustainable model out of it. Currently the operating costs are very high as the airlines are pricing below their cost. But in terms of market, the Indian market is growing. We can have more airlines but somewhere we’ll have to see if the cost structure is in line with the growth that we want and airlines will have to align their cost structure with market realities. Otherwise, we could sense that many airlines are finding it very difficult to sustain. Many airlines have registered losses recently. This trend will continue in India if the cost structure is not aligned quickly.