Airfares in India will be a dog-eat-dog game and we will be the biggest dog: AirAsia India CEO
Mittu Chandilya, CEO of AirAsia's Indian operations, says he could take flight by end May.
One of the most successful low-fare airlines AirAsia is ready
to take to the skies in India. A day after its global CEO Tony Fernandes accused Indian carriers of ganging up to block its entry here, Mittu Chandilya, the 32-year-old CEO of the airline's Indian operations, says he could start flying by end May. In an interview to Rajesh Chandramouli, he details AirAsia's plans.
Excerpts:
Are you frustrated by this delay? (The original plan was to take off before December 2013.)
No. Frankly, a lot of people didn't expect us to come this far. I feel the government wants us here, but not our competition. Again, which competitor wants another competitor? I see their point of view. I also see the ferocity with which they have come at us. It shows that we mean what we say. We are here to change Indian aviation. When they are coming with that kind of ferocity, we will not disappoint them.
SpiceJet, Indigo and Jet Airways announced lower fares a few weeks ago. Your take?
Everything that is happening now is not really low fare. It is very gimmicky. Spot fares are done to spur demand. To be fair to our competitors, they have done it at the right time for themselves. They needed cash. The challenge for any airline is to see how to keep these fares consistently low. That is truly the low cost/low fare airline. That is what we are aiming to do. We will not have gimmicky fares and then hike up fares.
How cheaper can AirAsia fares be?
At fares of 4,500 announced by airlines in their flash sale, we will be at least 30% cheaper. It again depends on what routes you are going through, seasonality.
What is your initial business plan?
We will operate in every big city other than Mumbai and New Delhi. Mumbai and Delhi are attractive. Costs are not competitive and competition is a lot more. Plus, everybody is going there. Why would I want to go to an already crowded market, which is going to slow down my aircraft turnaround time? We will hit all other tier-I cities and some of the tier-II cities. We are trying to stay pretty much to the south. We will saturate the 12 to 16 southern airports first.
We will run an extremely streamlined operation. We don't have room for errors. Every plane, route, schedule - my room for error is just not there. With a low plane base, a single mistake can wipe out your entire month's profitability.
We are aiming for 8 to 10 planes. A plane a month is the plan. It is an aggressive plan. 16 cities are covered. I will be happy with 60% load factor, but what I am targeting is 110% loads. When we come in, the passenger will benefit. There will be a price war. The just ended ticket sale is pre-emptive. Everyone will start undercutting the other. It is a dog-eat-dog game. We have always turned out to be the biggest dog out there.
I am actually excited that they are bleeding. I can just come in and mop up the floor and take the business from them. This delay in getting approvals has helped us learn from our competitors.
The bleeding balance sheets of your competitors should worry you. Does it?
I am actually excited that they are bleeding. I can just come in and mop up the floor and take the business from them. This delay in getting approvals has helped us learn from our competitors.
What have you learnt from your competitors?
Indigo does a fantastic job of sale and lease back of their planes. They do a good job of maintaining their assets. They dispose off their assets in six years and turn that into profit. They get new assets and maintain them well. They are good in cash management. They can be much better on operational issues, vendor issues etc.
SpiceJet tried to deviate from one fleet type to two to hit tier-II cities. We will never do that. Individually their fleet was efficient, but when you put it together, one pulls the other down. The way the leases are worked out also shows a lot of work needs to be done.
Jet formed a beautiful airline. They came in when Air India was monopoly. It is difficult to learn anything from them as their structure is very different from ours. They spend so much time in training their crew.
What is your view on the Tata-SIA airline?
In India, there is no difference between full service airline and low cost ones. Fares are not different, aircraft are not different. When they come here, they will be another competitor. Our board is entirely different. We don't talk to them at all. That way, its healthy. I am a competitive guy. I believe in win and destroy. There is nothing like win-win situation, unless you top it with an agreement. Here, there is no agreement.
Excerpts:
Are you frustrated by this delay? (The original plan was to take off before December 2013.)
SpiceJet, Indigo and Jet Airways announced lower fares a few weeks ago. Your take?
Everything that is happening now is not really low fare. It is very gimmicky. Spot fares are done to spur demand. To be fair to our competitors, they have done it at the right time for themselves. They needed cash. The challenge for any airline is to see how to keep these fares consistently low. That is truly the low cost/low fare airline. That is what we are aiming to do. We will not have gimmicky fares and then hike up fares.
How cheaper can AirAsia fares be?
At fares of 4,500 announced by airlines in their flash sale, we will be at least 30% cheaper. It again depends on what routes you are going through, seasonality.
What is your initial business plan?
We will operate in every big city other than Mumbai and New Delhi. Mumbai and Delhi are attractive. Costs are not competitive and competition is a lot more. Plus, everybody is going there. Why would I want to go to an already crowded market, which is going to slow down my aircraft turnaround time? We will hit all other tier-I cities and some of the tier-II cities. We are trying to stay pretty much to the south. We will saturate the 12 to 16 southern airports first.
We will run an extremely streamlined operation. We don't have room for errors. Every plane, route, schedule - my room for error is just not there. With a low plane base, a single mistake can wipe out your entire month's profitability.
We are aiming for 8 to 10 planes. A plane a month is the plan. It is an aggressive plan. 16 cities are covered. I will be happy with 60% load factor, but what I am targeting is 110% loads. When we come in, the passenger will benefit. There will be a price war. The just ended ticket sale is pre-emptive. Everyone will start undercutting the other. It is a dog-eat-dog game. We have always turned out to be the biggest dog out there.
I am actually excited that they are bleeding. I can just come in and mop up the floor and take the business from them. This delay in getting approvals has helped us learn from our competitors.
The bleeding balance sheets of your competitors should worry you. Does it?
I am actually excited that they are bleeding. I can just come in and mop up the floor and take the business from them. This delay in getting approvals has helped us learn from our competitors.
What have you learnt from your competitors?
Indigo does a fantastic job of sale and lease back of their planes. They do a good job of maintaining their assets. They dispose off their assets in six years and turn that into profit. They get new assets and maintain them well. They are good in cash management. They can be much better on operational issues, vendor issues etc.
SpiceJet tried to deviate from one fleet type to two to hit tier-II cities. We will never do that. Individually their fleet was efficient, but when you put it together, one pulls the other down. The way the leases are worked out also shows a lot of work needs to be done.
Jet formed a beautiful airline. They came in when Air India was monopoly. It is difficult to learn anything from them as their structure is very different from ours. They spend so much time in training their crew.
What is your view on the Tata-SIA airline?
In India, there is no difference between full service airline and low cost ones. Fares are not different, aircraft are not different. When they come here, they will be another competitor. Our board is entirely different. We don't talk to them at all. That way, its healthy. I am a competitive guy. I believe in win and destroy. There is nothing like win-win situation, unless you top it with an agreement. Here, there is no agreement.
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