| The flamboyant and Twitter-addicted Tony Fernandes, CEO of south Asia's leading budget carrier AirAsia, discusses with G Balachandar AirAsia's plans post the three-way Indian joint venture with Tatas and Arun Bhatia Telestra Tradeplace. Edited Excerpts: Why India, why now? I think India is ready for AirAsia and we have also grown to understand the Indian market better. We are waiting for approvals and hope we can start the operations this year. Is your plan to start operations by second half intact? It is hard to say when we will start exactly as we have not got all the approvals yet. September is bit too ambitious, but I still hope we can start this year. We are at present in the NOC (no objection certificate) stage and as soon as we get it from home ministry, we will submit for AOC (air operator certificate). But NOC approval is the key. How confident are you about Indian venture? Our main purpose is to explain why AirAsia has been successful and what we require to really change the aviation scene in India. If one goes by the numbers that are either stagnant or going backwards, the aviation market has not changed at all here. One can see so much development by way of new airport terminals, metros, mono rails, etc and can notice the vibrancy of the economy. But aviation has not grown the same way. I feel aviation is critical to the development of economy. About 11 years ago, we catered to two lakh passengers and this year we will carry about 44 million passengers. That kind of growth has not happened here. We will be explaining to the government how we have developed a complete aviation market. The biggest beneficiaries of low cost carriers would be small and medium businesses, tourism segment and migratory workforce. So, we are trying to explain our successful model and how government can facilitate it. Is India a difficult market in terms of policies or operating environment? I don't think it is. This is a myth, honestly. I don't think India is any different from Malaysia, Indonesia or other markets. There is bureaucracy everywhere. On the operation side too, we had challenges in other markets. When we started our operations in Indonesia and Malaysia, there were no low-cost terminals. I think we have to earn the respect of the government and airport authorities. We will have to work with them and show them the benefits. We have not felt so far like "it is risky to put money here". We find Indians and Indian government very pragmatic. So, if you present right case, I am sure you will find support. What do you think of low cost carrier market in India? Low cost model is very different from the premium model. Though Indian operators had the right fare structures, they didn't have the right cost structures. Hence they lost money and failed. The key thing in this business is the right cost structure. Also, about 50 per cent of the routes of AirAsia are new routes that other operators have never flown before. It is not just about flying to metros or big cities, it also about tapping the newer locations. Until now, there is no true low cost carrier in India. The premium ones have low cost products and other low cost ones have moved up in the value chain. So there is no one that is really, really a low cost carrier in India in my view. Why didn't you choose to acquire an existing player here? We have generally not been good at that. We are good at starting things organically and building up. Because when you buy an existing airline, we need to recreate the culture and it is not easy to impose our culture on them. We are a very open and transparent organisation with a flat structure and hence prefer to start organic. Of course, it does come with lots of problems. But we still believe that it is the best way for our business model. What is Tata's role? They will bring a lot of local knowledge to the venture — marketing, structuring of internet products, distribution etc. They are in many ways at the sharp end of the customer cycle. Through Tata Nano, they are trying to allow people, who never dreamt of owning a car, to have a car. Our model is also exactly the same in aviation. In Malaysia, most of our initial passengers were the ones who had never travelled on a plane before. Ratan Tata is one of the most successful businessmen not only in India but globally. To have such an experienced and successful businessman as mentor along with S Ramadorai as chairman and young Mitu Chandilya as CEO is pretty perfect opening combination. What are your initial plans for fleet and staff? We will start with three Airbus aircraft with sharklets and have plans to add one aircraft every month. We hope to have a fleet of 12 aircraft by next year. Every operator is focused on Delhi and Mumbai. We will start looking at lot of new destinations and at the markets that have been under served. For example, Tiruchi in the south. No operator had connectivity to Tiruchi from Kulala Lumpur and it has an average load factor of over 80 per cent. We like to do things no one has done before. We will go step-by-step and slowly paint India red. In the beginning there will be about 150 people in addition to the existing workforce here. We generally add about 30 people for induction of each additional aircraft. How important are distribution channels in India and what are your plans for corporate segment? Very important. We are an internet-based company but will that work throughout India? Probably not. But we will work with distribution channels and try to capture a larger demography. We will look at all possible options such as partner banks, payment for tickets through ATM, among others. Corporate segment won't be our initial target or main segment as our intent is to stay focused on the lower fares and simplest products. But as we increase frequency, we will start attracting them too. What about the cost structure in India? In the first part, we will offer discretionary pricing for every extra bag one carries, seat he chooses or food he wants and that will take care of the cheap pricing of the ticket. We will be really democratic in our fare structure. If you bring more bags we will charge you more. The person who brings no bags is actually subsidising the person who brings more bags. Thus it is unfair. Part of ancillary income is the value added services that you may or may not want. Second part is to capture the potential in other needs of customers who may be spending on hotels, products, insurance etc. We will try to fill in those areas and that is what we have been working for the past 12 years. Given the challenges like higher fuel costs and taxes, will Indian operations take little longer time to break even? Well, we are forecasting it not to be. We expect a fierce response from competition when we start our operations here. Actually, we took two years in Thailand, three years in Indonesia and one year in Philippines to make money. We have learnt in each market and hope to generate profits in a year's time here. However, aviation fuel is not a problem. The fuel price was $30 when we started out business, but it is $115-$120 now. But we have the best margins as we had other ways of reducing costs. Who do you think will be your major competitor? I would say we really are our own competitor. Because people expect a lot from us. We have to deliver the lowest fares every day. So we have to make sure that we have a disciplined lowest cost and good quality product. balachandarg@mydigitalfc.com  via Business - Google News http://news.google.com/news/url?sa=t&fd=R&usg=AFQjCNE43pBl1MyyQKlUud0ei5bHLDXciw&url=http://www.mydigitalfc.com/news/%25E2%2580%2598airasia-will-be-aviation-industry%25E2%2580%2599s-nano%25E2%2580%2599-275 | |||
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