Air Asia India – The “U” turn airline

Air Asia India started operations in June 2014 amidst much fanfare, including an event where bikers with Air Asia flags and the top management in open deck bus made their way from Bengaluru city to the airport – their main base. I have always been skeptical about growth and sustenance for Air Asia India and while I wish good luck to every airline and operator, so far I have been proved right in terms of Air Asia India. So far we have only seen a serious foot in mouth syndrome which has made me compare the airline with Paramount – another airline which was famous only for announcements.

I have wanted to review the operations of the airline and its constant U turns (hence the title), but stayed away – thinking it’s too early, but I thought I should write before it gets too late.

My only posts about the airline were about competition mirroring its network in August 2014. (Let the battle begin – IndiGo launches non-stop Bengaluru Chandigarh service to counter Air Asia India, More thoughts on rivalry between IndiGo and Air Asia India)

My only experience with them turned out to be a disaster except for the food. (A delayed Air Asia India Experience. Are they taking passengers for a ride?)

The “U” turns!

The airline’s maverick head – Tony Fernandez announced on Twitter his intention to set up an airline in India after Foreign Direct Investment (FDI) norms were relaxed. The group, tied up with Telstra and Tata’s to form Air Asia India. Tata’s – further tied up with Singapore Airlines to form Vistara, which incidentally has a wider network, bigger fleet, newer aircraft and all this within just three months of starting operations.

Air Asia announced that it would set up a hub at Chennai – a decision it reversed and moved to Bengaluru, the airline was to break-even in 6 months from the start of operations. While the shift from Chennai to Bengaluru was an easy one, I know quite a few people who had joined the airline because they wanted to shift to Chennai!

Since then till today – a recap of things which were said and never materialized

  • Chennai will be hub of Air Asia India and will be used to connect to Tier II cities
    • “To operate out of Chennai was a natural choice”
  • Airfares will be 25-30% lower than others
  • Airline will achieve break even in four months
  • We will stay away from Delhi and Mumbai because operating charges are ridiculously high
  • Airline will have 6 planes by December 2014
  • Air Asia to start services to Mumbai from early 2015

Interestingly the airline said that all seats were sold out for the first three months ending with much lower load factor and then pulling out of Bengaluru – Chennai – Bengaluru sector for good.

This article in DNA was a nice read – Unhappy Air Asia promoters put pressure on management to deliver

The airline cribbed about an array of issues – fuel costs, infrastructure costs, Route Dispersal Guidelines, 5/20 rule, fare matching by competition and network copying. Barring the last two points, everything else was known before entering the market. For the last two points, anybody and everybody would be factoring in competition reaction as part of “Go-To market” strategy. All the issues listed by the airline indicate a system wide failure to understand the market in the planning stage. Chennai did not see slot constraints after Air Asia decided to base themselves, they were always present!

Network Copying and IndiGo effect?

Nobody likes competition, so to expect that neither of the existing airlines would take Air Asia India head on, is naïve. However, what happened in this case what that everybody went head on – including the ATR42 of Air India!

While the reference could well be towards IndiGo, the pullout from Bengaluru – Chennai sector was more due to Jet Airways which has eight frequencies on the sector followed by Spicejet which has four.

After promising 30% lower fares – something which has vanished in thin air, it was the ATRs of Jet Airways with significantly lower operating costs which gave the tough fight and not IndiGo.

I wonder if Spicejet, IndiGo, Jet Airways, Go Air, Air India and Vistara should say that Air Asia has resorted to network copying as the airline started operations from Delhi to Guwahati, Goa and Bengaluru.

Chalo Delhi!

The first indication of Air Asia India adding a hub in Delhi came in this article: Delhi Airport’s Kiran Jain on being proud to be an Alpha Women

Delhi is a massive market, but is fiercely competitive as well. The airport saw 27,451,131 domestic passengers fly out from April-2014 to March-2015, at a growth rate of 13.5% over the previous year. The airport saw 9565 domestic departures in April’15 with 32% of them by IndiGo. The airport also has an interesting split of 51% of all departures being by Low Cost Carriers and 49% by Full Service Carriers.

However, Air Asia India had to expand somewhere and Delhi could well be a good bet for it.

Ground Time

The airline much touted its strategy of having quicker turnarounds. In reality, when you are going longer sectors like what some of the aircraft of Air Asia India are doing – you tend to have higher utilization but lower flight count. In such a scenario, the 00:05 saving doesn’t really help a lot in terms of adding a flight. At best, it could help have better timings for the last flight of the day but within a span of 00:15.

A quick glance at the network makes it clear that the airline which claims 00:25 turnaround plans for it only at Chandigarh and Jaipur. Chandigarh is a single flight station where it operates to from Bengaluru while Jaipur sees double daily operations from Bengaluru and single flight from Pune.

I5 ground time

Interestingly, its new hub at Delhi, sees one aircraft on ground for as high as one hour and forty minutes in the middle of the day.

Utilization & Operational Summary

Since the airline pulled out of Bengaluru – Chennai – Bengaluru double daily flights, the utilization levels had reached below 10 hours, which will see a quantum jump with the Delhi based rotations clocking 15:10 and 11:55 respectively.

With the addition of Guwahati – Imphal sector, which was expected to fill up the mandatory Cat 2A ASKMs under Route Dispersal Guidelines, the utilization is 12:17 daily, making it equivalent to what the Q400s do for Spicejet.  The B737 fleet of Spicejet and A320 fleet of IndiGo fly much more without considering the international operations

With existing flights the operational summary would be

  • Average Flights per day: 6.4
  • Total weekly flights: 224
  • Average Utilization: 12:17
  • Average Stage length: 1567 kms
  • Stations: 10

What Next?

A lot of people have asked me if Air Asia India will leave the country or sell out or see management changes. While the last cannot be ruled out, the first two will not happen. With the government planning to do away with 5/20 rule sooner or later, Air Asia India will get to fly international soon. Whatever the airline has said in the past indicates that it is interested – more in the international sector rather than the domestic one. However, in the past, Air Asia as a group has certainly shut shop or pulled out of ventures. Air Asia Japan is the biggest example of them all.

With a large aircraft order with the parent and some spare aircraft which can be arranged from the group, expanding rapidly will not be an issue. However, sustaining till then could well be an issue.

India is not an easy market to crack. People want cheapest tickets and highest levels of service. Market leader IndiGo will not be the only one fighting tooth and nail. Delhi – Goa and Delhi – Guwahati have traditionally been Spicejet strongholds and the airline continues to have a lot of goodwill in these markets along with large share in the group bookings segment – something which Air Asia is not accepting right now.

The airline serves tasty food, but the market has not yet identified anything beyond this. Sustained on time performance, wider network reach, sustainable yet affordable fares is what will make the airline a preference of choice. Today, it is not strong in either of it.

As I conclude, I am reminded of the military saying “The more you sweat in peace, the less you bleed in war”. Was this applicable to Air Asia India too? Better planning could have helped avoid these U turns? Or are the airline and its management purposely doing this believing in “Any publicity being good publicity”. It is difficult to decipher and only time will tell, where the airline goes from here. The latest that I have heard at the time of Delhi launch is – at the end of 2015 the airline will have 12 to 14 aircraft! I wish them good luck and I hope the skies are red and the balance sheet black!

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2 thoughts on “Air Asia India – The “U” turn airline

  1. Abhishek biswas

    Spicejet was the leader in Delhi Guwahati sector. However, it has reduced frequency from 3 to 1. Also, landlocked Manipur which is crippled by frequent strikes & Hartals – some lasting for more than 60 days, Air Asia can cash in. However, increasing frequency in Delhi Guwahati sector can help it corner market share. They can also mirror indigo in Guwahati Bangalore sector as they are the only ones flying non stop.

  2. Pingback: Easy to Blame, Hard to Change – Air Asia’s India dilemma? | Network Thoughts

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