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AirAsia Indian targets smaller cities in an attempt to attract customers without competing with homegrown incumbents, a strategy that will eventual lead the carrier to bigger cities as its fleet and reputation grow.

AirAsia’s new joint venture in India will begin domestic flights in October to underserved Chennai, Bangalore and Cochin cities in the south, the budget airline’s Chief Executive Tony Fernandes said Wednesday.

The Chennai-based AirAsia India will start out with three Airbus jets and plans to add 10 additional planes each year, Fernandes told reporters.

Fernandes was in New Delhi to tout the new low-cost carrier, a joint venture with Indian conglomerate Tata Group and investment company Telestra Tradeplace.

Malaysia-based AirAsia holds a 49 percent stake, making the carrier the first airline set up with foreign money since the Indian government relaxed investment restrictions in aviation as part of reforms to help revive a slowing economy.

The airline will not fly to New Delhi and India’s business capital Mumbai because of the heavy concentration of flights from those hubs as well as high-terminal costs there, he said.

Fernandes said his airline wanted to expand the fledgling aviation market by servicing smaller destinations as opposed to competing on saturated routes with existing domestic airlines like IndiGo and SpiceJet.

“The Southeast Asian aviation market is far ahead than India,” he said, “which is ridiculous with the amount of talent in this country, the amount of economic activity in this country and the amount of tourism potential.”

Fernandes said he wanted to make air travel accessible for Indians with cheaper fares and more flight choices. “Flying is not for the rich. It should be for everyone.”

The company will initially only operate on domestic routes because Indian aviation laws require airlines to have at least five years of flying experience and to operate at least five airplanes before being eligible to fly internationally — a regulation that Fernandes called “bizarre.”

Southeast Asia’s top budget carrier with ventures in Indonesia, Thailand and the Philippines, AirAsia hopes to cash in on the expected rapid expansion of the undeveloped aviation market for India’s 1.2 billion people.

India’s annual airline passengers, both domestic and international, now total only 160 million. The Center for Aviation, an industry consultancy, predicts that number will nearly triple to 450 million by 2020.

While the Indian airline industry has expanded enormously in recent years, only one airline, IndiGo, has been able to turn a consistent profit, while others suffered from labor strife and mismanagement.

Copyright (2013) Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.


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