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BW Businessworld

A Questionable Flight Plan

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The aviation industry and passengers are abuzz with the news of a new airline — AirAsia India — taking its maiden flight. Finally, after over a year of wrangling with the authorities (the Foreign Investment Promotion Board clearance was given in March 2013), lobbying by rivals and despite Subramanian Swamy’s protests, AirAsia India’s maiden flight will take off on 12 June. The aircraft will be the only one in its fleet, which came in around March 21st and has been lying around since.

My best wishes are with the airline — not only as a well-wisher of a sector that is doddering no matter where one looks (Jet Airways, SpiceJet and, of course, the grand old Air India) but also as a passenger. All passengers are enthusiastically celebrating AirAsia India’s tantalisingly low fares, as was evident on 4 June, when tickets for the 12 June flight sold out in less than 10 minutes.

However, I cannot help but say that the odds are stacked quite firmly against the success of this airline and its impact on the immediate future. And here’s why. First, the airline’s hub is in Chennai which seems like an odd choice, especially since Bangalore was where the opportunities were most evident after the Kingfisher Airlines debacle. As soon as the launch date was known, SpiceJet dropped fares on the routes it expects the airline to ply. AirAsia India, however, has dropped the fares even lower, which is suicidal to my mind. Even if it does manage to offer rock-bottom prices, how long can it sustain them, is anybody’s guess.

The Centre for Asia Pacific Aviation’s Kapil Kaul says the airline is hoping to achieve amazing aircraft utilisation — 16 hours a day with 20-minute turnarounds. They must be hoping for magic since AirAsia’s existing operation currently reports utilisation levels of around 12 hours and the best practice globally for a narrow-body operation is just above 13 hours a day. So, Kaul argues, this sounds quite ambitious no matter which yardstick one applies. I’m not saying it’s impossible, but just that it would be making history in some ways.

I also find the people chosen to run and manage affairs the Indian business a bit odd. In a team of around 200, very few experienced hands have been taken on. I know AirAsia’s global CEO, Tony Fernandes, argues that it is not necessary to have highly experienced professionals in order to succeed and sometimes fresh out-of-the-box thinking is what is needed to make that difference. But India is no ordinary market. It needs highly experienced professionals who understand the ins and outs of running an airline — and even then, they have often failed to succeed. Before its first take-off, AirAsia India’s COO, who did not have any experience in the aviation industry and was selected by the airline, has already left the carrier.

Of course, the airline has Fernandes himself — who has to his credit the success of AirAsia in Malaysia. But no matter where one looks, the airline currently has plenty of troubles of its own. It has deferred deliveries of some aircraft for the next 4-5 years and the financial performance of all its subsidiaries has sharply deteriorated over the past year. So, he may have more pressing matters on his plate.

An industry veteran, who was a part of the IndiGo startup team, in fact visited Malaysia after the airline wanted to hire him and then refused because he felt “they were simply trying to replicate what they were doing in Malaysia” and he was less than convinced it would work in India.

The company, of course, would factor in losses for a while but the delays caused by India’s endless bureaucratic requirements has made the airline already spend a fourth of its startup capital (paying the staff and the cost of the A320 that’s been cooling its heels for almost three months while all the permits come in) even before it spreads its wings.

So while I wish it luck, I remain a sceptic, who would be more than happy to be proved wrong.

(This story was published in BW | Businessworld Issue Dated 30-06-2014)