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Air Asia to bring back affordable fares to India

July 4, 2013 Aviation, Headline News No Comments Email Email

egtmedia59Air Asia India that is likely to begin operations by winter is optimistic on bringing-in affordable fares back in aviation. Air fares have risen sharply after the closure of Kingfisher airlines last year.

Tony Fernandes, Group CEO, Air Asia was in capital New Delhi on Tuesday to meet the Indian Aviation Minister. He said at the press conference: “AirAsia will try to make flying more affordable in India. We will have the right cost environment to stimulate the market. Our game-plan is very simple. We want to have the lowest fares and improve connectivity within this vast country because we think there are lots of routes that are just not served here.”HH250x250-3

Industry is skeptical on this. Madhav Oza, Director, Blue Star Air Travel Services told eGTM: “It’s gutsy of Tony Fernandes to announce affordable fares in the existing tough scenario in India. Airports and associate services are at pretty high costs, rendering most airlines (operating here) unprofitable. It’ll be remarkable if Air Asia can achieve its goal under the same environment.”

Air Asia is looking at carving out a new market in India and will start operations in South India with Chennai, Kochi and Bangalore as potential hubs. Fernandes said: “If you look at air travel here, it’s so concentrated on Delhi and Mumbai. There are a huge number of airports that are underutilised. Recent announcement by the (Indian) Prime Minister to build 50 new airports will go a long way in achieving this objective.”

Fernandes said: “There is no rush for us to go to New Delhi and Mumbai airports, as they are charging crazy. But eventually, we may have to go in there, say when these cities have a second airport or low-cost terminals or when we really scale up,”

Will this trigger another price war and more losses for ailing airlines? What is in store for travel agents?

Oza said: “If Air Asia succeeds (in offering affordable fares), other airlines will be forced to compete on fares and might have to suffer more losses. Passengers will definitely have a good time. Majority sales still happen through travel agents as credit card penetration is very low in India. Airlines, whether LCCs or otherwise, will eventually have to depend on agencies for sales.”

The $ 100 billion Tata group has a 30 percent stake in the new airline company, without any operational responsibility. Air Asia has 49 percent and Delhi Telestra Tradeplace, the remaining 21percent.

Fernandes has said that Ratan Tata, Chairman Emeritus of the Tata group will be playing an active role in what he (Tata) feels is a different enterprise for India.

AirAsia India had announced the appointment of former Tata Consultancy Services (TCS) Chairman S Ramadorai as its Chairman last month. The new LCC is planning to start operations with three aircraft and further add at least 10 aircraft annually.

Written by : Anand & Madhura Katti

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