AirAsia: aggressive plan for India domestic service

MUMBAI Mon Jul 1, 2013 3:36pm IST

1 of 4. An Air Asia Airbus A320-200 aircraft approaches its parking space at the Low Cost Carrier Terminal (LCCT) in Sepang, outside Kuala Lumpur March 21, 2012.

Credit: Reuters/Tim Chong/Files

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MUMBAI (Reuters) - Budget carrier AirAsia(AIRA.KL) plans to aggressively grow its Indian affiliate's fleet by adding 10 planes a year and will focus operations on the country's under-utilised airports, the group's chief executive Tony Fernandes said on Monday.

AirAsia India, a joint venture between the Malaysia-based low-cost airline, Tata Group and investment firm Telestra Tradeplace, is expected to begin a domestic service from Chennai in the fourth quarter of 2013.

It will focus on connecting under-utilised airports within India instead of offering services to the country's main hubs Mumbai and New Delhi, Fernandes told a press conference in Mumbai.

To do this, it has an "aggressive" plan to add 10 Airbus A320 aircraft a year to its fleet, he added.

"Game plan is very simple. We want to have the lowest fares, we want to improve connectivity within India. We think there are a lot of routes that are just not done," he said.

"If you look at air travel, it's so concentrated on Delhi and Mumbai ... there is a huge amount of airports that are under-utilised."

India's low-cost aviation sector is developing slowly, with the three main budget carriers operating only about 130 planes across the country of over a billion people.

AirAsia will initially concentrate on southern India from its Chennai base before expanding to other parts of the country, Fernandes said.

Its main competitor out of Chennai will be domestic low-cost carrier SpiceJet, while other Indian low-fare carriers include IndiGo and GoAir.

The domestic tourism market will play a big part in the airline's success, said Fernandes.

"India will become a very big hub for us eventually," said Fernandes.

The airline will offer only domestic services, as under Indian regulations the country's carriers cannot fly on international routes until they have at least five aircraft and have clocked up five years of operations.

AirAsia last week announced its exit from the Japanese market, which it entered with much fanfare via a joint venture with All Nippon Airways (ANA)(9202.T). The relationship, however, broke down over the last year as the two squabbled over AirAsia Japan's strategy and ANA said that it would buy out its partner.

Fernandes said that AirAsia and ANA were "bad partners" and that he would "never work" with another "premium airline" after the ANA experience, and following an acrimonious exit from a cross-shareholding agreement with Malaysian Airline System Bhd (MASM.KL) in 2012.

"ANA is the highest cost airline in the world, we are the lowest cost. Opposites don't attract. We just had a completely different vision of how to run the airline. Nothing is wrong with the market, the market is fantastic," said Fernandes.

"The lesson is I will never ever work with another airline in my life. Let me qualify that - premium airline."

(Reporting by Aradhana Aravindan; Writing by Siva Govindasamy; Editing by Prateek Chatterjee and Jeremy Laurence)

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