 "IndiGo runs best shop, will be competing with them: Mittu Chandilya")
After almost one year of operations in the country, AirAsia has chosen Delhi as its northern hub and its flights from the national capital to Bengaluru, Goa and Guwahati will be operational from Thursday. AirAsia Chief Executive Officer Mittu Chandilya tells Somesh Jha and Surajeet Dasgupta that the airline will have a total of eight aircraft by the end of this year and aircraft utilisation will go over 13 hours. Edited excerpts:
How many aircraft you plan to induct by the end of the year?
We have a total of five aircraft. We will easily have a total of eight to nine by the end of the year. So, another three to four should come in this year.
No, we will open up to a lot of tier-II cities. I am not particularly keen on any more metros.
Why so?
I think the metros are very saturated. Our model is tier-II cities and giving people an opportunity to fly. Delhi has been a deviation because we needed a northern hub. Delhi made sense because of political reasons and airport infrastructure.
Globally, AirAsia is known for its low-cost model. How has been the experience in India so far?
India has some of the lowest fares in the world with the highest cost and that is the reason airlines don't usually do well. But we have been able to keep costs low and, in some cases, it is comparable to some of the top players in India.
SpiceJet also kept fares at a very competitive level…
They can do whatever they want. Whether they can sustain that is the question. Our average fares have been around Rs 2,000. If you look at our base fare, it has been much lower. At the high-end, it has been lower than IndiGo. Frankly, I think IndiGo runs the best shop in India. They will be the ones I will be competing with.
With Delhi added to your network, would your average fare go up?
Yes. The average fares will be Rs 3,500 throughout the network.
At what levels do you break even?
It's difficult to say. Now, with Delhi added and with longer routes coming in, we are very close to breaking even.
Would that be possible by December this year?
Hopefully, even sooner.
Why is the airline growing slow in expansion?
In the industry, the competitors were doing a few things. So, you had to wait and watch. While competitors gave up a few routes, we had to consider whether to add up on those routes. We finally decided not to because then you deviate from your model. Moreover, the 5/20 rule is till under discussion. Until that comes in, I am not really keen on adding more aircraft. It doesn't make sense because if you have a small aircraft and small fleet base, you suddenly start building up a few routes and if 5/20 changes entirely, then you have to prioritise accordingly. So, you have to induct aircraft at a certain pace. I will never go with more than two aircraft a month.
If the new flying norms come up, what does it mean to you?
It means we will be back on pace with the growth rate we had talked about. So, we can induct one aircraft a month or maybe more.
Are you happy with the new guidelines? The incumbent airlines are crying foul on the new rules...
Not at all. Exactly! That's a stupid argument. If the argument is: If we have done it, you have to do it too, we would still be peddling bicycles somewhere. Maybe, the airlines will have to sit and talk.
You talked about a total of eight aircraft. Would you add more if 5/20 goes away?
It depends on the kind of manifestation (it gets). If they talk about the minimum credit requirements, then it won't work. In fact, the new point system benefits the helicopters. So, I can start operating a helicopter. RDG is a great rule with a social view in mind but one can't connect that with flying abroad rules. Let the airlines figure out how to make money. Then, there is the talk on putting a ceiling on fares. Are we on the business of making money or not?
How many aircraft you plan to induct by the end of the year?
We have a total of five aircraft. We will easily have a total of eight to nine by the end of the year. So, another three to four should come in this year.
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Will you start operating from Mumbai this year?
No, we will open up to a lot of tier-II cities. I am not particularly keen on any more metros.
Why so?
I think the metros are very saturated. Our model is tier-II cities and giving people an opportunity to fly. Delhi has been a deviation because we needed a northern hub. Delhi made sense because of political reasons and airport infrastructure.
Globally, AirAsia is known for its low-cost model. How has been the experience in India so far?
India has some of the lowest fares in the world with the highest cost and that is the reason airlines don't usually do well. But we have been able to keep costs low and, in some cases, it is comparable to some of the top players in India.
SpiceJet also kept fares at a very competitive level…
They can do whatever they want. Whether they can sustain that is the question. Our average fares have been around Rs 2,000. If you look at our base fare, it has been much lower. At the high-end, it has been lower than IndiGo. Frankly, I think IndiGo runs the best shop in India. They will be the ones I will be competing with.
With Delhi added to your network, would your average fare go up?
Yes. The average fares will be Rs 3,500 throughout the network.
At what levels do you break even?
It's difficult to say. Now, with Delhi added and with longer routes coming in, we are very close to breaking even.
Would that be possible by December this year?
Hopefully, even sooner.
Why is the airline growing slow in expansion?
In the industry, the competitors were doing a few things. So, you had to wait and watch. While competitors gave up a few routes, we had to consider whether to add up on those routes. We finally decided not to because then you deviate from your model. Moreover, the 5/20 rule is till under discussion. Until that comes in, I am not really keen on adding more aircraft. It doesn't make sense because if you have a small aircraft and small fleet base, you suddenly start building up a few routes and if 5/20 changes entirely, then you have to prioritise accordingly. So, you have to induct aircraft at a certain pace. I will never go with more than two aircraft a month.
If the new flying norms come up, what does it mean to you?
It means we will be back on pace with the growth rate we had talked about. So, we can induct one aircraft a month or maybe more.
Are you happy with the new guidelines? The incumbent airlines are crying foul on the new rules...
Not at all. Exactly! That's a stupid argument. If the argument is: If we have done it, you have to do it too, we would still be peddling bicycles somewhere. Maybe, the airlines will have to sit and talk.
You talked about a total of eight aircraft. Would you add more if 5/20 goes away?
It depends on the kind of manifestation (it gets). If they talk about the minimum credit requirements, then it won't work. In fact, the new point system benefits the helicopters. So, I can start operating a helicopter. RDG is a great rule with a social view in mind but one can't connect that with flying abroad rules. Let the airlines figure out how to make money. Then, there is the talk on putting a ceiling on fares. Are we on the business of making money or not?