 "Air Asia India CEO Amar Abrol speaks during a press conference to announce the fleet and route expansion plans in Bengaluru")
For about a year, AirAsia India, the joint airline of Tata Sons and the Tony Fernandes-owned AirAsia Bhd, had halted any adding of planes and destinations, citing government policy barriers on expanding to routes abroad. It also faced challenges such as increased competition from larger rivals such as IndiGo and GoAir, and exit of its first chief executive, Mittu Chandilya. In March, Tata Sons increased stake and brought in Amar Abrol, former American Express executive, who was heading TPaay Asia, a mobile wallet owned by AirAsia in Malaysia, to run the fledgling airline. “We are here for the long haul,” he tells Raghu Krishnan. Edited excerpts:
How has been the experience over the past few months?
Great to come back home. I have been out of the country for 20 years. It is the right time to get into civil aviation. The policy is set, we have got the funding, the team is in place and we are on a growth trajectory. We have all the right ingredients to make us successful in India.
How are you scaling up?
We have started our next chapter. We inducted the seventh aircraft and it goes commercial on September 22. As we speak, we sold 70 seats. Our intention is to get to 20 aircraft as soon as possible. It takes effort to get there -- aircraft induction, building teams, keeping stations ready and all of this without compromising on safety and security.
How long will you take to reach 20 aircraft. Six months to one year?
It depends on the team. We've all rolled up our sleeves and begun work. The biggest hurdle is, do we have money in our pocket? We have money now and it takes three to nine months for inducting a pilot, training, meeting DGCA (sector regulator) requirements and there are multiple moving parts. We are training all through the nights. I am in a rush to get there. It takes nine months to have a baby; I am only four months old.
After 20 planes, would you look at flying outside of India?
Our natural strength is Asia. AirAsia as a group pretty much owns the skies in Thailand, Malaysia, Australia, China, Korea and Japan. Everything is eastward. We have a massive network and we will plug into that. We will also fly westward. The A320 (aircraft) offers four to four and a half hours, so anything that comes with that radius from cities in India, we will try to fly. It has to be commercially viable but there is a natural synergy to take advantage of, the full entire infrastructure, airports, in Malaysia and beyond.
Are you profitable?
We just turned the corner in April, started gross profit-positive. That is the first hurdle. The second is to get cash-positive; the third is to get to Ebit (earnings before interest and taxes)- positive. We will continue to make investments. The airline industry is quite interesting in that perspective. You have got to invest now and fly six months later. Certainly, there will be heavy investments being made in six, 12, 18 months from now. We are the only airline that has a 25-minute turnaround; whatever we save there, it goes to the consumer. We are the only airline that has fairly efficient fuel burn ratios. We have a number of things we do efficiently that allows us to keep our overall costs low.
Tata Sons runs Vistara and also sells cheap tickets. Would that hurt you as a company?
We are two independently operated companies. I think in the Indian market, right now, there is no concept of full service airline. Everybody is competing on one thing — price point. I don't know how they are doing. I would like to learn from them.
Are these aircraft brought from AirAsia?
The decisions we make are for the benefit of the company. Whoever gives us the best deal. We do a RFP (ask for bids), basically, send a tender out to all suppliers of the A320. We have our own specifications, guidelines. Whoever supplies the aircraft with the right specs and least cost, we will go with them. There is no restrictions on me as AirAsia India to specifically buy from the parent.
The (government's) civil aviation policy talks of capping prices at Rs 2,500 on routes where it wants to increase traffic. We already operate on routes at Rs 1,100 a ticket. Bengaluru to Kochi costs Rs 1,100-1,400, depending on the demand and supply. In my discussions with the aviation ministry, Rs 2,500 is a price point. We will evaluate and if it doesn't work out, we will go back to the government.
Some of the sectors might not have enough traffic?
Yeah. We are evaluating all that the aviation policy offers. I am in constant dialogue with GoI (government). It is a progressive ministry, very progressive. We have to grow civil aviation in this country; there is a huge opportunity. Unless the airline operator makes money, it is not going to work. We have to make some money, we have to give back appropriate amounts of return on equity for our investors, for the industry to grow. That is the bottom line.
As you grow, what is the plan to increase team strength?
We have roughly 700 people. For every aircraft, we generate employment for 80-100 people. We should add 1,000-1,300 over the next 12-18 months, when we reach 20 aircraft.
What is the take on competition like IndiGo?
Here is the macro math. There are 330 million of the middle class, of which only 70 million fly. There are 330 city pairs an Airbus 320 can touch. There is enough opportunity for everyone. IndiGo's focus is more on trunk routes. We don't do trunk routes. We are focused on young India, students, tourists and offer a different route map than others do.
But, these routes are also price-sensitive?
We constantly evaluate look for routes that are commercially viable...Once we go into the market, we like to develop the market. Kuala Lumpur-Bandung did not exist before AirAsia started flying; today, it is the most profitable sector.
What could trip you as an airline?
I think it is our internal ability to deliver. I have got a strong team to deliver. Nothing can trip us if we have got the will. There could be hiccups such as delayed aircraft delivery, engineering problems, weather...As a leader, as an organisation, I would like to focus on controllables. The first controllable is get the money. If we stick to the game plan, we will get to 20 (planes), we will fly international, we will own this country. We are here for the long haul, next 5-20 years.
