Saturday, April 14, 2012

EXCLUSIVE! Aerospace Diary Special - Is AirAsia looking at investing in India?

Neelam Mathews
April 14, 2012

Even as a decision on FDI by foreign carriers in Indian airlines draws nearer, Aerospace Diary has learnt Asia’s most successful budget carrier, AirAsia might want to enter the Indian market.

A message to AirAsia Chief Tony Fernandes remained unanswered. However, this could be because of the weekend having already started in Malaysia- two and a half hours ahead of India. We do understand, even a Chief of an airline has got to get some rest! we shall report his answer when we get it.

“Tony is always fishing,” an official told Aerospace Diary. But that ofcourse, does not mean a yes or no.

Two years ago, when Aerospace Diary had met up with Tony in Bahrain during the Formula One for a long interview and asked, should the Indian rules allow, would he consider setting up an AirAsia India? “Yes, one day. For the moment I have my work cut out,” said Tony. Could that day have arrived?

There is little doubt that India’s domestic market is growing and if managed well, could make business sense for the likes of Tony Fernandes, who would possibly look at linking up India’s major domestic destinations with his low cost operations around Asia. He has the spirit, guts, cash, people and routes to do so. And he has already started recruiting in India! 

However, it was the complicated regulatory issues and lack of transparency that made him withdraw his Mumbai and Delhi flights. With an Indian partner- whether it be a new domestic carrier or a present one – hassles will be considerably eased for AirAsia. The reason IndiGo seemed to have no qualms when AirAsia started flying to India was because they felt they were an Indian carrier with a local loyalty. This might change if AirAsia becomes part Indian.

But it would be prudent not to take IndiGo lightly given their business plan seems to have worked till now and worked well.

Besides there’s always the issue of airport charges. When we had asked Tony his experience of Indian airports, his answer was candid. “Indian airports are of two types. The private parasites who are doing a job. They put in money and want a return. But the danger is nobody is regulating their return. They look for short term profits as opposed to long term development. Then there are the government airports where people get paid a salary where they do not do much work. Airports are always a problem in Asia.”

Could the time have come to take the bull by its horns?

1 comment:

  1. FDI by foreign airlines will be an interesting proposition. What remains to be seen is the way in which it will be allowed. The minister hinted at having two thirds of the directors to be Indian nationals. This might not give out much but it will not be as easy as many people might want it to be.

    The case of Air Asia is a bit complicated now. The share swap deal with Malaysian was a much bigger reason for them to pull out of some Indian operations than regulatory policy of India. The Federation of Malaysian Consumers Associations has submitted a case to investigate monopoly charges after the swap.

    Air Asia my fish in Indian waters, but the question is where is the fish? SpiceJet might be a good option given its decent sized network and international operation. The Tamil connection might help as well.

    Very interesting news indeed.