DOMESTIC AIRLINES - FASTEN YOUR SEAT BELTS!
By Ruma Dubey
The Indian aviation industry seems to have hit a nasty air pocket, shaking up everyone and causing a lot of air sickness. The grounded Kingfisher and callousness of Vijay Mallya is as such a big black cloud. Air India as such was a very depressing topic. Then the continuing uncertainty over the Jet–Etihad deal. It was expected that this deal would have received the go-ahead yesterday but now it has been referred to the Cabinet. This will eventually get the go-ahead but the delay is causing a lot of distress.
And in the midst of all this, the news that Malaysian airlines company – AirAsia coming to India seemed like the best thing that could have happened to the sector in a long time. Today, we learn that the domestic airline carriers have appealed against the FIPB clearance to Air Asia, stating that the 49% FDI allowed in aviation was applicable only for existing carriers.
This is probably at the behest of the President of the Janata Party, Mr.Subramaniam Swamy who has been saying all along that the entry of AirAsia will hurt the domestic carriers. So is he fighting for the domestic carriers or for the people of the country, who as such are reeling under rising costs? And if AirAsia does manage to give us all cheaper flight options, why not? Competition is always healthy and it is the customer who gets the benefits. If the others are struggling and not able to cope and if AirAsia does manage to do well, is that because it gained at the cost of the domestic carriers or because of its efficiencies? With Kingfisher gone off the air, surely there is a gap which needs to be filled. And in the current scenario, AirAsia holds a lot of promise.
The domestic carriers are sure to be a worried lot. The day the FIPB clearance was given to AirAsia, Spice Jet and Jet Airways had hit red. That is the indeed the kind of impact a mere FIPB clearance has. So why are the domestic airlines so worried while people are hoping that AirAsia soon takes to the sky?
Well, AirAsia is a budget airline and its CEO, Tony Fernandes has promised that it will bring to India, air fares like never before. He in fact wants air fares to be the biggest differentiator. There is even talk of the company offering vacant seats for free. This, at a time when Jet and Spice are hiking fares to cover costs; making most of the void left by Kingfisher. Naturally, the entry of AirAsia is music to the ears of people.
And this competition from AirAsia is not to be taken lightly as within a short span of time, less than 10 years, it has emerged as the largest low-cost player in the world. This entry into the Indian aviation sector, will probably be the best thing that happened to the Indian fliers in a long while and probably the worst thing for existing airlines. AirAsia is not a fly on the wall which can be ignored, it is an elephant which can come trampling down on all.
AirAsia will keep its costs low by having a very thin organisation – only 20 employees per aircraft. Like all budget airlines, there will be no assigned seats for passengers, no frequent fliers mile, no airport lounges, charge for every check-in baggage. AirAsia will have no agents and as stated earlier, its own website will be its sole booking agent for sales. This obviously works as 65% of its sales in 2012 came in from its website. While other airlines have been cribbing that it is uneconomical to run an airline in India, AirAsia feels that our 1 billion population is a monster of an opportunity and feels that fares not yet low enough!
The airline, a JV with one of the most respected groups of India – Tata’s, it hopes to spend Rs.80 crore initially to get a succulent bite into the juicy airline sector of India, especially for Budget airlines. In the JV, AirAsia will own 49% stake, Tata Sons will hold 30% and the balance 21% will be held by Arun Bhatia led Telstra Tradeplace, whose son is married to the only daughter of billionaire Lakshmi Mittal. The airline has roped in none other than Ratan Tata as its advisor and former TCS chairman S Ramadorai is the AirAsia India chairman. R Venkataraman, former executive assistant to Ratan Tata and Bharat Vasani, chief legal counsel of the Tata Group are among the directors on the board.
The company has applied for a NOC for flying with the Indian aviation ministry. And news is that it would not take too long and is unlikely to be mired in too much red tape. The airline is hoping to takeoff by October this year.
Well, we the people can only hope that this airlines gets its wings soon so that flying indeed becomes a mode of transport for the common man not just for the elite.