Ticket prices on Chennai-Bangalore route were unsustainable
Budget carrier AirAsia, credited with changing the market dynamics in Southeast Asia by offering bottom-low fares, does not seem to have an easy passage in the price-sensitive Indian market.
Its Indian subsidiary AirAsia India, in which Tata group is a partner, has pulled out one of its inaugural flights on Bangalore-Chennai route due to operational losses. Moreover, the airline has also been treading cautiously in adding capacity in the market and has missed its fleet expansion targets. “AirAsia India has withdrawn flights from the Bangalore-Chennai route. They were selling tickets at a price which was not sustainable,” an industry source said.
The airline did not respond to an email query from Financial Chronicle on the issue.
AirAsia had earlier said that some of the domestic routes might have been saturated in traffic volume, pointing towards low passenger load factor on the Bangalore-Chennai flight. The airline currently operates a fleet of four Airbus 320 aircraft with the fourth plane joining operation last month. As per latest data released by Directorate General of Civil Aviation (DGCA), AirAsia India flew 81,000 travellers in February, 11 per cent lower than January. It, however, recorded higher flight occupancy at 77.9 per cent during this period.
“India is a difficult market. You can’t always be right here. But AirAsia is flexible in its approach. It had earlier said it would focus on south India and would not operate flight to Delhi because of high airport charges. It has now changed its plan and announced to start flights to Delhi realising high traffic volume on the route,” said Rajan Mehra, Universal Aviation managing director and former India head of Qatar Airways.
AirAsia India which started its operations last June is estimated to have lost about Rs 21 crore (12.7 million Malaysian ringgit) in the quarter ending December 2014. The airline CEO Mittu Chandilya had recently said that he expected to reach break-even mark in June when sixth aircraft would be inducted.
AirAsia India is a three-way joint venture between Tata Sons, AirAsia and Telestra Tradeplace. While Malaysian low-cost airline AirAsia Berhad holds 49 per cent in the company, Tata Sons hold 30 per cent in it. Arun Bhatia of Telestra Tradeplace hold the remaining 21 per cent in the Indo-Malaysian air-carrier.
The domestic aviation market is dominated by low-cost carriers. Riding high demand for affordable air travel these carriers have gradually increased their share in the pie controlling nearly 60 per cent of the market. IndiGo, the no-frill carrier that started its operation in 2006, has grabbed the largest share of the market controlling 37.1 per cent share on the back of aggressive fleet and network expansion.