Malaysia-based low-cost long haul airline, AirAsia X, will have to wait till the year-end to break even in its operations in India as it grapples with rising fuel costs. The airline recently completed its first year of operations from India.
“It normally takes around 12 months for a route to mature and break even. But the challenge for us now is to manage the high fuel costs. Therefore, we expect to break even by the end of the year,” Mr Arzan Osman Rani, Chief Executive Officer, AirAsia X, told Business Line .
AirAsia X is the low-cost carrier AirAsia's long haul arm. It operates four flights a week from Mumbai and daily flights from Delhi.
The high airport charges in these two cities are also affecting the growth of business for AirAsia X.
“These two airports are definitely on the more expensive side as compared to the airports even in Sydney. It definitely does affect our low-cost model as every dollar that the passenger is taxed reduces the appetite of the passenger to travel,” said Mr Osman Rani.
Against ICAO rules
Earlier this week, International Air Transport Association (IATA) put India on its “wall of shame” for high taxation claiming that the country's $450-million service tax on the aviation industry is in contravention of the ICAO rules.
The airline though has been clocking high seat factors (seat occupancy).
“Seat factors on our India routes are around 75 per cent. We would like to go to a daily service from Mumbai but traffic restrictions from the Government side are stopping us,” he added.
India currently contributes 10 per cent to AirAsia X's business and the airline expects it to remain at the same level for the short-term as the number of daily flights can't be increased due to government restrictions.
AirAsia X isn't too concerned that full service carriers such as Singapore Airlines are planning on beginning a new low-cost airline.
“I think the market is big enough and it will grow more with the arrival of new low-cost carriers. Even when Tiger Airways was launched, the market grew rather than our business getting affected,” said Mr Osman Rani.
Online bookings
The airline recently opened a booking office in Delhi, despite being an online booking airline primarily.
Commenting on the opening of the airline's on-ground booking office in Delhi, Mr Osman Rani said, “We are still primarily an online booking airline. Almost 99 per cent of our bookings are made online. But we thought we needed a booking office to help passengers with their queries of visa and other travel arrangements as well as for people who don't have access to a credit card.”
Marketing campaigns
The airline is also evaluating opportunities to increase its visibility in the Indian market by way of marketing campaigns.
AirAsia X is also taking deliveries of new aircraft from 2,012 to 2,020.
However, in the short-term none of the new aircraft are likely to be deployed on the Indian routes.