AirAsia India turns one on June 12 this year. On the eve of the first anniversary, Mittu Chandilya, Chief Executive Officer of the airline, spoke with BusinessLine and explains why the airline has not grown in the manner planned initially. Edited excerpts from the interview.
In May when you got the licence, you planned to have 11 aircraft in the first calendar year. You have only five. What went wrong? Did you overestimate the market?
No. I still believe in the market, and we will probably make up the kind of growth we were envisioning.
Nothing happened. I think, when we first launched, we were looking at our model. Making sure that it works in India.
Have you tweaked it?
A little bit
In what sense?
Commercially we were not allowed to do a lot of things that we wanted to.
Like?
Unbundling
But unbundling has started now.
It has hardly started.
What is missing?
There is no clarity on whether it is unbundled. Can we do a base fare with no bags on it? No. The regulations are still very against that. Lot of things we want to do (are) not allowed.
What will you like to see as far as unbundling is concerned?
I think open it up. Entirely. If I want to unbundle then I give the passenger a base fare and allow the passenger to choose. If he does not want to carry a bag, we do not want to charge him for it.
Explain base fare. Is it ₹1?
No. It could be ₹500, it could be ₹1,000. I am giving that as an example. I am not saying that is our base fare.
Let us say it is ₹1,000, and then if the traveller wants to choose a seat, it goes up to ₹1,250 or ₹1,300. Then you choose a meal, so another ₹250 or ₹150 gets added. It builds up to what the fare will ultimately end up being. But I would still want to cap it.
Cap it a t what?
The difference should be that my base fare should be 40-50 per cent lower than the base fare of other airlines. At the moment my all-in fare is 25-30 per cent lower than others... If I unbundle it up… If a passenger does not care about where he sits, whether he wants a bag, he just wants to come in the morning and return in the evening, has just one hand luggage… I think you will be looking at a base fare of ₹1,000 plus a little bit more in charges such as airport tax.
Unbundling is one of the issues holding back the growth of AirAsia India. What are the other bottlenecks that have stopped the planned growth?
A few things… 5/20 being one. I am giving the example of 5/20 because I think it is the single biggest contributor to the postponed growth.
How does that affect you?
Significantly. A lot of our growth has been because of or should I say non-growth has been because of 5/20. If international is available tomorrow. You want to make sure that your net work reflects that.
As a small airline with five aircraft (if) suddenly international comes up…. you are forced to make a decision because inducting aircraft … They do not exactly grow on trees. You have delivery schedules, commitments, etc. And believe me we have worked extremely hard to navigate and move some of those deliveries without taking on any additional costs. Not easy to do.
Besides, there are a few things that happened last year. One airline which was almost going away gave away a few routes that were very interesting but very different from what we wanted to do.
Interesting routes like?
Vizag, for example, where everyone is running to now. There are many others. Coimbatore. Then we looked at them and said should we look at some of them. Again, the question was should we quickly induct the fleet and start taking that on, but it is very different from the model that we wanted to go with. So we made a call, let us not do that.
The 5/20 discussions are still going on and I think we are about a month-and-a-half away from hearing what it will be. We hope they will come up with something final that will allow us to plan our network.
The danger is that if you predict what the network is or do not take 5/20 into account, suddenly 5.20 comes in with a five aircraft fleet, then you are left with prioritising… do I shut down these routes and start quickly on international routes, that I want to do. Which is not right for any market because you have invested in a market, you have built passenger confidence, which will go down. So we decided let us stick with what we have, let us cap the growth.
If 5/20 does happen, what changes will you be making in the plans you had?
Go back to what we had envisioned. Have a vibrant domestic market and a significant presence going international. It will be the same entity and aircraft which will do international.
So, basically, the evening operations will be international.
Yes exactly. Evening operations and maybe some day operations.
That will see a huge ramp - up of the fleet?
Absolutely. That is where we will be back on par with everything that we had envisioned.
If 5/20 does not happen then what? What will be the time scale to take a decision?
5/20 will happen. It will happen in some manifestation. It may not be what we had envisioned or hoped for.
What did you hope for?
Complete abolition. Rule makes no sense. Which I do not think will honestly happen. Given the discussions we have been having, I think there are significant other concerns from, probably, incumbents and others on removing a rule which has been enforced on others.
You are a person who put in his personal funds into a sports team. The only other airline promoter who did that did not have a very happy ending. Is it going to be the same as far as AirAsia India is concerned ?
(Laughs) The only difference is that I do not own this airline. He owned two. This sports team is a small little investment which is done with our savings and with our passion to give back to society because we are developing tennis players from India and giving them the opportunity to play elsewhere.
He is a bigger personality. I think he is a legend. He has accomplished a lot. I think in India we have to be... you have to respect the fact that he has done a lot. Regardless of what happened in the end. Horrible thing that he is going through, but a fitting thing for him, because there is no way you can absolve your innocence from something.
How many of the things planned initially have happened and how many have not?
We have done certain things we did not expect. We have flown close to a million passengers. By the time we complete our first year we would have flown more than a million passengers. No other airline in India has done that before in their first year of operations. We have done that with a skeleton fleet, meaning, we have utilised aircraft significantly. We have built a robust team which is not dependent on external factors any more. I am not dependent on getting captains from elsewhere.
While it may look as though we are doing nothing… No. we are doing a lot of things internally. Making sure the culture is right, the model is right, the revenue management is right.
If people are thinking we are sitting there waiting for things to happen… well, no. We have been sharpening the knives.
If 5/20 does happen h ow soon after the announcement will you be able to start operations?
Next day. The aircraft are not utilised, They can run overnight right away. By the time the fifth aircraft comes in, it will be 13 hours of utilisation. We can push to 16 hours