AirAsia to start India operations by end-2013

Malaysian low-cost airline AirAsia hopes to start its Indian operations with three Airbus planes by the end of this year with most statutory clearances in hand and hopes to break even in a year's time, a top official said.

"We are yet to get the NOC (no objection certificate) from the home ministry. Earlier we thought we will start our operations here by September. We hope to start our operations by the end of this year," Tony Fernandes, group CEO at AirAsia, told reporters here Saturday.

In a three way joint venture partnering with Tata Sons and Arun Bhatia-promoted Telestra Tradeplace, the Malaysian airline plans to start a scheduled domestic airline.

AirAsia will hold 49 percent stake in the joint venture while Tata Sons will hold a 30 percent stake and Telestra Tradeplace 21 percent.

According to Fernandes, AirAsia will start its Indian operations initially with three Airbus craft and add one plane every month.

"There is no change in our initial investment plan of $20 million. That will remain the same as we are confident of being cash positive," he said.

He said the airline will have a total headcount of over 250 people during the first year of operations.

Queried about the number of destinations AirAsia would fly by the end of first year of operations, deputy group CEO Kamarudin Meranun told IANS that it "was not the number of destinations that we fly that matters. It is the number of flights we make in a market. It saves marketing and brand promotion costs".

Meranun added that the key aspect is to keep the costs low for being a successful low fare airline.

Fernandes said each plane will make around six to eight trips a day and the turn around time per plane is strictly 25 minutes.

"The key is to have a proper cost structure. Low cost model is different from premium airline model," he said.

He said apart from passenger fare, AirAsia has other revenue streams like food sales, in-flight on the plane body advertisements, selling travel insurance, hotel rooms and others.

"We are going to sell foreign exchange," he disclosed.

In India the airline will look at underserved markets, he said.

"The Tatas will bring to the table local knowledge, marketing, strategy, distribution," Fernandes remarked while refuting that AirAsia is charting the path for the Indian group's entry into the sector.

He said the company is in talks with several agencies to outsource some of the operations.

"In Malaysia we do all the work - ground handling and others - by ourselves," he said.

On the branding side, Fernandes said the Indian airline will look at movies, music, sports and other events.