Business
‘We know how to compete’
Dec 30, 2012 10:20 PM , By Murali N. Krishnaswamy
Aireen Omar: Competing in a region which is growing fast. Photo: Murali N. Krishnaswamy
Aireen Omar: Competing in a region which is growing fast. Photo: Murali N. Krishnaswamy
TALKING BUSINESS India is definitely a market where we want to have more destinations, says Air Asia CEO

On December 21, 2012, low cost carrier Air Asia Berhad became the first airline operator in the world to take delivery of an Airbus A320 aircraft installed with “sharklets.” These fuel-saving wingtip mounted twin structures — the A320 is the first in Airbus’s family of aircraft to be fitted with it — are designed to reduce fuel burn by 4 per cent corresponding to an annual carbon dioxide reduction of around 1,000 tonnes per aircraft.

In addition, they also offer an operator the flexibility to increase the aircraft’s flying range by another 100 nautical miles or accept an increased payload of up to 450 kg.

Air Asia’s Chief Executive Officer Aireen Omar was at Airbus’s plant at Toulouse in France to receive the aircraft, which will be operated on routes served by Malaysia Air Asia. The airline recently placed an order for 100 new aircraft. Eventually, it will have a fleet strength of 475 aircraft, making it Airbus’ largest customer.

Speaking to the media after the acceptance function, Ms. Omar spelt out, among other things, the airline’s strategy for India, a developing market on its radar. She said that the middle term plan was to capture the South Indian market using its Malaysian base.

As and when its long haul division, called Air AsiaX, took delivery of more aircraft, the plan would be to focus on the North Indian market as the aircraft used would be more efficient to operate to destinations that took more than four hours to reach.

In addition, using its base in Thailand, this division would expand further into North India.

When asked about the benefits of using the aircraft with “sharklets” in terms of a reduction in passenger fares, she said that while it would have to be studied, it had to be noted that cost savings were passed on to passengers in the form of lower fares.

In response to another question about trends in the Indian market, Ms. Omar said that while she understood that the country’s aviation sector was opening up in terms of ownership patterns, what was more important was the cost of operating an airline here, keeping in mind factors such as airport charges and fuel costs.

She said that if state monopolies in some of these areas were also opened up and became competitive, then low cost carriers such as hers would be able to try and capture the market here quite efficiently.

Excerpts from the rest of the interview with The Hindu:

Does the lack of a hub in India hamper your operations?

No, not really. I think India is definitely a market where we want to have more destinations and more frequencies from our network that is based in Malaysia, and Thailand especially. So we don’t really need a hub to be able to reach to the population based there. We will just have to be able to fly from Malaysia and Thailand. Indonesia may be a bit too far out because usually with the Airbus A320 aircraft, our plan would be to be able to fly within a four-hour radius. So, definitely, at some point we do want to grow India more.

With so much of fleet commonality among many airlines in the region,is Air Asia looking at the maintenance, repair and overhaul market?

I think that is not really our core business. Certainly that is something that we need to see whether it fits into the overall scheme of business but it is not something that we are looking at immediately.

And are you looking at the cargo market?

We do have cargo capacity, but the thing is we wouldn’t be looking at cargo where we have a different type of aircraft and a different type of schedule to accommodate this. What we have is cargo that we fit into the belly space of the aircraft, without compromising the low cost business model, and without compromising the 25-minute turnaround ground time. So cargo would be something that we see as helping optimise revenues within our low cost business model.

Singapore Airlines’ recent sale of its stake in Virgin Atlantic will presumably give it the space to think about its own regional plans. How will this and the plans of its subsidiary airlines Tiger Airways, SilkAir and Scoot affect Air Asia and Air AsiaX?

I think we will continue to do what we know best. We are actually competing in a region which is growing fast. It is in the ASEAN region, with a population base of more than 600 million.

This is a region that has one of the highest growing GDPs in the world and with the fastest growing middle income GDP in the world also. It is a population based where the geographical landscape is conducive for air travel because it is surrounded by water. And the alternative to land transportation is non-existent. I mean, land transportation is basically not quite there yet, not as how you see it in Europe or in the U.S.

So I feel that there are a lot of players who can come in. It is a huge market there. We know what we do best and we should be able to know where and how to compete.

What about the use of biofuels? There has been a stirring in this direction.

I suppose we will explore any alternative that would be cheaper. At some point if biofuels would be a cheaper alternative then why not? But that is something that we have to explore deeper. I can’t really say much about this and on whether we will, but we are open to anything that would help reduce our costs better.

(This correspodnent was in Toulouse at the invitation of Air Asia Berhad.)

murali.nky@thehindu.co.in


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