AirAsia – Can it deliver value for the aspirational Indian?

Last Updated: Thursday, June 12, 2014 - 20:58

Pic courtesy: AirAsia

Ajith Vijay Kumar

Determination, passion and willingness to take risks – that`s Tony Fernandes for you. The maverick serial entrepreneur, who turned the once bleeding Malaysian government-owned AirAsia into Asia’s biggest budget airline, saw his long cherished dream come to reality when one of his birds took to the skies from Bangalore for Goa on June 12.

When the Airbus A320, painted in lively red, gained altitude over breezy Bangalore, its rate of ascent was matched by the growing anxiety among established domestic airlines on the impact of the entry of AirAsia India Pvt Ltd (AAIPL) into their turf.

From finding fault in the manner in which FDI was allowed to the grant of licence to fly with just one aircraft, Indian carriers represented by the Federation of Indian Airlines (FIA) have been opposing Air Asia from the word go.

Their worry is not unfounded. Fernandes comes with a formidable reputation of having disrupted established norms and rewritten rules of the game in whichever market he entered.

And, the unrelenting fighter made his intention clear that he is ready for the game in the land of his ancestors – he is ethnic Malaysian Indian with roots in Goa. I never give up, Tony says of himself.

The AirAsia boss openly declared that the entire Indian aviation industry has tried to block AirAsia`s entry.

“Some airlines scared of us. We must be doing something right. Help us people of India. Don`t let cartels win and not let ordinary man fly (sic),” he tweeted.

Fernandes took the battle into enemy territory with another tweet: "@Mittu Chandilya (CEO AAIPL) exciting plans for airasia Indian. Whatever Indigo tries to do to stop us it just makes us stronger and smarter. Well done.(sic)"

The second post was removed later but his competitors got the message.

The FIA has been giving ludicrous arguments to justify its anti AirAsia stance. On the FDI, while it argues in favour of money coming in from outside, it also holds the view that FDI should be to allowed only to make existing airlines stronger and not as capital to start a new airline.

And to stress the point, the FIA talks about the position on FDI in retail – the government is opposed to it so as to protect the interests of lakhs of small traders. It would augur well for the FIA to see a clear distinction - FDI in retail was blocked as it would have affected livelihood of those who don`t have the resources to compete with big corporations and FDI in aviation (AirAsia, Tata-SIA airline) would increase competitiveness in the market.

It may affect some Indian airlines but in an open economy, the rule of the game is simple and straight: The fittest will survive.

Some so called `experts` have also expressed fear that AirAsia`s predatory pricing strategy will adversely affect the balance books of all airlines as they will cut ticket prices in the mad scramble to retain market share. Most budget airlines have already cut fares to take on AirAsia.

If they bleed, they bleed. After all, these very same airlines do make a killing whenever an opportunity comes by – like when Air India pilots went on a flash strike.

No airline cared about fairness. They jacked up ticket rates almost overnight and justified it as a product of market forces due the sudden mismatch in demand and supply.

It suited them then and now it doesn`t when the big daddy of discount fares has come calling.

Their opposition is suggestive of a lack of stomach for a fight and, ironically, also a measure of their confidence that Tony will do it in India as well.

That`s why rather opposing AirAsia`s entry into the arena, they should devise ways to beat it in the field. As Mittu Chandilya, CEO AirAsia India, said in an recent interview, “Competitors should try to beat me commercially.”

Amidst the dust created by the high profile turf war, the impact of AirAsia on the way the average Indian perceives flying has not been pondered upon to the scale and extent to which it will get affected in the days to come.

Apart from the minuscule percentage that constitutes the upper class, most Indians still take air travel as an indulgence – the normal being the overnight train. Flying adds to their status and standing in society - many of them, the occasional flyers, leave security check tags on their bags long after they complete the journey, apparently, to ensure that their jet flying lifestyle gets noticed.

Flying is aspirational.

AirAsia`s business strategy – to make air travel affordable to everybody - is fundamentally aligned to the needs of the new Indian but appears to be on a slightly different axis.

Tony Fernandes offers a no-frills point-to-point service. It`s a great concept but by doing away with all the `frills`, the airline also risks taking away the `thrill` of flying.

AirAsia works on the belief that the single most important pull is cheap fares. While it will work in a market like India where no domestic route is longer than 4-5 hours. Comfort is, to a great extent, not that much of priority. Cattle class is bearable.

However, given the certainty that other Indian careers will try to match it fares, the discerning Indian customer may go for the airline – time slot is important too - that has the best brand image even if it was to cost a couple of hundred rupees more than AirAsia`s rock bottom prices.

Remember the early branding of Tata`s people`s car Nano. In its quest and stress on making every Indian own a car, Tata Motors failed to address the aspirational demand of growing India.

The product was great but it`s down market image did it in. The new Indian wanted to shift from a two-wheeler to a car but he did not want to buy a car that would project him as a poor man who can only afford a Nano.

AirAsia too is a great product but it needs to avoid the mistake of projecting itself as an airline which anyone and everyone can afford.

Yes, anyone and everyone should fly but what is more important for the aspirational Indian is that he gets to take pride in having flown with the right set of wings.

Hope Tony Fernandes is reading...



First Published: Wednesday, June 11, 2014 - 17:49

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