Turbulence at AirAsia India: Can it Turnaround?
“Of course, there was hype. Have we lived up to that? No. But no one expected all these issues that we have been caught with. Are we giving up? Clearly not.”1
–Tony Fernandes, CEO, AirAsia Group
It has hardly been a smooth flight for AirAsia India (AAI) since its establishment in March 2013. AAI, an Indo-Malaysian budget airline, a tripartite joint venture, started operating in India since mid-2014. However, even after 20 months of its operations the airline faces turbulence with the mounting losses, acute cash crunch, differences between the partners and exit of its top-level executives. While the low-cost operating model of the parent company, AirAsia Berhad (AirAsia Bhd), the largest Low-Cost Carrier (LCC) in South-East Asia, was highly successful in other countries, AAI was facing problems. While the company officials termed deficit of funds and aviation regulations in India as the core reasons for the airline’s tepid growth and problems, experts opined that the reasons are mostly internal. However, during March 2016, there was a change in the shareholding pattern of the partners, raising hopes of the stakeholders that AAI could fly smoothly and in the right direction.
AirAsia Berhad – The Parent Company
AirAsia Berhad (AirAsia Bhd), the Malaysian low-cost airline headquartered in Kuala Lumpur, was established in 1993, by government-owned DRB-HICOM2 and started its operations on November 18th 1996. In December 2001, the heavily-indebted ($11 million) company was bought by Tune Group Sdn Bhd3 for a token sum of one Ringgit4.5 Tony Fernandes (Fernandes), CEO, AirAsia Group, bought the company, turned it around and made it the first highly successful budget no-frills airline.
Exhibits
Exhibit I: Evolution of Indian Civil Aviation Industry
Exhibit II: Profit/Loss Status of Airlines in India (FY-2012 and FY-2013)
Exhibit III: Market Share of Major Airlines in India
Exhibit IV: FIA's Plea Against AAI's Entry
Exhibit V: AAI's Festive Discount Offer
Exhibit VI: Top 10 Airlines in India – 2015 (w.r.t Market Share)
Exhibit VII: AirAsia India Market Share
Exhibit VIII: AirAsia's Concerns
Annexures
Annexure I: AirAsia and Subsidiaries
Annexure II: AirAsia Berhad (Group) Financials (2011-2015)
Annexure III: AAI vs LCC Competitors (Routes, Schedule and Prices)
Annexure IV: Traffic and Operating Statistics of Indian Carriers on Scheduled Domestic Services
- 1 Tushar Srivastava, “Govt should provide level playing field: AirAsia CEO Tony Fernandes”, http://www.hindustantimes.com/business/time-for-india-to-enable-more-people-to-fly-airasia-s-tony-fernandes/story-tpQO7gM66INCY7Aw1XlngI.html, March 29th 2016 (accessed date: April 7th 2016)
- 2 DRB-HICOM Berhad is one of Malaysia’s leading corporations, involved in the automotive manufacturing, assembly and distribution, services, property and infrastructure sectors. It assembles cars in Malaysia for TATA Motors, Honda, Isuzu, Suzuki, Mercedes-Benz, Volkswagen, Higer, JAC and BeiBen.
- 3 Tune Group Sendirian Berhad (meaning ‘private limited’) is a leisure and entertainment corporation founded by the Malaysian entrepreneurs Tony Fernandes and Kamarudin Meranun, which offers affordable leisure and entertainment activities via its subsidiaries – airline, hotel, telecommunication, financial services, sports, media and creative industries.
- 4 1 Malaysian Ringgit (MYR/RM) equals 16.66 Indian Rupee (INR/`) and $0.25 as on May 5th 2016
- 5 “The Beginner’s Guide to AirAsia: Hi, We’re AirAsia!”, http://www.airasia.com/in/en/about-us/hi-we-are-airasia.page (accessed date: April 7th 2016)