Skift Take
While going into India with Tata is a very smart move, AirAsia will not change the economics of Indian aviation market overnight. This will require more patience and political dexterity than existing players have shown.
AirAsia Bhd., Southeast Asia’s biggest discount carrier, reported profits in all but one year in the past decade. It’s now entering a market where the industry has lost more than $6.6 billion in five years.
The airline may struggle to post profits in India as high fuel taxes, airport costs and cut-rate competition erode gains from rising travel demand, said Harsh Vardhan, the chairman of Starair Consulting that advises airlines. AirAsia will also have to contend with the nation’s bureaucracy that interferes with pricing of tickets.
“AirAsia can’t overnight change the economies of operations in India,” said New Delhi-based Vardhan. “Fuel prices are common, the bureaucracy is the same for everyone and the environment is very competitive. That will make it difficult for them to make money.”
The airline aims to start Indian operations in the fourth quarter after winning approval yesterday for the nation’s first foreign aviation investment since rules were eased in September. Carriers in the country may lose $1.4 billion this fiscal year, CAPA Centre for Aviation has forecast, as high fuel costs and a price war forced liquor tycoon Vijay Mall
