Today, India, for the size that it is, has only four airlines that fly international: Full service carriers (FSCs) Air India and its subsidiaries, and Jet Airways, and Low cost carriers (LCCs) SpiceJet and IndiGo. This is in contrast to the 10 airlines that operate domestic scheduled services in India, today. While Indian carriers flew 81 million domestic passengers in calendar year 2015 (CY2015), Indian carriers flew only 18 million passengers in the same period.
Only two airlines/airline groups operate short, medium and long haul international services: Air India and Jet Airways. Both airlines have diverse fleets: from short haul domestic ATR 72 turboprops to long haul international Boeing 777s. The LCCs in contrast have narrowbody jets that can cater only to short haul international services.
Due to the limitations of fleet and perhaps the lack of commercially attractive international destinations, LCCs IndiGo and SpiceJet deployed only 4.8% and 9.5% of their total flights on international, in CY2015. In contrast, Jet Airways (Including operations from the Jetlite AOP) deployed 22.1%, while Air India (Including Air India Express and Air India Regional (Alliance)) deployed 32.7% of its total flights on international. Air India and Jet Airways together contribute to 84.5% of all international departures by Indian carriers, while IndiGo and SpiceJet contribute to just 8.8% and 6.8% respectively.
This statistic shows IndiGo and SpiceJet are very small players in the international front, serving destinations at neighbouring countries. IndiGo operates only to five international destinations: Kathmandu (Nepal), Muscat (Oman), Singapore (Singapore), Bangkok (Thailand), and Dubai (U.A.E.), while SpiceJet operates only to six international destinations: Bangkok (Thailand), Colombo (Sri Lanka), Dubai (U.A.E), Kabul (Afghanistan), Male (Maldives), and Muscat (Oman).
Air India and Jet Airways started operations before the 5/20 rule was instated in the year 2005. IndiGo and SpiceJet started operations after the 5/20 rule was introduced. The 5/20 rule requires airlines to operate domestic services for a minimum period of five years, after which it can fly international only if the airline has a fleet size of 20 or greater.
Air India Express was the only airline to start immediate international operations (although on an AOP different from Air India) after the 5/20 rule was introduced. The first flight of the airline was an international flight.
Neither IndiGo nor SpiceJet fought the 5/20 rule at that time as the focus of both airlines then, as it is today, is to tap the potential of the domestic market. SpiceJet started international operations in October 2010, while IndiGo commenced international operations in September 2011. Despite both LCCs having started international operations nearly five years ago, when the scale of domestic operations were smaller, both airlines chose not to focus on international operations. (See IndiGo’s fleet induction, here) Both airlines always had the option of inducting larger aircraft to serve destinations beyond the surrounding Asian and Middle East countries. But such is not their business model.
As a result, the only Indian carriers to majorly serve international are Air India and Jet Airways, both of which were not ‘victims’ of the 5/20 rule, whereas IndiGo and SpiceJet, which chose to focus on domestic even though they started international operations five years ago, are ‘victims’ of the 5/20 rule, strongly opposing the removal of the a rule that means nothing, and does not impact either airline..
Go Air started operations in the year 2005, but chose not to increase its fleet beyond 19 aircraft. It deferred its 20th aircraft, which was readied by Airbus. As a result, the airline does not fly international, and seems to have no issues remaining a domestic player. Yet, the airline opposes the removal of the 5/20 rule, though it chose not to operate international.
In the quarter ending 31st December 2015, a total of 12.6 million international passengers were carried by both Indian and international airlines. Of that number, Indian carriers flew just 4.5 million passengers, or just 36% of the total traffic.
India is underutilising its bilaterals, due to restrictions placed by rules such as the 5/20. For the purpose of this case, and for want of time, we consider only three international destinations: Singapore, Bangkok, and Kuala Lumpur.
As of late February 2016, there are three airlines from Singapore that operate to 13 destinations in India. Singapore Airlines, Tiger Airways and Silk Air together operate 134 flights per week to India, from Singapore, and an equal number of return flights. Together, the airlines deploy 30,517 seats per week between Singapore and India, in each direction, using a variety of aircraft: Airbus A319s, A320s, Boeing 737-800s, Airbus A330s, Boeing 777-200s, 777-300s, and Airbus A380.
In contrast, three Indian airlines (four if you count Air India Express separately) connect Singapore to only four destinations in India. Air India, Air India Express, Jet Airways and IndiGo together operate 63 flights per week between the two countries. Together, the airlines deploy just 13,244 seats per week between Singapore and India, in each direction, using Airbus A320s, Boeing 737-800s, Airbus A330-300s, and Boeing 787-8s.
Thai Airways, Thai AirAsia, and Bangkok Airways operate from Bangkok to eight destinations in India, flying 73 flights and deploying 19,497 seats per week, Using Airbus A320s, Boeing 747s, 777-200s, 777-300s, Airbus A330-300s, and Boeing 787-8s.
In contrast, SpiceJet, IndiGo, Jet Airways and Air India together operate 62 flights, deploying 12,474 seats per week, from four Indian destinations to Bangkok, using Airbus A320s, Boeing 737-800s, 737-900s, and Boeing 787-8s.
From Kuala Lumpur, AirAsia Berhad, AirAsia X, Malindo, and Malaysian Airlines operate 180 flights to 12 Indian destinations, deploying 32,903 seats per week between Malaysia and India, using Airbus A320s, Boeing 737-800s, 737-900s, and Airbus A330-300s.
In contrast, only Air India Express operates to Kuala Lumpur, connecting only Chennai to the Malaysian capital with 4 weekly flights and deploying 744 seats per week.
While not all destinations are commercially viable, there is a huge mismatch between the capacity deployed by foreign carriers, and the capacity deployed by Indian carriers, on the same set of routes. Infact, the superior connectivity offered by foreign carriers is not matched by Indian carriers, leaving a large scope for more Indian carriers to boost the Indian economy while also providing international passengers seamless domestic connectivity.
The 5/20 rule must go if India should see it’s own airlines connect India with the rest of the world.
What the FIA won’t tell you
The Federation of Indian Airlines (FIA), have something against the airlines of the Father of Indian Aviation (FIA), Late JRD Tata. The Tata’s have already done enough to promote connectivity within India: TATA airlines was renamed Air India.
The FIA (Federation) is shaken by the prospects of airlines such as Vistara and AirAsia India. The goal of the FIA is to restrict the operations of such airlines to within India, so that players like the market leader can use its low cost base to lower fares on every route such airlines fly, and bleed the airlines dry. Starting with the smallest and the least capitalised airlines, airlines will knock off the Indian scene, one by one, leaving only a few to operate in India, with the market player enjoying a huge monopoly in setting fares. At that point in time, India will suffer, with neither good international connectivity, nor with strong domestic competition nor worthy alternatives.
While the FIA blames consultancy firm KPMG of auditing Singapore Airlines and consulting for the government, it remains silent on consultancy firm CAPA.
CAPA India, in its Aviation Outlook 2016, stated, “Despite repeated statements by the Minister that there is no logic to the 5/20 rule and that it should be abolished, the discriminatory regulation still remains in place”.
Guess which consultancy firm’s services was sought for IndiGo’s Red Herring Prospectus? CAPA India.
Excellent work in reducing unit costs in Q2’16, exceeded expectations.
Disappointing revenue performance.
Excellent ancillary revenues.
Accumulated losses around 200 crore, losses since start of operations around INR 150 crore.
Financial & certain performance data reported by AirAsia India is inconsistent, inaccurate, and unreliable.
Before we begin the analysis of AirAsia India’s performance, it must be noted that the quarter reports of AirAsia are unreliable, on at least four counts, as observed:
The quarter report for Q1’16 (“SECOND QUARTER REPORT ENDED 30 JUNE 2015”) states that in Q1’15, AirAsia India reported a net loss of RM 0.4 Million. However, the quarter report for Q1’15 (“SECOND QUARTER REPORT ENDED 30 JUNE 2014”) states that AirAsia India reported a net loss of RM 13.8 Million. This translates to a difference of RM 13.4 Million / INR 25.9 crore.
The quarter report for Q4’15 (“FIRST QUARTER REPORT ENDED 31 MARCH 2015”) states that in Q4’14, AirAsia India reported a net loss of RM 12.4 Million, which, based on the RM-INR conversion rate prevalent then, converts to INR 22.7 crore. However, the P&L statement in the same Q4’15 report states that AirAsia India had a net loss of only INR 8 crore.
The quarter report for both Q2’16 (“THIRD QUARTER REPORT ENDED 30 JUNE 2015”) and Q2’15 (“THIRD QUARTER REPORT ENDED 30 JUNE 2014”) states that in Q2’15, AirAsia India recorded a net loss of RM 15.7 Million, which converts to INR 29 crore based on the RM-INR conversion rate prevalent then. However, in the Q2’16 report, AirAsia India is stated as having incurred a net loss of INR 52.9 crore.
The flown capacity (ASK) reported by AirAsia India in its quarterly reports is 12%, 5% and 3% higher than what the airline has reported to the DGCA in Q2’16, Q1’16, and Q415. However, in teh two sources of data, the number of flights by the airline match perfectly, and the number of passengers flown are reasonably close.
As a result of (3), we will refrain from comparing Q2’16 data with Q2’15 data, but will only compare Q2’16 data with Q1’16 and Q4’15 data.
As a result of (4), we will refrain from using the AirAsia India flown capacity as reported in the quarterly reports, as this leads to very misleading performance numbers. We stick to the DGCA data.
We had already mentioned the first three points, but the discovery of issue (4) made us withdraw our earlier analysis and revise the numbers. This is the revised analysis.
Due to the ambiguity resulting from points (1), (2) and (3) above, the total losses accumulated by AirAsia India including Q2’16 is around INR 200 crore. Total losses since start of commercial operations (ignoring June 2014) stands at INR 150 crore as reported by AirAsia India.
Q2’16 (July 01st – September 30th, 2015) was AirAsia India’s first full quarter of 5 aircraft operations. In this period, the airline flew 416,182 passengers (excluding no shows: 401,905. No shows : 3%), which is a 38% rise compared to Q1’16, though the number of flights increased by 50%. This explains Q2’16’s load factors of 76%, as against Q1’16’s load factors of 83%. The load factors in Q2’16 were lower than the 79% witnessed in the other lean season – Q4’15. Load factors include no show passengers.
The airline operated 34 daily flights as of 30th September 2015, and flew its millionth passenger in the first half of August 2015.
Q2 is historically a lean season. Capacity in Q2’16 grew by 56% over Q1’16, despite flights increasing by only 50%. This is in line with the average stage length of each flight increasing to 1,208 km/flt from 1,146 km/flt. Low load factors, increase in average stage length, and the low pricing power in the lean season have together resulted in the average fare dropping to INR 2,684 in Q2’16 from INR 3,350 in Q1’16. In Q2’16, AirAsia India did not inaugurate any new routes, but added a frequency on the Bengaluru – Vizag sector, and hence, there was no significant effect of low yields due to new routes.
Ancillary revenues at the airline have picked up very well. From being just 8% of total revenue in Q4’15, to 10% in Q1’16, it touched 15% in Q2’16. This has been aided by the increase in cargo per flight, to an average of 1,205 kg per flight in Q2’16 compared to 1,074 kg/flt in Q1’16 and 971 kg/flt in Q4’15.
However, on a unit basis, the airline’s revenue per available seat kilometre (RASK) suffered a 27% drop from Q1’16 figures, to settle at INR 2.22/seat-km, due to the factors mentioned in the preceding paragraphs. The unit revenues are 22% lower than the Q4’15 lean season.
AirAsia India’s cost performance is very good, and has touched record low values in Q2’16.
Unit aircraft fuel expenses fell by 13% in Q2’16 compared to Q1’16, despite fuel prices falling by only 9%. Higher average stage length of 5% can only contribute little to improved fuel consumption. However, tankering and uplifting fuel from stations with low sales tax on fuel may explain a part of the lower fuel expenses. Sales tax at Vishakhapatnam is just 1%, Goa 12.5%, Guwahati 22%, Imphal 20%, and Delhi 20%. Delhi, Guwahati, Imphal and Vishakhapatnam operations, and increased operations to Goa in Q2’16 may have significantly contributed to the drop in fuel costs.
Inexplicably, the staff costs have dropped in Q2’16 compared to Q1’16, from INR 31 crore to INR 29 crore. While there is no obvious explanation for such a drop, it has resulted in the unit staff costs to drop by 41% in Q2’16.
Unit maintenance costs have increased by 2% in Q2’16.
Due to longer flights, capacity has increased by 56% but flights by only 50%, in Q2’16 compared to Q1’16 resulting in the 7% drop in unit user charges and related expenses, which are largely a per-flight expense.
Unit lease expenses have dropped significantly by 29% in Q2’16, attributable to increased aircraft utilisation, higher capacity and no aircraft having to remain on ground in Q2’16. Average lease rental per aircraft per month is INR 2 crore.
Other operating expenses, most of which are fixed, have been diluted by the higher capacity, dropping by 25% in Q2’16.
Other Income, which is treated as part of operations by AirAsia India, increased by 10%, positively impacting the bottom line.
The cumulative effect of increasing frequency, network changes, and increased aircraft utilisation, amongst others, has reduced unit total operational costs at AirAsia India by 21% (including other income which can also be a negative quantity as in Q4’15). This is a brilliant performance, though the drop in staff costs is yet to be clearly identified. One explanation is perhaps the reduction in training expenses due to stagnation of fleet growth, and perhaps the voluntary exit of certain crew.
Break Even Figures
In Q2’16, AirAsia India realised a per-passenger cost of INR 4,621, which is 10% lower than the INR 5,166 cost per passenger in Q1’16, but 15% higher than the INR 4,009 cost per passenger in Q4’15.
In Q1’16, AirAsia India incurred a loss of INR 1,469 per passenger. At the same unit passenger revenue of INR 3,154, AirAsia India would have needed a break-even load factor of 112%.
AirAsia India lost INR 1.04 per seat flown every kilometer, which is 5% lower than INR 1.09/seat-km in Q1’16, but 30% higher than the unit loss incurred in Q4’15.
AirAsia India’s cost structure is depicted in the pie chart. Fuel constitutes 36% of the airline’s expenses.
Cancellations and OTP
Only 6 flights were cancelled by AirAsia India, in Q2’16. The airline operated 3,032 flights, with an average on time performance (OTP) of 87%.
In Q3’16, AirAsia India inducted its 6th aircraft into operations, in the second half of November 2015. Daily flights have gone upto 40, with increase in frequencies and the inauguration of a new route, Delhi – Vishakhapatnam.
Our forecast for AirAsia India’s performance in Q3’16:
Quarter’s Load factors to increase to around 85%.
Capacity to increase by 12% and passengers carried (including no shows) to touch around 520,000.
Average unit passenger revenue may rise by around 20%+ compared to Q2’16.
Certain unit costs to slightly increase due to addition of 6th aircraft and sending one aircraft for half a month for scheduled heavy maintenance.
Certain unit costs to very slightly increase due to weather related delays and diversions.
Ancillary Revenue percentage to drop in light of higher average fare.
For break even, unit passenger revenue must rise by around 45% (compared to Q2’16)
Very slim chance of an operational break-even. More likely in Q1’17 (April – June 2016).
The airline, which will end calendar year 2015 with a fleet of six airplanes, is expected to induct atleast one additional aircraft before end March 2016.
The additional aircraft, which will be the 7th airplane for the hitherto 17 month old airline, will be based out of Bengaluru. Presently, three are based at Bengaluru, and two at Delhi, with the 6th aircraft taking the count at Dehi to three. Basing the 7th out of Bengaluru is necessary to ensure that atleast 50% of the airline’s fleet is based out of Bengaluru, as per an agreement AirAsia India has with Kempegowda International Airport, Bengaluru. This agreement, a drive by the airport to increase traffic, gives AirAsia India certain benefits in terms of airport charges.
The 7th aircraft is expected to add a third frequency between Bengaluru and Delhi (both ways), and increase the frequency between Bengaluru and Goa to thrice daily, both ways. The aircraft will enable the opening of a new sector for the airline, a direct flight between Bengaluru and Guwahati.
With the 7th aircraft, the airline will fly 46 daily flights from its two hubs at Bengaluru and Delhi, deploying 8,280 seats a day. Capacity in ASK will increase by 47% over the 34 daily flights flown today, and 19% over the full utilisation of the fleet with 6 aircraft.
The Delhi <> Goa sectors, and the Delhi <> Guwahati sectors will get an additional frequency. The new sector that the airline is expected to operate is Delhi- Vishakhapatnam. Delhi to Vishakhapatnam will depart at 6:05 am as I52551, and will depart Vishakhapatnam at 8:35.
The total number of flights on the Delhi<>Goa sector goes upto thrice daily, and the number on Delhi<>Guwahati goes upto twice daily, from November 17th.
However, the airline now has two flights to Goa from Delhi (and back) spaced just 45 minutes apart, which may lead to cannibalization, pronounced during the off-peak seasons.
The new Delhi – Guwahati flight gives a Delhi passenger the option of a meaningful day return on the same airline.
One of the three aircraft patterns is expected to be dedicated to these new route and frequencies. Aircraft operating the pattern will fly DEL-VTZ-DEL-GOI-DEL-GAU-DEL, accumulating a block time of 14:45 hrs.
With the addition of the new aircraft and the related routes, the airline will increase capacity (measured in available seat kilometres) by 24% over the existing network, and will increase seat capacity by 17% to 7,200 daily seats. Daily flights will increase to 40 from the present 34.
Unlike in the summer peak season when the airline had two airplanes on ground for nearly two months, and incurred setup costs associated with the opening of four new stations (Delhi, Guwahati, Vishakhapatnam, Imphal) the airline in the winter peak season is not opening any new stations, thereby incurring no one time costs related to the network.
Presently, the airline is only selling the new DEL-GOI-DEL and DEL-GAU-DEL flights. The DEL-VTZ-DEL flights are yet to be announced and opened for sale.
AirAsia India, which has been slow in its growth owing to a primarily domestic-international network strategy that was thwarted by the unreasonable delay in lifting the 5/20 rule (a rule requiring an airline to fly international only after flying domestic for 5 years, and a minimum fleet size of 20 airplanes), received its 6th aircraft at Hyderabad’s Shamshabad airport at the MAS-GMR MRO facility.
The aircraft, bearing MSN 4346, previously flew for Indonesia AirAsia as PK-AXL. It is a non-winglet airplane, and is 5 years 4 months old.
It has now been re-registered to VT-APJ, as a tribute to late Dr. A.P.J Abdul Kalam.
This is AirAsia India’s third non-winglet airplane. This is also the fourth airplane to be dedicated to a person (living and dead) or a place. The other three are VT-ATF (Tony Fernandes), VT-JRT (JRD Tata) and VT-BLR (Bengaluru).
This is perhaps the last airplane the airline will induct in this calendar year – something we had mentioned earlier.
With this, AirAsia India will be adding capacity during the winter peak season. The airline may start operating new sectors or additional frequencies only towards mid-late November 2015.
Due to the late announcement of routes, some of the lowest airfares may be found on AirAsia’s network. While this is good for passengers, it may adversely impact the airline’s unit revenues.
The airline has however started offering via flights – Passengers from Delhi can fly to Imphal via Guwahati, something which the airline did not offer earlier. Via flights will help improve revenues at the airline – something we had mentioned earlier.
While total costs in the airline will rise with the induction of the 6th aircraft, unit costs are expected to slightly fall, which is good for the airline.
The 6th aircraft may be based at Delhi, and may connect the national capital to Visakhapatnam, among other frequency/route additions.
Operational exigencies are common and happen to every airline. Last evening, one of AirAsia India’s five aircraft, registered VT-BLR, Airbus A320-216 (bearing serial number 4070 manufactured 6 years ago), while operating I5 1321 – the Goa to Bengaluru flight – returned to Goa immediately after departure, as it reportedly suffered an engine bird strike on departure. The aircraft returned safely to Goa, where it remains grounded at the time of writing.
A second aircraft, VT-ATB presently based out of Delhi, operated I5 2327, the scheduled Delhi-Goa afternoon flight. On landing at Goa, it operated 1321 – the Goa – Bengaluru flight. The aircraft later performed a late night ferry (non-commercial flight) from Bengaluru to Goa, and then carried the Goa-Delhi passengers, landing at Delhi at nearly 3:30am.
VT-BLR’s temporary grounding had affected the airline’s network. The previous night’s Bengaluru-Vishakapatnam-Bengaluru and Bengaluru-Cochin-Bengaluru flights, which were to have been operated by VT-BLR, were delayed by around 3 hours and 1 hour, respectively, as other aircraft (VT-ATF, VT-JRT) had to operate these flights after finishing their usual patterns. The pattern of only one of five aircraft: VT-RED based at Delhi, was not affected.
As a result of VT-BLR’s grounding at Goa, today morning’s Bengaluru-Jaipur-Bengaluru (I5 1720/1721), and the afternoon Bengaluru-Goa-Bengaluru (I5 1320/1321) have been cancelled, while the evening Bengaluru-Jaipur-Bengaluru (I5 1722/1723) flights have been delayed by at least 2 hours.
Training flights on VT-JRT at Bengaluru’s HAL airport, conducted last night, were not affected.
The aim of this entry is to study how the airline handled an incident, and the effects of such an incident on the network, and not to comment on or judge its ability or methodology.
Among all airlines to have started operations with mainline jets (Airbus A320 or Boeing 737 aircraft), AirAsia India’s growth (in terms of passengers flown) has been better than only GoAir’s. While GoAir’s average aircraft fleet in the first year of operations was higher than AirAsia India’s, but flew with poor load factors.
Air Deccan is not considered as the airline started operations in October 2003 with 48 seat ATR-42 aircraft and inducted its first Airbus A320 only in July 2004 – 9 months after starting operations.
Until the issue of flying international is resolved, AirAsia India may induct just one other Airbus A320 into its fleet by the end of the calendar year 2015, taking the total fleet size to 6. Vistara will however induct 3 more to take the total fleet size to 9 aircraft by the end of the calendar year.
Vistara’s total passengers flown at the end of the fifth full month of operations (June) is slightly better than what Kingfisher flew in the corresponding period.
Vistara may have flown close to 450,000 passengers towards the end of July 2015, since start of operations. The airline is expected to fly its 500,000th (half millionth) passenger during the second or third week of August 2015.
One of AirAsia India’s aircraft utilisation has increased to one of the highest in the country.
1 millionth passenger expected to be flown around August 5th.
Typical turn around time: 25 -30 minutes.
The airline, which started operations one year ago on June 12th, 2014, now operates a fleet of 5 aircraft from 2 hubs – Bangalore and Delhi. All of the airline’s present flights from Delhi are no less than 2 hours 20 minutes long. Such long flights ensure that the airplanes spend a larger fraction of the flight in air, resulting in higher aircraft utilisation.
One of the airline’s 5 aircraft rotations flies only 2:30hr flights. This rotation covers a Delhi-Bangalore return, and two Delhi-Goa returns. Together, the utilisation on this pattern totals to 15:10 hrs, which is 50 minutes short of the target that the airline had made public, but one of the highest in the country for all domestic operations.
Average utilisation is however at 12:19 hrs, and the minimum utilisation is 11:00hrs. The average turn-around time at the airline is 36 minutes, a figure that is 16 minutes higher than the target of 20 minutes. However, turn around periods of 25 minutes and 30 minutes account for 70% of all turnarounds. There are no turnarounds of 20 minutes. Refer graph below.
The airline recently added Imphal as a destination, raising the number of destinations to 10. The airline today flies 32 flights a day, deploying 5,760 seats a day and flying around 4,500 passengers daily. Till end May 2015, the airline had flown 716,000 passengers. The airline may fly its 1 millionth passenger on or around the 5th of August 2015.
The airline may add a third Cochin flight in the morning, to provide a well spread out thrice daily service to Cochin from Bangalore. When added, all airplanes will be flying at near maximum utilisation in their rotations. No further growth is possible with the existing fleet.
Aircraft between hubs may be swapped through the night flight I52227 DEL-BLR and I52228 BLR-DEL. Two rotations sync up at the right times to allow for a swap. Until a third Cochin is launched, the airline may use the morning flight I52221 DEL-BLR to swap airplanes.
Ideally, considering that Delhi base has higher aircraft utilisation, the airline may realise a higher fuel saving by deploying two winglet-equipped aircraft at Delhi rather than just one as is the case today. Winglets help realise greater savings on longer flights.
According to the AirAsia Group, AirAsia India, “Overall performance was better than expected with strong loads but is working on keeping costs under check.”
AirAsia India’s journey so far has been interesting. What was a pleasant surprise was the airline reporting its lowest ever net loss in an operating quarter – of INR 19 Cr. This, despite Q4 being a season of low travel demand, and in the same quarter having had numerous delays and cancellations. It was also the first full quarter of three aircraft operations.
AirAsia India claims to have an attractive cost structure. In this piece, we analyse their figures for Q4 FY’15.
In the months of January, February and March 2015, AirAsia India flew 222,502 passengers. No show passengers were 15,055. These two total to 237,557 seats that were sold. No show accounted for 6% of all sold seats. Total seats flown were 300,240, and flown passenger load factor was 74% for the quarter, while seats sold load factor was 79%.
The airline carried a total of 1,620 tonnes of cargo on 1,668 flights, which averaged to 971 kg of cargo per flight – a very good number.
A total of 2,260 hours were flown in the quarter. With three aircraft, this averaged to a daily average aircraft utilisation of 8:22 hrs per aircraft per day. This low average utilisation reflects the cancellations and delays in the quarter due to crew shortage. While the airline was originally scheduled to fly 22 flights a day, the average flights per day in the three months were lower due to the same reason.
12,155 of the airline’s passengers were affected by cancellations and delays of more than two hours in the quarter.
Market share stood at a constant 1% throughout the quarter.
AirAsia India realised an operating expense of INR 95.3Cr in the quarter.
37% of AirAsia India’s costs are due to fuel. The next biggest is staff salaries which make up 25%. Lease comes next at 19%. These three together make up 80% of the airline’s costs. In this period, the airline had three aircraft: VT-ATF/ATB/RED. All three are new enough to have no maintenance issues or checks, and hence maintenance is only 3%.
Average lease cost per aircraft is INR 2 Cr per month.
AirAsia India realised an operating revenue of INR 74.4Cr in the quarter. Of this, 92% was due to passenger ticket sales, while 8% was due to ancillary revenue.
The average fare per passenger (excluding taxes and fees) for the quarter was at INR 2,884. Revenue per available seat kilometre (RASK) was at INR 2.75/seat-km, while Cost per available seat kilometre (CASK) was at INR 3.53/seat-km.
At the same load factor, average fares could have been increased by INR 878 per passenger to operationally break even.
At the same average fares, operational breakeven load factor stood at 103%.
Both figures above assume constant ancillary revenue. Ancillary revenue per flight was INR 35,320.
Average operating cost per block hour was INR 421,311 (US$ 6,600).
Average cost per kilometer flown was INR 635/km.
AirAsia’s losses are on a steady decrease. With five aircraft operating in Q1’16, better routes, and the strong travel demand, the airline may spring a surprise with its Q1 performance.
A sixth aircraft is expected to join the fleet in June. Q2’16 – a lean season- will be an interesting quarter to watch, with a mild possibility of a break even. The airline may either break even or post profits in Q3’16.
The airline added Imphal to its booking engine on 28th May 2015.
AirAsia India is a wonderful airline, and has got a few things right. Their on board service is one of those.
As an airline, especially a start-up airline, making mistakes is inevitable. Falling short of projected growth plans and heavy flight cancellations and delays in certain months of the first year of operations are acceptable. Both these have happened to AirAsia India, and the industry understands. Of course, there are better examples, such as IndiGo, which has managed to play the game like no other.
The unacceptable part? Factually incorrect statements that can lower the overall credibility of the industry.
Here is an excerpt from the May 20 interview of the AirAsia India CEO, by Ashwini Phadnis, as published in The Hindu Business Line:
How many of the things planned initially have happened and how many have not?
We have done certain things we did not expect. We have flown close to a million passengers. By the time we complete our first year we would have flown more than a million passengers. No other airline in India has done that before in their first year of operations. We have done that with a skeleton fleet, meaning, we have utilised aircraft significantly.
We contest both claims  & , in the interest of factual correctness.
The graph on top (click to enlarge) shows the total number of passengers flown against the first twelve months of operations. All data is from the DGCA.
IndiGo, Kingfisher Airlines, SpiceJet, and Go Air started operations in the 2005-2006 timeframe. Within the first one year of operations, all airlines in consideration, with the exception of Go Air, carried in excess of 1 million passengers. IndiGo crossed the 2 million mark in the first year!
As of 31st March 2015, AirAsia India had carried 550,000 passengers. This means that the airline will need to carry 450,000 passengers to touch the 1 million mark by the end of June (AirAsia India started operations on 12th June, 2014). This means that the airline will need to carry on average 150,000 passengers in the months of April, May and June. Is this achievable?
Data for the month of April and May were not available at the time of writing this piece. Since April had no new flights, but had infact cut 4 – Bangalore- Chennai & back, the airline flew around 97,200 seats in April. With an assumed 82% load factor – their highest so far, the airline could have flown no more than 80,000 passengers in April.
66% of May was flown with 18 flights a day, which totals to approximately 65,000 seats. Effective 21st May, the airline will operate 8 new flights. For 33% of the month this totals to around 47,000 seats. IN total, May can fly only 112,000 seats. At a generous 90% load factor, this is 100,000 passengers.
In June, the airline will fly 28 flights a day, flying approximately 140000 seats a month. At 80% load factor, this will result in around 120,000 passengers being flown.
This means that AirAsia India will close its first year of operations with a maximum of 850,000 passengers, neither meeting nor crossing the 1 million mark.
We wish the airline all the very best for its northern hub operations.
AirAsia India announced today Delhi as its second hub, after Bangalore. Delhi will also serve as a base for the airline, while Bangalore will remain the home base.
Assuming that the airline will start flying between Bangalore and Delhi, the airline will for the first time begin flying on a Category I (Cat I) route, as defined by the prevalent route dispersal guidelines (RDG). Flying on a Cat I route will now oblige the airline to deploy a minimum percentage of the Cat I route capacity on Category II, IIA and III routes. Capacity is measured on an available seat kilometer (ASKM) basis. Every 180 seat flight between Bangalore and Delhi adds approximately 3,42,000 ASKM.
This makes the choice of Delhi as a base very important.
The importance of Delhi
Category II (Cat II) routes are routes which were traditionally looked upon as ‘loss making’ routes. These are routes that connect the mainland to the ‘neglected’ north-east, far north, and the islands that make up Lakshadweep and the Andaman and Nicobar Islands. (Please note that ‘neglected’ is a harsh word, but that’s how the ministry looks upon these regions as far as air connectivity is concerned). 10% of the Cat I capacity must be deployed on Cat II routes (To be soon revised to 20%). Had AirAsia India flown to Port Blair from Chennai or Bangalore, this requirement could have easily been met. AirAsia’s Airbus A320s cannot operate into and out of Agatti’s short strip.
Category IIA (Cat IIA) routes are routes which connect airports within a ‘neglected’ region. Examples are Jammu-Srinagar, and Guwahati-Bagdogra. Unfortunately, the southern portion of India – where AirAsia India is based- has no such Cat IIA routes. 1% of the Cat I capacity must be deployed on Cat II routes (to be soon revised to 1.5%)
To cater to a Cat I route and Cat II & IIA routes, the northern part of India is a wiser hub.
All the routes AirAsia India flies today are Cat III routes, as per prevalent RDGs.
Establish the route
By having a hub at Delhi, AirAsia India can fly early morning flights from Delhi to Bangalore, which can be mirrored by early morning Bangalore – Delhi flights. Similar flights from either destinations may be flown in the evening. This requires one A320 to be based at Delhi, to start with.
If such a strategy is followed, each aircraft will fly a minimum of 2 flights on the Bangalore – Delhi/vv route. Each flight is planned for 2:45 hrs, which will total upto 5:30 hours of utilisation per aircraft on this city-pair, leaving a maximum of around 7hrs of utilisation for other stations.
We feel that the airline may fly a 3x Bangalore-Delhi one way, per day, of which at least 2 shall be direct flights.
Flights to Delhi are not expected before May 2015, and perhaps not before mid-May 2015.
Deploy Cat II & IIA capacity.
Flights between Delhi-Jammu-Srinagar or Delhi-Guwahati-Bagdogra or Delhi-Guwahati-Agartala may be flown for Cat II and Cat IIA capacity. Delhi-Jammu-Srinagar seems to be the most likely set of cities to be flown first.
If the airline is innovative enough, it may make the most of its patterns to fly underserved routes. I am obliged to not exercise my creativity in suggesting routes.
Open Vishakhapatnam as a destination
AirAsia India presently flies three aircraft, and one of the three patterns flown everyday has a poor utilisation of just 7:50 hrs (see above). It is in this pattern – the third pattern, that two flights to Vishakhapatnam may easily fit in (as published in the DGCA’s Summer Schedule), with perhaps slight schedule changes.
The necessity – 5th aircraft
Opening the Delhi-Bangalore route will require two additional aircraft: one based at Bangalore, and the other at Delhi.
Further, as per CAR Sec 3 AT series C Part II, operators “will be given one year’s time from the date of securing operator’s permit, to have the fleet size of five aircraft”. AirAsia India secured its AOP on May 7th, 2015, and a 5th aircraft is necessary to meet regulatory requirements.
Today, at around 11:00hrs IST, AirAsia India’s 5th aircraft flew into Hyderabad from Kuala Lumpur. The aircraft is a used Malaysia AirAsia A320-216 (9M-AHU) without winglets, and is around 5.5 years old. The aircraft is AirAsia India’s second, non-winglet A320, after the 7 year old A320 which was unveiled to the public on 21st March in the JRD Tata livery (see image on top). Both aircraft are yet to start flying commercially for the airline.
The first three aircraft have winglets. If the airline is prudent with its fuel burn, only the winglet equipped aircraft (VT-RED/ATF/ATB) will be deployed on the BLR-DEL vv route.
Thank you to @ATCBLR on Twitter for posting the 5th aircraft’s arrival.
Marked shift in strategy
Last year, Mittu Chandilya, CEO AirAsia India had announced Goa as the second hub, with the induction of the 4th aircraft. He had also mentioned that the airline will keep off Delhi and Mumbai.
The airline last operated flights on the Bangalore – Chennai route on 31st March 2015.