Interlysis01

The Flying Engineer conducts an interview & analysis (interlysis) of Mrithyunjaya Chandilya, CEO of AirAsia India, and the airline.

Key Points

  • Mittu and Mrithyunjaya are two different people, thanks to a study by Albert Mehrabian.
  • “AirAsia is formed as a tourist airlines”.
  • Goa poised to become the airline’s next hub, when the 4th airplane arrives.
  • 2nd and 3rd aircraft by end July/ early August, and one airplane a month thereafter.
  • 6 aircraft by end of CY2014, and 14 aircraft by end of FY2014-15.
  • 8-9 destinations by end of CY2014, and 15-16 destinations by end of FY2014-15.
  • Point-to-point carrier, looking at new, virgin territories.
  • Plans to operate to north India in six months or less, with four+ aircraft in fleet.
  • Aircraft utilisation downward revised to 12-14hrs/day/acft from 16hrs.
  • Turnaround time upward revised to 25 minutes from 20 minutes.
  • “990 fare for us is something that we think is sustainable”. 25% aircraft flies with 990 fare.
  • AirAsia stands out because of strict discipline on costs.
  • Stern about employee performance.
  • Confident of 4 month break even “If the two and three airplanes come in as per schedule”.
  • Salaries upward revised.
  • Six months before non-performing route is closed.
  • Market big enough for more carriers, but ” you’ve got to be clever about it”.

Interlysis02According to Albert Mehrabian, who is known for his works on the importance of verbal and non verbal communication, only 7% communication is through words; Of the remaining-and hugely significant-93%, the tone of the voice accounts for 38%, and body language accounts for 55%.

Which is why there are Mittu Chandilya and Mrithyunjaya Chandilya – the textual version and the full length version of the same man-chief executive officer (CEO) of AirAisa India. He’s as young as 33 years, has no prior experience in managing an airline, or having been part of an airline, and is at the reigns of the youngest airline in India.

The social media version – Mittu – sometimes paints the picture of an aggressive, self centred, instigative, witty, over-confident young man maybe wanting a little more maturity.

Typical examples are: “Wow! Received overwhelming response to our Goa & Chennai routes. I have decided to have additional Rs 5 promo fares!“- Adding fares is an airline’s collective decision backed by strong research and a green signal from the resource and revenue management team. Replacing the “I” with the “we” would have sounded better and more inclusive, in our humble opinion. Sanjiv Kapoor, COO (and the yet to be announced CEO) of SpiceJet congratulated Mittu on Twitter with ‘all his heart’ when AirAsia India’s first airplane arrived. “Congrats Mittu, and welcome Air Asia! Note that SG also has all-leather seat covers! 🙂“, mentioning the leather seat covers on board to correct one gentleman who had stated that the last airline to fly with leather seats was Air Deccan. Mittu’s reply? “Thanks for the warm welcome. On the leather seats, you mean to say let’s not make a song & dance about it 🙂“. Instigative? Maybe. Especially to those who know about the infamous SpiceJet Holi incident.

Immediately coming to the defence of the CEO’s image is the other 93% -the real Mrithyunjaya: sharp, soft spoken, well-accented, who projects the image of a determined warrior, family man and a team player, friendly, approachable-destroying hierarchy and dissolving levels, polished, and who speaks his heart out in a tone that is hard to offend many. He knows how to keep a conversation alive with his wit and humour. A small example? During the interview, “Ajay came from the other ‘Blue’ airlines, he heads all ground services for me. And we’re all red now, it’s been bashed into the head. He’s a strong, intelligent guy who pushes his way through”.

And his most impressive attributes? His seemingly balanced confidence, discipline and leadership traits, lending him the image of a man who is learning, open-minded, but means business, determined by hook (and maybe not by crook) to lead his airline to the goals he has set for himself and the board.

It’s not the first time, and he’s not the first person to be placed in a seat that is usually filled by men of experience -Aditya Ghosh, and Tony Fernandes are some of many examples. Mrithyunjaya’s absent background in aviation is both a boon and a bane to him and the airline. The cons are the lack of understanding certain industry processes, the absence of a self-derived statistical and historical analysis of the sector, especially in as challenging an environment as India, and over optimism – all of which can significantly impact planning and promises. The pros? The absence of a “baggage” of stereotyped ideas and thought processes, and the innocence to ask and question time consuming and money burning processes. It is easier for a new entrant to see what has been missed; the fresh-minded thinking and curiosity is what drives innovation – the mantra for the success of many low cost carriers world over. In essence, Mrithyunjaya’s history prevents him from throwing sufficient light on a long, dark runway- like a channelled, intense landing light, but allows him to see more of the short distance space- like the spread of a taxi light. Yes, it can short sight him, but it gives him the flexibility to turn his head around and look, at close range, what has probably been missed by those with long sight.

But he isn’t running the show alone. With the men and women at the AirAsia group with tonnes of relevant experience on their hand to support AirAsia India, Mittu’s lack of airline experience fades to irrelevance.

In this Interlysis (Interview-analysis) of Mrithyunjaya & AirAsia, we cover what he speaks, and study some of what he says. Mrithyunjaya spoke to The Flying Engineer and other media when he and TFE landed at Goa on AirAsia India’s first commercial flight on the 12th of June, 2014. Questions asked by others, but reproduced here by TFE start with an [O]. Views / analysis by The Flying Engineer are italicised, and start with “TFE – “.

Interlysis031. We’ve landed in Goa. What does that prove to the entire world?

Look, I’m really, really happy coming into Goa. Goa, apart from many things has been Tony Fernandes’ father’s hometown. His father is from here, so symbolically, it’s a very big thing for us. So, I’m very excited about being here in Goa.

2. And after the entire ordeal that you as an airline went through, and then this flight having happened. What does it show to the entire world?

Well, I don’t know what it shows to the entire world, but look, I think it’s all about perseverance, where we’ve been fighting and making sure that we get all the approvals and that we deserve to be here, and so it’s very nice that we’ve come into a place where we’re welcome. Goa has welcomed us with open hands as you saw here, and that’s part of the discussion we’ve been having over the last year, here, as well. I hope to actually park planes here.

3. [O]: Do you plan to make Goa a hub?

Well Goa is actually…we have Chennai, we have Bangalore, and Goa will be the third hub, and we’ve worked through that. Look, I think it’s the same things as why we chose Bangalore as our second hub: it’s a supportive airport, you know, infrastructure is decent, I think we have…ah…we have a state government which is supportive, we have partners here who are setup, which would be the right brand for who we are, and look, Goa is a tourist destination. AirAsia is formed as a tourist airlines. We’ve gone to a lot of tourist destinations. When we went to Bali the first time, there weren’t even many airlines at that time. We just believe in Goa.

TFE – AirAsia doesn’t seem to adapt to the airport. Rather, it looks for ways to make the airport adapt to the airline. This has happened overseas as well, where the group has benefitted from airports of their choice. Apparently, and as reported by Livemint, AirAsia India is going to benefit from certain clauses that the Kempegowda International Airport is offering: overnight parking charge waiver, and a discount on landing and parking charges. The sales tax on ATF is the same at Bangalore and Chennai – 29%. Making AirAsia move to Bangalore and have its headquarters there will be beneficial to the airline in terms of cost. The CEO of AirAsia has also been in talks with the Goa chief minister, and the airline constantly seems to be working toward making choosing airports that “welcome” the airline with cost benefits.

4. Most of the airlines rely on corporate travellers for the bulk of their business. You said it’s a tourist airline. Are you looking at corporate travellers for a major chunk of your business, will you make inroads to the corporate world?

Yeah, absolutely. You have to, right? But if we choose a destination like Goa, you can’t be dependent on the corporate travellers; we would be targeting all segments of travellers and hope to do this in a conscious way, but I would never discount or never like…uh…exclude anybody from any segments.

TFE – Corporate travellers aren’t yet spoilt for choice. IndiGo appeals to the corporate, because of the low airfares, great on time performance, connections, and frequencies. That is something SpiceJet cannot match- the frequencies and connections on the mainlines. If AirAsia gets into similar routes, the in flight experience, which seems to be great, may draw more of the corporate travellers to the airline. The CFM 56-5B6 engines on AirAsia’s Airbus A320 aircraft are quieter than the IAE V2527-A5 engines that power IndiGo’s, further increasing passenger comfort awarded by AirAsia’s leather seats.

ATF5. Fleet expansion plans, route expansion plans, rapid expansion?

Look, I think expansion plans…I think after a month and a half we’d bring in our second and third planes. So the next two would come at about the same time, and frankly, that schedule isn’t set…uh…I was waiting for this first flight to take off and make sure that we go through a lot of things, and then we set that, but…you can expect that in July end or August beginning, when we’d get the other two planes coming in, and then after a month’s break probably, it’ll be one plane a month.

TFE- This is the power the AirAsia Group offers the Indian startup. AirAsia on average takes delivery of 3-4 aircraft per month, from its huge Airbus 320 order it placed- which all orders combined is 475 A320s, comprising 264 A320NEO and 211 A320CEO. It can work with slots to suit its needs, and getting 2 aircraft for India in just one month is not an issue for the group, which enjoys the benefits and economies of scale.

6. [O]: In the state budget, the CM talked about making Goa an aviation hub. That would require you to park planes over here. Is that going to happen over here? When do you think that will happen?

When the new fleet comes in. Not with the second and third ones, but right after that.

7. For the record: your fleet targets for the calendar year and financial year?

End of the calendar year we are hoping to get six. Financial year, look, I’d aim for us to be 14. So it’s a rapid expansion.

Interlysis048. By the end of this year, how many routes would you have?

We’d be looking at new, virgin territories that we haven’t been to. Goa is one of them, you know, we never actually….we didn’t have a hub here, before, and it wasn’t even a destination. So, like Goa, we’d be expanding. I think you’d be looking at close to 15-16 destination by the end of this financial year. Calendar year? I think you’d be looking at anything between eight-nine.

TFE – This is different from the 10 aircraft and 10 city financial year end target that was conveyed to the Financial Express by the CEO on May 31st, and 8 aircraft to Firstbiz on May 7th. Shows that the airline is probably constantly re-working their goals targets. Which is good, from one angle.

9. [O]: Why has Bangalore become a hub for AisAsia?

See, this is…what people do not understand about our business is that we’re a point-to-point carrier. That means that you need more than two, or three, or four hubs, to cover all of India. That’s the reality of it, Because point-to-point means you start from one place, you go to one, and you come back and park the plane. We don’t do three way exotic routes and none of that.

10. [O]: Where are you focussing on, mainly?

All over India.

11. Kochi seems to be your next destination. Your focus seems to be on the south, for now. When are you planning of going north?

(Grins, “Too clever, this one”).

Soon, I think we’d be aiming in about six months, maybe sooner.

12. And that is with how many airplanes?

When the other two and three come in.

13. So that will be with airplane number 4?

Yes. So we do park one here at Goa, and one of the two or three which come in here. Then it gives us connectivity to the north.

14. So you’re not going to park airplanes at Mumbai or Delhi, even if you are to start off operations there?

No. Not at this point.

Interlysis0515. [O]: Will it (the fleet) be a Boeing or an Airbus?

No, always Airbus. Airbus 320s, we’ll never take anything apart from a 320.

TFE – A question that I may have laughed at, and may never have asked, but is a good one in retrospect. Firstbiz on May 7th, had quoted the CEO as saying that all the aircraft will be on direct lease from Boeing, which was later, hours after the interview was published, corrected to Airbus. Either Mittu, excited and tired after having received the AOP on the same day, may have time travelled to AirAsia’s former Boeing fleet, or the interviewee may have been the victim of a transcriptional error.

On a serious note, airlines world over love the Airbus A320 for its economics, and those numbers will only get better. Compared to the A320 with sharklets, the new-engined Airbus A320 aircraft, the A320NEO, will give operators 11% lower fuel burn over long flights. But that isn’t enough. Today, IndiGo does not use Airbus A321 aircraft, which can carry 220 passengers – 40 more than the Airbus A320- for the simple reason that the economics don’t work. But the airline changed its 180 airplane order to include 20 A321NEO in September 2013, in lieu of 20 Airbus A320NEO, as the larger airplane’s economics with the new engine does make sense.

Statistically, the market has continuously been shifting toward larger aircraft. A larger aircraft from the same family costs a little more to operate, but the cost per seat reduces. On thick routes, deploying a larger capacity aircraft from the same family is one way to sustain with low airfares. The average yields may be low, but the volume makes up for that. AirAsia will, and may opt for Airbus A321NEOs in the near future to stay competitive.

Mrithyunjaya admitted a little later that the group has been studying the A321.

16. And the aircraft utilisation?

Will be 12 – 14 (hours per day).

TFE – This is a lower target compared to the earlier target of 16 hours utilisation per day. 14 is sensible. The average utilisations are: IndiGo: 11.5hrs/day, GoAir: 12.5hrs/day. Air Costa flies its Embraer E190s for 14hrs40min a day, but the aircraft isn’t an Airbus A320 like what’s used by AirAsia, IndiGo and Go.

Air Costa, which has one of the highest aircraft utilisations, operates nine flights on its E190s, everyday, which total to almost 14.5hrs of utilisation per day. Add an optimistic 25 minutes turnaround per flight, for the A320, and that totals close to 18.5hrs of aircraft operations, per day. So 16 hours utilisation would have meant in excess of 20 hours utilisation per day-something that doesn’t leave much time for the aircraft’s daily maintenance and even if it did, will necessitate 3 sets of crew per aircraft per day, as opposed to just two.

We’re not suggesting it’s impossible; it just is too optimistic until the 5/20 rule is abolished. A sample of Indonesia AirAsia’s aircraft utilisation pattern shows six domestic mainline flights between Jakarta and Surabaya of 1:20hrs block time each, followed by two four hour international flights: Surabaya-Bangkok, and the return, totalling 15:35hrs of aircraft utilisation, with 25 minute turnaround on the domestic flights and 30 minutes on the international flights, leading to 19 hours of aircraft operations (flight + turnaround), per day. Doable? Absolutely, but you must fly international to get those numbers and still have comfortable time for maintenance.

17. And the turnaround time? The schedules that have been published show 35 minutes.

Because it’s one plane and we’re starting out slow. (And you hope to…?) 25 minutes, and not a minute late. That’s…the one thing that gets me really upset is if we’re late, you know, I just….that’s something that I just would never tolerate, so…25 minutes and we got to do that.

18. I believe that the DGCA has a problem with very short turnaround times?

They do.

19. 25 Minutes is not yet acceptable to them.

Yes.

20. Is that going to take a lot of convincing to…?

No.

21. So they are going to accept 25 minutes?

They will.

10_VTATF_docked_Gate0122. There was a plan to have only stairs for your airplanes, today you have aerobridges. That’s going to impact your turnaround time, that’s also going to add cost. Is this only for today?

This is, I think in Goa, there’s a concept of moving more to aerobridges, you know, just because the airport right now is big enough for it. In Bangalore, we hope to start using the buses soon. It’s just that we don’t have it available right now. Because you know, they have slots approved, and you know, a lot of the other airlines have taken those right now, but in the future we would try and aim to….

23….keep away from the aerobridges…?

No. Not entirely away from aerobridges, no. If the airport wants to give the aerobridges at a cheaper cost for us to use it, then I’ll factor in our turnaround time, and you know, keep making sure we hit those turnaround times.

24. Because you now have only one entry and exit with an aerobridge, and it slows you down?

That right, yes, it does slow you down.

25. So how would you work: a tradeoff between aerobridge cost and turnaround time? Because your 25 minute would be impacted with an aerobridge.

No, not really. Actually…all our drills we’ve run, you know, we’ve actually been able to maintain both. Even with an aerobridge, we hit just about right on 25 minutes.

26. With 100% loads?

Yeah.

TFE – The AirAsia Group ensures that all its subsidiaries operate with 25 minute turnaround. The 25 minute was a number that came with AirAsia’s previous fleet of Boeing 737 aircraft. The aircraft have no brake cooling fans, and hence the manufacturer had recommended 25 minutes as the minimum turnaround to allow the brakes to cool. That number has stuck on. It must be given to Mrithyunjaya that he and Tony wanted to better to a 20 minutes turnaround, which Mrithyunjaya talked about, publicly.

A 20 minute turnaround is not impossible. It has been achieved during line operations by operators such as IndiGo and erstwhile Kingfisher. But there are two problems-one is that it is not always achievable, and second is that the airport conditions in India make even 25 minutes a challenge to achieve on a 180 seat airplane. Security policies which prevent all passengers from making their way to busses in one go, and the mentality of passengers: not showing up at the gate on time are contributory factors to slower boarding times. Further, at Kuala Lumpur LCCT (from which AirAisa has moved out), passengers would walk to the aircraft. Here, the busses must cross the taxiway, and since airplanes have priority over busses, there is additional delay. Adding to the delay is the air traffic control which sometimes, due to traffic, may not allow for a timely pushback.

Another contributing factor is the general habit of Indians which is not traveling light. Cabin baggage and check in baggage waste time during check-in, boarding, deplaning, loading an unloading.

Average turnaround times at IndiGo are 30 minutes. But Mrithyunjaya’s statement: hitting “just about right” on 25 minutes is bothersome. You cannot plan with a number that’s just about right. You may need buffers. Cause a delay will have a cascading effect on the entire airline schedule, and that’s when OTP may go for a toss.

AirAsia must come up with incentives to passengers to make them report to the gate early. It may also want to adopt optimised boarding methods such as the Steffen Method.

To reduce long queues, and cut costs, AirAsia is soon transitioning to web check in and home printed boarding passes. Tweeted Tony, “Dedicated Web check on counters for speedy bag dip off from next week. Soon Q at check in will be a thing of the past“. This may allow passengers to reach the gate faster.

781_all_inclusive27. [O]: Your fares are low. How are you going to sustain it?

Well look, I think…you know, we gave a five rupee fare, which is…ah…it’s…ah…so five rupee fare is very much a…it’s a promo fare. So we wouldn’t be doing that very often; we may do it once in a while to, you know, launch a particular route, or, you know, build some capacity in a particular route, but, look, I think the 990 fare for us is something that we think is sustainable, and the idea is that the whole plane isn’t 990. You know, you get a certain fraction of the plane, and it sells very quickly, so if you see a 990 fare, go grab it. Because it wouldn’t be there even tomorrow. And that’s the way it operates. And then, you have the other fares. But for me, the trick is the average fare has to be consistently low. So when you pool the entire fare of the entire aircraft, it has to be 30% lower.

28. So it’s not the initial misconception that you’re going to offer fares that are consistently 20-30% low?

Yes.

29. So that’s a misconception?

No, no, no. It will be on average 30-35% low. If you are to average all the fares on board, on a particular route, it will be lower than the competition’s.

30. And typically what percentage of your capacity will you reserve for promo fares and the remaining to your standard fares?

Well, it really depends, you know. Frankly, you could think that the 990 would be 45-50 seats, and the promo fares will be maybe 10 to 15. That’s it, and the rest of it will be regular and hi flyer.

31. What’s the difference between 990 and promo?

Five rupees. Five rupees is a promo fare.

32. And the rest would be standard fares?

No, it wouldn’t be standard. I think the highest we went up to on one of these bookings was around 2,000 on a regular, and 6,000 was the Hi-Flyer. Hi-flyer is a whole thing bundled in, and all of that.

33. [O]: Yeah because your fares have now gone up, I mean, even one week, two weeks out.

Yeah. It’s demand and supply. You know, when the planes are full, like this one, we had only 4-5 seats that I had kept for our own staff, (some of) whom didn’t show up, which means there are no seats available.

Interlysis0634. [O]: How many passengers were travelling?

This was 180, and we had two no shows who were my own employees. The rest were all booked.

35. AirAsia projects itself as low cost, but based on what I saw today-lean aircraft, nice seats, boarding music, it’s not low appeal. What do you have to say?

(Laughing, he turns to a colleague, “He should do the marketing for us”).

Look, I’ve always said one thing. For me, safety, security, and quality-don’t compromise on them. Why can’t people have a Kingfisher type of service on board, why can’t they have an IndiGo type of reliability, you know, in terms of on time performance. And why can’t they have the fares of AirAsia? I hope to bring all three of those together. Now Kingfisher did some things that are well above the ground, you know-two classes, and you know, your eye cleaning liquids for your glasses- you don’t have to go that distance. But you can have clean aircraft, good seats, good looking crew, clean, and you know, just have good food, and you know-we’re into basic things.

36. Is the market big enough to accommodate everybody, or is someone going to bleed?

Look, anytime you have a new entrant coming in, in Indian history, it shows that somebody exits, but I believe that India is definitely big enough for more than just the five or six carriers that they have right now. It can take in a lot more, but you’ve got to be clever about it.

TFE – If you try to capture a saturated, mature market, you have a higher chance of death. Air Costa, which at one point seemed like the most unlikely airline to take flight, is silently performing the best, for its size. It’s clever: it’s keeping off the mainlines, and focusing on thin, long, point-to-point connectivity, mainly to Tier II and III cities. The airline has the right aircraft, and is expanding the market, rather than vying for a share of the market. Today, Air Costa is the only airline to not have any true competitor.

37. [O]: Inspite of tough competition in the aviation Industry, how do you manage to have low cost prospects?

Look, I think it ultimately comes down to discipline on costs. You’ve got to keep your costs low. That’s I think the difference between how AirAsia does things and maybe some of the other competitors do things. I can’t comment on another airlines, I don’t know their cost structure, but in our cost structure, we manage every little cost down to the detail. Whether it’s how many papers you’re printing, how many cups of coffee we’re using, we manage everything-we monitor all of that. And that’s not to say that we’re really trying to save the paisa here and there, but it’s the discipline. It’s a discipline that one person, when they know that they have to print an additional piece of paper, there’s a direct impact onto the fares.

38. [O]: Are you confident to survive this….?

Yeah, otherwise I wouldn’t be here.

04_Seats39. [O]: Your plane has been praised by the gentleman [TFE] and by many other passengers for the cleanliness and service provided. How long will that continue?

Oh you have to, you have to keep it clean, you know. Look, I think certain things are hygiene. In airlines, cleanliness of the plane, cleanliness of the crew, on time performance, engineering, maintenance, daily maintenance checks-all those are disciplines. You don’t mess with that. So, this is why I get very upset when people say, you know, we’re like another airline. No, because we’re not. Our discipline is actually a lot more. The aircraft, if you think about it, is my second most important asset, the first being my people. And both of those you’ve got to take care and maintain really well.

40. [O]: Will you be able to stick to your four month break even time?

If the two and three airplanes come in as per schedule, we will, in four months.

TFE- For an airline like AirAsia, the operational cost for a Bangalore-Goa trip is between INR 330,000 – 360,000. In earlier interviews, Mittu had claimed that even 60% load factor was acceptable. 60% of 180 seats is 108 seats. Mittu further states that the INR 990 fare is sustainable, and that around 50 seats are sold at 990. This leaves approximately 60 seats for regular fares, and 50 for 990.

50 sets at INR 990 account for just INR 49,500, or ~ INR 50,000, of which INR 250 per ticket goes to the airport and the government as service tax, leaving just INR 37,500 with the airline. Even with an operational cost of INR 330,000, the airline must have an average yield of INR 4,875 for each of the 60 seats. When the tax and airport charges are factored, this amounts to an average fare of ~ INR 5,350 for each of those 60 seats. Considering that the HI-flyer fares- the costliest of the lot- are priced at INR 5,900, and that the other non-990 fares are priced at all inclusive fares such as 1699, 2300, 2740, 3370, 3696, 4840, 5416 and the like, it is difficult to understand how the airline can generate sufficient revenue to break even with a 60% load factor considering the 990 fares occupy 50 seats. If the 50 hot seats are also charged for, and sold per flight, the airline makes INR 21,700 as ancillary revenue (before tax), which only reduces the average required fare by ~INR 360 per seat, to ~INR 5,000.

Based on TFE’s analysis, the breakeven load factor for AirAsia India may be closer to 75%.

Adding stress to Mittu meeting the target is the loss of revenue of ~INR 200 per passenger for check-in luggage upto 20 kgs The DGCA has prevented AirAsia from charging for check in baggage. Even if 50% passengers -90 – opted to check in their luggage, the airline could have generated INR 18,000 per flight, which would amount to INR 1,44,000 per day over 8 flights or 1.72Cr for four months, per airplane, assuming each aircraft flies 8 flights a day. This adds to INR 2.6Cr for 4 aircraft, over 4 months, based on their expected induction schedule.

If an airline cannot operationally break even, it is difficult (but proven otherwise too) for the airline to break even as a whole. However, considering that their Goa flights are flying with loads of ~85% & above, the airline shouldn’t have a problem making the necessary money to help Mittu meet his self-imposed 4 month break even target.

41. [O]: Will you have daily operations here in Goa?

Yes, that’s our ultimate goal. For me, I don’t believe in seasons, you know. Everyone keeps telling me that Goa is a low season at this point, and for me, I believe that seasons are only what you make it out to be. If you bring in a fare which is low enough, maybe people will say: ‘Okay, I don’t have anything to do today, let me get up and fly’.

42. The advantage of launching in a low season v/s a peak season?

Look, when you launch in a high season, obviously your revenue and your profit margins will be a bit better. No doubt. But when you launch in a low season, it’s also gives you the time to ramp up your operations, over time. High season means extreme high volumes, your booking systems aren’t yet checked out, your turnaround times go for a whack, you know, all those things. So the teething pains probably are better at a low season.

TFE – Valid point, but there could be more to it. It seemed like the hurry with which AirAsia India launched was to get the airline going even before the government could actually change hands. July 12th-in the lean season for air travel-was the first commercial flight: Bangalore-Goa. Once the airline started operations, it would be difficult for the new “progressive” Modi government to go regressive and shut the carrier. That is probably why Subramanian Swamy was hell bent upon preventing the airline’s first flight. Political thought credit: Lobo.

Interlysis0743. What about salaries? Apparently the salaries of your pilots are lower than your competition?

No. Untrue. Actually, we matched about a month ago. I only wanted to do that when we were ready to launch.

TFE – Apparently IndiGo pays its pilots higher. What’s more, AirAsia pilots get calls from the IndiGo HR at Delhi requesting them to join the airline, with higher salaries, offering a joining bonus to many.

44. The logic behind that? To keeps costs under check?

No, I think it’s just an assurance of being able to fly. What’s the use of me giving a salary, you know, up ahead, when we don’t have the license on hand.

45. What are you doing to inculcate a feeling of belongingness in the airline, like, if for example, how do you make him feel like he’s part of the airline, and work towards the welfare of the airline?

Look, I think frankly, whenever we’ve hired-I was employee number 1-you know, when we started this joint venture, I was employee number one, and every person that’s come in or has come on board has been somebody that I’ve actually had a hand in (recruitment), and culture is very important. So I don’t care if you had an MBA from Harvard, Stanford, you know, Sarjit here has been for thirty years, with AirAsia even before Tony came in, and the culture, and the values, and the personality of the person, matter a lot. Because when you have somebody who comes in from a Harvard, Stanford-I’m generalising a little bit-but, when you have someone who comes in with that kind of pedigree, when things go bad, their immediate reaction-usually with my experience-is that they’ll jump ship. They’ll go to someplace where they don’t taint their careers. But when I take somebody who doesn’t have a degree, but I train them, the moment that things go bad, they are my street fighters. They’re the ones who come out there, and really fight.

Air_Asia_Tony_Fernandes46. That’s interesting, because, the kind of history that Tony shows is if a route doesn’t work, or if an arm of AirAsia doesn’t work, he cuts it immediately. He doesn’t waste time trying to ponder and give it time, and this is opposite of what you expect of your employees. How does that work?

For me, look, I would always like to give people opportunities, give them a chance to try, I take chances on people if they can actually achieve their dreams, and…ummm…and then look, look, I don’t tolerate non-performers, let’s be clear about that. Now somebody is not working out for me whether its ethical, or whether its performance based- they don’t survive too long with me. But, I give them chances to have failures. Make mistakes-one, two, three, you know. Don’t make the same mistake three times. That’s my issue.

TFE- Amisha Sethi served as the chief commercial officer (CCO) of AirAsia India for 11 months. Mittu told the Financial Express that the precious CCO ‘was asked to leave’. Gaurav Rathore now heads the commercial.

47. But you don’t give any chance to non-performing routes. If it isn’t working, you shut it immediately.

No. Actually here, in India, you’ve got to give it some time to develop. So I wouldn’t say immediately, but you’ve got to give it a at least six month run in. Three months run in. You know, if there’s a route that we made a real bad decision about, then yes, it will be (stopped) a lot sooner. Look, we spend a lot of time and effort to marketing investments, and a lot of time and effort to have partnerships setup, state government relations, and…it’s not the best thing if you launch and shut it down.

48. [O]: What made you take a Goan partner?

Who, Tony? I don’t think we selected him because he was Goan, frankly speaking. I think we selected him…I don’t know. Look, AirAsia-he’s done a phenomenal job. I think him being…having Indian origin, makes a lot of sense. But he’s very Goan even though he may not know that he’s Goan. He loves football, he’s crazy about football, you know, he owns a premiership league in Queen’s Park Rangers, and I think once he comes here, he would love Goa. I almost think that he’ll buy a house here.

49. [O]: Was he earlier associated with you?

No, No. I think the discussion started over, as you’d expect in most things, over cocktail or something like that. And when the rules changed, it became a formal relationship. TATAs are particular about who they go into partnership with, and it made sense.

50. What did Tony see in you to choose you? There’s a confusion out here-did he approach you for advice on whom to hire as the CEO of AirAsia India, or did he approach you, knowing that he wanted you as the CEO of AirAsia?

(Laughing, “It’s a good question. He’s done his homework and he’s come. In the flight and all he (TFE) was nice to me, now he’s come out and he’s brought out all these. Now he knows, I couldn’t have opened the door and chucked him out!”)

Now look, I think…to be frank, think Tony and me clicked, immediately. And I think it clicked because of the competitive nature of who the both of us are: we’re both very alike in many ways: he shows his competitiveness in a different way and I in my own way, but we’re very alike. And that’s where we really clicked. And then I think he went up to the board and said, ‘Look, this is the guy I want running’. And I never worked for Tony before, I never worked for AirAsia before that, and then the board met with me.

Actually, he didn’t meet me with anything in regard. I was giving a speech at a conference, and they heard me speak, and they were asking me to come join the group for a while. Then the India venture came in, and I was saying, ‘No, no, no, no, no’, and when the India venture came in, right from the early days of the discussion, and I knew who the partner was, it became interesting for me. So when this all came through, they said, ‘look, this is the guy you got to go with’, and the I met with the board, and they liked me, and my vision…See, I’m an aggressive guy. I don’t take lack of performance. You can ask Sarjit, he gets yelled at from me at all times and I just cannot tolerate lack of performance, and I can’t tolerate missing deadlines.

And I set those deadlines myself. So the board would come to me and say, ‘Okay, break even in one year’. I’m saying we break even in four months! That’s what I’d expect of myself, I’d treat this company like it’s my own money there, why would I let me money drown? So the team, actually, is really charged up to do this. And when the fares happened-I don’t know if you’ve followed on Twitter-when I did 990, I asked, ‘shall I drop the fares even lower?’. Majority of the people came back saying, ‘No no no, don’t drop it anymore’, and I was like, ‘Great! So we’ve hit a fare that is decent enough where people to afford’, but I still did the five rupee fare. And, you know, I really want everybody to have an opportunity to fly. Even when I gave the free seats in the plane today, the guys with the hats, you know, it’s their first time that they’re trying to come on AirAsia, and I wanted to make sure they fly again.

51. But this is whimsical? Or is it well planned and fenced?

(With a wide grin) It’s a little bit of both. You know, it’s a little bit of spontaneity: I saw them sitting out there and I said, ‘Let’s give it’. But…uh…the elderly people were planned.

Interlysis0852. There are two red airlines in India, which fly with the red livery….

Hopefully they’ll be one soon.

53….<removed upon request>…

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I’m trying to prove a point here. Everybody talks about aviation expertise, and all of that, but…look, you got to have done something significant in aviation for me to respect you. Now, IndiGo. Rahul Bhatia: I respect him, tremendously. Aditya, who I’ve met many times, I respect him…

55. You’ve met him?

Yeah, many times. We have dinner and stuff like that. It’s a tight fraternity, you know. So I respect those guys. So, if you’re going to come up, and you know, go toe to toe with us, do something worthy of it.

56. [O]: You don’t have any prior airline experience. Do you think that’s a handicap, or has that been an advantage?

Frankly, and it’s not media speak, it’s been my strongest asset. You’ve got a group there in AirAsia which has extremely sound discipline. You know, they’re rigid about their operational excellence, and then you’ve got the TATAs who understand India. And then, you have me. And my initial first few days, I was asking all the basic, stupid questions. You know, the stupidest questions, which he (TFE) must be sitting and saying, ‘How could he ask these silly questions?’. Simple things, like, you know, Type Rating- what is type rating? I would ask those questions. And I’m not afraid about asking. Because you’ve got a little bit of time to ask those questions. And do a good job knowing.

You ask those questions, and you constantly keep saying, ‘Why, why, why can’t it be better?’, and after the entire year, we’re probably better. The big thing is, you can’t take the AirAsia process and cookie-cutter it to India. You can’t take TATA’s operational process with all of its different, you know, portfolio companies and then put it into an airline. So you got to merge the two. And I think for me, that was the biggest benefit. And I’ve been very clever about who exactly I wanted in the team. It’s a mix of aviation folks, and non aviation folks.

Look, for me, aviation, in India particularly, has a lot of bad habits which I wouldn’t want. I don’t have to mention what they are, so I was very particular that when we do this, I don’t have all these bad habits. And when we went through our AOP process, when the regulator would come and say, ‘look, this takes one month’, and I’d say, ‘No, I want it in two days. How can we make that happen?’. I’d be talking to the regulator, saying, ‘What can we do. Why do you need the one month? Explain to me, exactly, where it (slows)’. And they’d say, ‘No, it’s a process, file needs to move’. I’d say, ‘Give me the file, I’ll take it myself’. I think you need to have that sort of attitude.

You can never say ‘No’. You’ve got to be pushing.

Interlysis0957. You’ve opted for the A320 NEO, and your engines are from GE. On the other hand, your blue competitor has opted for the NEO, with engines from Pratt & Whitney. The NEOS with P&W engines are going to be delivered much sooner than yours with the GE Engines, so that’s going to give you a competitive disadvantage for a few years?

And that’s why we’ve not chosen those routes to go. See, I think, when you have the NEOs, the operational efficiency really kicks in when you’re doing the longer routes. So we’ve chosen our route strategy which are like one hour routes. We can barely get through our service in those. So, we’ve planned it out well.

TFE – The CFM LEAP-1A and the PW1100G that power the A320NEO will enter service with about a year’s gap of each other. IndiGo has opted for the all-new design PW1100G, and that engine is relatively immature, yet promises future growth potential. AirAsia has opted for the LEAP-1A, which, according to the manufacturer, build on the reliability of the proven CFM engines.

Key factors that may have influenced AirAsia’s decision to go in for the LEAP are the great relations that the airline group enjoys with the engine manufacturer, and the reliability that the engine promises. Right from its Boeing days, AirAsia has flown only with CFM engines. That allows the airline to squeeze out maintenance benefits and sops which other airlines may not be able to. For example, Go Air switched from the CFM engines on its present airplanes to Pratt and Whitney’s PW1100G for its NEOs. Go Air is too small to reap any benefits from continuing a relationship with CFM.

One of the PW1000G variants powers the Bombardier C Series, and that airplane recently had an uncontained engine failure. Investigation is underway, but what is proves is that a wholly new engine has uncertainties, which may impact reliability.

58. Is Mittu Chandilya, the CEO of AirAsia: Is he confident or is he overconfident?

(Smiles, and looks around, “See he’s really pulled out his gloves and he’s come to…”) I don’t think I’m overconfident, I think what I do is I set aggressive targets for our team, and I don’t take any prisoners. When we go to war, we fight till we win. It doesn’t mean rubbing somebody else off, huh? My goal is low fares for everybody. And if somebody can’t keep up with that, fine.

Conclusion

With rail fares rising and air fares dropping, the market is going to expand, allowing more people to fly and more carriers to survive. But as Mrithyunjaya says, you’ve got to be clever about it. With AirAsia India poised to make money after four months, it may emerge as a formidable carrier. If the airline can keep its BELF (Break-even load factor) low, then it may even sustainably compete with the likes of Air Costa which fly 112 seat airplanes.

Mrithyunjaya is an inspirational figure. It takes a lot to stay confident in the midst of negativity, fight, and carry a personality that is nothing less than charming; Mrithyunjaya visibly fits snug in AirAsia’s culture. Many would fall for his style.

Being a former model has lent him the “Look” syndrome. Not only does he go to lengths to make sure that he-and the airline brand- look good, you’ll also notice that he starts almost every conversation with a “look”.

And that’s what the world, and the entire Indian aviation is doing. They’re not just looking, but watching every single step of the new red airline.