A Glimpse of Tony's AirAsia India, and His Success Mantra

The author described AirAsia India as the most dynamic airline in India at that moment. It showed a fair amount of uncertainty, and the real control seemed to sit with Tony Fernandes and his team in Malaysia. This post also covered Tony's recipe for an airline's success.

Key points

• Arun Bhatia was neither present nor mentioned.
• Tony was less certain than before and used the word "hopefully" often.
• AirAsia's head of investor relations contradicted the CEO's four month break even target and the fleet plan.
• Tony said the 14 month wait and strong early response had made the vision "much bigger".
• Ratan Tata said India had room for both Tata SIA and AirAsia as competitors.
• Tony's mantra: discipline, collaboration, exclusivity, frequency and aggressive expansion.
• He pushed for unbundled fares, and promised to help a cabin crew member become a pilot.

The event

The press conference was meant to mark the official launch of the airline. Tony Fernandes flew for the first time on his Indian arm's aircraft, to Goa, where his father was from. On stage were Mittu Chandilya (CEO), Tony (Group CEO), Ratan Tata (chief advisor), S. Ramadorai (chairman) and R. Venkatraman, a former assistant to Ratan Tata. Only Tony, Mittu and Ramadorai spoke. Arun Bhatia, whose Telstra Tradeplace owns 21 percent of the airline, was absent. Neither Tony nor Mittu mentioned him. Only Ramadorai did, to say that he sent regrets. Tony talked of only Ratan Tata and the Tata Group when he described finding a partner.

The author linked this to the AirAsia Japan failure, where Tony gave too much control to a large full service partner. In later ventures he split the 51 percent not owned by AirAsia between two partners so that neither has real control. In India, Ratan Tata was only an adviser, and Tony wanted the airline run his way.

From "will" to "hopefully"

For the first time Tony said that AirAsia and Tata would "hopefully" transform Indian aviation. When the author asked him why, he said he had reached a point where there was no use in making bold statements. The business is tough, with many outside factors, but AirAsia had grown from two Boeing 737 Classics about thirteen years earlier to an order for 475 A320s. He pointed to Tiruchirappalli, where the group flew two flights to Kuala Lumpur and became the first to offer direct international flights. Tony said he was more optimistic about the airline's performance.

Mixed messages inside the group

Mittu had told reporters that cost discipline meant tracking paper and coffee cups. Tony joked about how many printouts it would take to pay for the party and the press conference at a premier Bangalore hotel. The author agreed that a cost is a cost.

The disagreement was bigger. Mittu expected to break even in four months. Benyamin Ismail, AirAsia's head of investor relations, reportedly told the Economic Times that it would not happen within eight months. Mittu had told the author less than a month earlier that the target was 6 aircraft by the end of 2014 and 14 by the end of the financial year. Ismail reportedly said it would be 3 or 4 aircraft by the end of the year if the 5/20 rule did not change. Tony wanted aircraft to arrive faster. The author said this made the airline look disunited.

Asked whether the homework had been done, Tony said the team and partners were right and the group had flown to India for a while. He said, "It's not that we are coming in naive into India". The author felt the airline's quick adjustments showed flexibility, and said India has not opened up as much as Indonesia, Malaysia or Thailand.

Competitors and the market

Ratan Tata said he was proud to be linked with both segments and expected them to compete constructively. Tony said India had huge scope for all airlines and that he told competitors they should work together to make flying more affordable. He said AirAsia had started in Malaysia with 200,000 passengers and now carried 51 million. He hoped governments would look at fuel tax and low cost infrastructure, and that airports would see that cutting charges for one million passengers can bring ten million. He welcomed the new government's 100 day aviation policy and its focus on low cost airports.

Volumes and the five rules

Tony's success mantra was volumes: grow fast, bring aircraft in faster, and fly ten times a day where there is one flight a day, to cut cost per passenger. The author summarised five things a real low cost carrier must do:

1. Be disciplined about costs.
2. Work with airports to reduce charges.
3. Go places no one else goes.
4. Increase frequency.
5. Expand quickly.

Bangalore's Kempegowda airport had applied to AERA to offer discounts to carriers meeting certain criteria. The author noted that the clauses seemed to suit specific carriers only.

Tony called AirAsia "democratic". He wanted fares unbundled, since a passenger without a checked bag pays for the 15 kg allowance used by others, and he believed that 90 percent of the time people do not need meals. The author noted that a true democracy would let passengers bring their own food, though there might be reasons for a ban such as smell, spills or onboard sales.

People

About half of India's roughly 13,000 pilots were unemployed. On the first flight, cabin crew in charge Monica Mohani held a commercial pilot licence for five years and had worked for Kingfisher and IndiGo. Tony pointed to her and said the airline would help her become a pilot.

The last word

Tony said load factors in July were above 90 percent. The author said routes, utilisation and the speed of expansion would decide break even. He thought the contradictory messages showed that AirAsia was not fully ready for India, though it was adapting quickly. Tony ended by saying he was thrilled after 14 months and called this "round one".