Interlysis: AirAsia India and Mrithyunjaya Chandilya

The Flying Engineer called this an "interlysis", a mix of interview and analysis. It covered Mrithyunjaya "Mittu" Chandilya, CEO of AirAsia India, and the airline itself. He spoke to The Flying Engineer and other journalists after they landed at Goa on the airline's first commercial flight on 12 June 2014. Questions from other reporters were marked as such, and the author's own views were added after many answers.

Key points

• He described AirAsia as a tourist airline at heart.
• Goa would become the third hub, after Chennai and Bangalore, once the fourth aircraft arrived.
• Aircraft two and three were due by the end of July or early August, then one aircraft a month.
• Six aircraft by the end of the calendar year 2014 and 14 by the end of the financial year 2014 to 15.
• Eight to nine destinations by the end of 2014 and 15 to 16 by the end of the financial year.
• Utilisation target lowered to 12 to 14 hours a day from 16, and turnaround time target raised to 25 minutes from 20.
• A fare of INR 990 was sustainable, and about 25 percent of an aircraft was sold at that fare.
• Break even in four months, if aircraft two and three arrived on schedule.

Mittu and Mrithyunjaya

The author began with the work of Albert Mehrabian, who found that only 7 percent of communication is in the words, 38 percent is tone of voice and 55 percent is body language. He used it to separate two images of the same man. The social media Mittu sometimes came across as aggressive and over confident. The man in person was sharp, soft spoken, friendly and approachable, with a good sense of humour.

Chandilya was 33 and had never run or worked in an airline. The author saw this as both a help and a risk. It could mean missing industry knowledge and too much optimism. It could also mean a fresh mind that questions slow and costly habits. He also had the backing of the AirAsia group's experience.

Goa, hubs and routes

Chandilya was happy to land in Goa, the home town of Tony Fernandes' father. He said Goa would be the third hub because, like Bangalore, it had a supportive airport and state government, and local partners. Goa is a tourist destination, and AirAsia was set up as a tourist airline. The airline would not rely only on business travellers there but would serve all groups.

The author noted that AirAsia tends to pick airports that will adapt to it. At Bangalore the airline was reported to receive an overnight parking charge waiver and discounts on landing and parking charges. Aviation turbine fuel sales tax was 29 percent at both Bangalore and Chennai.

AirAsia was a point to point carrier, so it needed more than a few hubs to cover India. It would look at new territories, and planned to fly north in about six months, when the fourth aircraft arrived, with one aircraft based in Goa. It would not base aircraft in Mumbai or Delhi at that time.

Fleet

The fleet would always be Airbus A320s, nothing else. The author said the group took three to four aircraft a month from an order of 475 A320s, 264 of them A320neo and 211 of them A320ceo. He added that airlines prize the A320 for its economics, that the neo cuts fuel burn by 11 percent on long flights, and that AirAsia might look at the A321neo. Chandilya later admitted that the group had studied the A321. The author also noted that an earlier report had wrongly said the aircraft would be Boeings, and it was later corrected.

On engines, AirAsia chose the CFM LEAP-1A for its neos, while IndiGo chose the Pratt and Whitney PW1100G, which was due about a year earlier. Chandilya said neos matter most on longer routes, and AirAsia's routes were about an hour long. The author suggested the airline's long CFM history gives it maintenance benefits, and recalled an uncontained engine failure on a PW1000G powered Bombardier CSeries.

Utilisation and turnaround

The 12 to 14 hour target was lower than the earlier 16 hours. The author listed IndiGo at 11.5 hours a day, GoAir at 12.5 and Air Costa's E190s at 14 hours 40 minutes, and said 16 hours with 25 minute turnarounds would leave little time for maintenance and would need three crews a day.

The published schedules showed 35 minute turnarounds because the airline was starting slowly. Chandilya wanted 25 minutes, and he said the DGCA, which had concerns about very short turnarounds, would accept it. He said drills with an aerobridge still hit about 25 minutes with full loads. The author noted that 25 minutes dates back to the group's Boeing 737s, which had no brake cooling fans. A 20 minute turnaround is possible, but Indian airports, bus transfers, taxiway crossings, passengers arriving late and heavy baggage make it hard. IndiGo's average was about 30 minutes. The author advised incentives for early arrival at the gate.

Fares and break even

Chandilya said the INR 5 fare was a promotion used rarely. The INR 990 fare was sustainable, and the fares across a whole flight would average 30 to 35 percent below competitors. He expected about 45 to 50 seats at INR 990 and 10 to 15 promotional seats, with the rest regular and "Hi-Flyer" fares. The highest regular fare he cited was about INR 2,000 and the Hi-Flyer about INR 6,000. The flight he was on carried 180 passengers.

The author estimated the operating cost of a Bangalore to Goa trip at INR 330,000 to 360,000. He worked out that with 50 seats at INR 990, the other 60 seats would need an average fare of about INR 5,350 to break even at a 60 percent load factor. He felt the break even load factor was closer to 75 percent. He also noted that the DGCA would not let the airline charge for checked baggage, a loss of about INR 200 a passenger. Goa flights were then running at 85 percent or more.

Chandilya said cost discipline is the difference at AirAsia, down to how many pages are printed. He also said launching in a low season gives time to fix booking systems and turnarounds before the peak.

People and the market

Chandilya said pilot pay had been matched with the market a month before, once the airline was ready to fly. He valued culture over pedigree and said he did not tolerate non performers, though he allowed mistakes. He gave routes at least three to six months before closing them. Asked about the lack of airline experience, he called it his strongest asset, since it let him ask basic questions and push regulators to shorten the approval process. He said India had room for more than five or six carriers, but a new entrant has to be clever.

The author concluded that falling air fares and rising rail fares would grow the market, and that AirAsia India could do well if it kept its break even load factor low.

The page also noted that Chandilya asked for a few questions about competitors to be removed.