AirAsia not to break even before eight months, says head of investor relations Benyamin Bin Ismail
The airline will in the first four months "build its brand" offering low fares and getting traffic on its flights, said Benyamin Bin Ismail.
Fernandes, who was in Bengaluru to "celebrate" AirAsia India's launch, said the airline will now have six planes by December. Its earlier plan was to end the year with four, said AirAsia India CEO Mittu Chandilya.
"We need to accelerate our plane induction plan. Our load factors are great. The response is very impressive," said Fernandes.
AirAsia started operations on June 12 and currently flies to Chennai, Goa and Kochi from Bengaluru. It now operates one Airbus A320 plane.
Scaling up is crucial for AirAsia to compete against bigger rivals such as IndiGo and SpiceJet as low-fare carriers currently control 57% of the Indian passenger market. AirAsia's low fares are fast matched by rivals and passengers would go to an airline which has higher flight options.
The airline is a tripartite joint venture between AirAsia (49%), Tata Sons (30%) and Arun Bhatia, a private investor who owns Telestra Tradeplace (21%). It started with an initial investment of $50 million.
Fernandes later said the founders would every year invest $200 million to $250 million in the airline.
Meanwhile, Benyamin Bin Ismail, head of group investor relations at the airline's Malaysian parent AirAsia Berhad, said it has no chance of a break even before at least eight months.
The airline will in the first four months "build its brand" offering low fares and getting traffic on its flights, said Ismail. The airline had targetted a breakeven of 4 months.
The airline, like its peers, faces a high cost structure of steep fuel prices, foreign currency expenses and interest rates. AirAsia, which will use Bengaluru as one of its main hubs, has got sops from the airport on landing, housing and parking charges, but the move has been opposed by other airlines. The airline, which depends on ancilliary or non-aeronautical revenues to add to its bottomlines, was recently barred by the DGCA from charging for all checked-in luggage. Indian carriers typically allow local passengers 15 kilos of checked-in luggage.
AirAsia India launched flights at advance fares as low as Rs 490 and Rs 990, at much lower levels, which would cover costs of the airline. The average price now is in the high thousands, said Chandilya.
Also, AirAsia's launch was delayed by close to six months and the airline started operations with a cost base of $5 million on aircraft parking charges and salaries to its 300-odd staff.
The airline's Bangalore-Goa flights however have been running at near full loads, Ismail said. "We are already making money on our Bangalore-Goa flights which is unbelievable and unprecedented," said Fernandes.
Ismail also said AirAsia will possibly apply for international operations as soon as India relaxes rules for overeas flying in India.
As per current rules, Indian carriers have to fly domestic routes for 5 years and have at least 20 planes in their fleet before they can be considered to operate overseas flights. The previous government aimed to abolish the rule, and airlines are appealing to the new government to carry the plans through.