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AirAsia India aims to turn profitable by end of FY19, says MD Amar Abrol

LiveMint logoLiveMint 04-07-2017 Shally Seth Mohile

Mumbai: AirAsia India, a joint venture between Tata Sons Ltd and Air Asia Bhd, is looking to turn profitable by the end of fiscal 2019, the year it plans to start international operations, Amar Abrol, managing director and chief executive of the low-cost airline said.

“We have an eye on profitability and be there sooner than later, perhaps by 2019,” said Abrol, adding that three-year old airline has been clocking Rs100 crore in ticketing revenue alone since the past five months.

Tony Fernandes-promoted AirAsia Bhd, through AirAsia Investment Ltd, owns 49% in AirAsia India. The Tata group owns 49%, and two directors of AirAsia India—S. Ramadorai and R. Venkataramanan—hold the rest.

As part of the airline’s expansion strategy, the Bengaluru-based airline plans to expand its fleet to 14 Airbus A320 planes by October from the current 11. These will be leased planes and not from the AirAsia Group. It would add six more by 2019, increasing the overall fleet size to 20. Indian regulations make it mandatory for an airline to have at least 20 aircraft in its fleet before starting international operations.

With a market share of 3%, Abrol pointed out that Air Asia will remain steadfast on its strategy of connecting metros to non-metros and owning one aircraft type for cost efficiency. “There’s no point in launching flights from Mumbai which is already very well served by other airlines,” said Abrol. Instead of adding newer destinations, the airline will focus on increasing frequency from under-served destinations it has a presence in and have a dominance there.

With more than 90% load factor, 14 hours of flying per day and a short turnaround time of 25 minutes, Air Asia India is one of the most efficient units of Air Asia group, Abrol claimed.

Abrol said under the new goods and services tax (GST) regime, airlines will be taking a hit of Rs10 crore to Rs12 crore per aircraft bought or leased.

Under GST, there may be a levy of 5% on import of aircraft, Abrol said. Airlines will be hit as GST paid on services is available for credit set off, GST paid on purchase or import of goods is not. Airlines, he added, are talking with the civil aviation ministry for exemption of tax on imports.

Airlines will also have to pay 5% GST on lease rentals which is available for credit set off, Abrol said. The airlines, he said are likely to absorb the costs and unlikely to pass it on in the form a fare hike till there is clarity.

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