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AirAsia India to start operations with a no-frills airline model

LiveMint logoLiveMint 02-06-2014 Tarun Shukla

New Delhi: AirAsia India’s maiden flight from Bangalore to Goa on 12 June marks the beginning of a new era in Indian aviation where passengers will have to pay for every additional service, including baggage.

AirAsia India, which will fly its Airbus A320 aircraft from Bangalore to Goa and Chennai starting 12 June, has announced it will not allow any free checked-in baggage and will not refund fares if the tickets are cancelled, according to the airline’s website.

“This is excellent as a 0kg baggage allowance will be game changing. We will see some disruptive pricing and commercial strategies from Air Asia,” said Kapil Kaul, South Asia chief executive officer (CEO) for Capa, an aviation consultancy.

While existing low-fare airlines such as IndiGo and SpiceJet charge for meals, preferred seats, extra baggage, priority boarding and lounges varying from `200-600 for each service, they allow free 15kg check-in baggage and refund fares with cancellation charges of up to a maximum of `1,500.

It is unclear whether AirAsia has taken the regulator’s approval for charging for all services as airlines are supposed to do at the start of every month.

AirAsia India CEO Mittu Chandilya did not offer any immediate comments on the matter.

AirAsia’s India entry has been controversial with some local airlines opposing the government’s decision to allow it to operate in India.

When AirAsia India announced it was offering the first 15,000 seats for `5 plus taxes, rival IndiGo swiftly followed with promotional fares of `1 plus taxes on the same routes.

IndiGo is one of the airlines that has opposed AirAsia’s entry and filed a lawsuit together with some other carriers grouped under the Federation of Indian Airlines (FIA).

On Friday, FIA wrote a letter to finance minister Arun Jaitley asking him to bar the new airline from operating in India. The body has already gone to courts disputing a government policy that allows foreign airlines to invest in Indian start-up airlines.

AirAsia group CEO Tony Fernandes has openly accused IndiGo of stalling its entry.

“Some airlines (are) scared of us. We must be doing something right. Help us people of India. Don’t let cartels win and not let ordinary man fly,” Fernandes wrote in a post on Twitter on Saturday. He also said Indians should have more options. Fernandes later deleted the Twitter post.

Rival SpiceJet reacted to the post saying Indians already have more choice than people have in AirAsia’s home turf in Malaysia. “People of India already have more choice than the people of Malaysia when it comes to airlines. And we had leather seats, hot meals, and low-fare sales and promos too! Even `1 fares! And cabin crew uniforms and liveries in blue, yellow, orange, green, grey, pink, you name it. We have the whole spectrum here,” SpiceJet chief operating officer Sanjiv Kapoor said on his Twitter account.

IndiGo, which has not made public remarks so far on AirAsia, declined to comment.

On Twitter, Kapoor also said it was unfair to block SpiceJet from offering low fares while letting rivals sell cheap tickets. Directorate General of Civil Aviation (DGCA) had come down heavily on SpiceJet in March for offering cheap tickets ranging from `1-1,499, calling it predatory pricing.

“What is predatory, disruptive, dangerous? Offering `5 fares in peak season, and that too within 14 days of travel. Let us wait and watch...We will find out soon what a ‘level playing field’ means, at least as it comes to pricing,” Kapoor said on Twitter.

DGCA did not offer a comment immediately.

Air Deccan founder G.R. Gopinath said FIA was behaving like a cartel in opposing new entrants.

“There actions are despicable and anti-national,” Gopinath said, “AirAsia is good for the country and good for the consumers. It will open new routes which will promote tourism and increased connectivity will increase investment to areas which are hitherto unconnected. Lower fares will expand the consumer base by making more common people fly. Obviously the cartel of Indian operators are trying to block it. They forget they are here because of reforms.”

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