AirAsia: Asia's Largest Low Cost Airline's Foray into India
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Case Code: BSTR432 Case Length: 14 Pages Period: 2012-2013 Pub Date: 2013 Teaching Note: Not Available |
Price: Rs.400 Organization: AirAsia Berhad Industry: Aviation Countries: India; Malaysia; Asia Themes: Diversification, Geographic Diversification, Entry Strategy, Joint Ventures |
Abstract Case Intro 1 Case Intro 2 Excerpts
Introduction
In February 2013, Malaysia-based AirAsia Berhad (AirAsia), Asia's largest budget carrier, announced plans to launch a regional airline in India in association with Tata Sons Ltd (Tata Sons), India's largest conglomerate, and Telestra Tradeplace Pvt Ltd (Telestra). The new airline, named AirAsia India, was expected to start operations from June 2013. AirAsia India would be managed by AirAsia and operate from Chennai, a metropolitan city in Southern India. It would be a low cost carrier and target tier II and tier III cities in India. Analysts opined that the entry of AirAsia would bring about changes in the highly competitive Indian aviation market. The new airline was expected to develop new markets between India and South-East Asia. “Up to now, Indian private airlines have followed Air India's footsteps.
They see gold mines in Dubai or Singapore, and their strategy is then to get into that already existing gold mine. The mind-set of AirAsia has been 100% opposite, and to develop a market where none previously existed. So I don't think it is primarily an ultra low-cost attack on what is already there. I think it is probably about creating new markets," said Craig Jenks, President of Airline/Aircraft Projects Inc., a leading New York-based air transport consulting and advisory services firm.
Some analysts were concerned about the hurdles AirAsia would face while operating in India. They said that AirAsia enjoyed a significant infrastructure advantage, including separate low-cost terminals in its domestic market. But in India, it would face a huge infrastructure shortage.
However, AirAsia was confident that the new airline would be able to create a niche market for itself. According to Tony Fernandez (Fernandez), CEO of AirAsia, "First, there are a billion people in India; second, millions of people travel in trains; and third, there is a big potential in under-developed routes. We have been studying the Indian market for the past three years and we feel now is the right time." ....
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