AirAsia sparks fare war with first India flight
ASIA'S biggest budget carrier, AirAsia, is set to make its maiden Indian flight this week, fuelling a cut-throat fare war in a sector already reeling from losses.
AirAsia India will take off on Thursday with an eye-catching promotional fare of 990 rupees (S$21) for flights between high-tech hub Bangalore and the popular coastal resort of Goa - cheaper than a second-class train ticket.
The carrier's founder and chief executive, Tony Fernandes - a millionaire former music executive who styles himself as Asia's answer to British tycoon Richard Branson - is a hardened discount-fare warrior.
But analysts warn that Mr Fernandes could find the ride more turbulent than he reckoned in India, where no-frills carriers already dominate with a near 65 per cent market share in the country of 1.2 billion people.
"India could be AirAsia's greatest test," said Kapil Kaul, head of India operations for the Centre for Asia Pacific Aviation, a consultancy.
The company will start with just one plane, but aims to scale up to 10 planes and 10 cities by the end of the fiscal year in March next year.
All but one of India's six airlines are suffering losses, and AirAsia's plan to pitch its fares 30 per cent below those of even low-cost rivals will create new strains.
Mr Fernandes, who calls himself a "disruptor", tweeted: "Some airlines (are) scared of us. We must be doing something write (sic)."
Indian budget rival SpiceJet, which posted a record loss of 10 billion rupees last year, has cut fares on southern routes and blasted AirAsia's "predatory pricing".
Indigo, the only money-making Indian carrier, has followed suit, with promotional fares of just one rupee plus taxes.
"Indian carriers have a track record of engaging in unsustainable fare-discounting, and an unusual willingness to bear losses," said Mr Kaul.
Over the past seven years, Indian carriers have lost a combined 594 billion rupees, he said.
Mr Fernandes "may have under-estimated the capacity of Indian carriers to pursue irrational pricing", he added.