For the industry watchers, the Tata-AirAsia joint venture has come as a surprise. The experts are not able to offer any definitive comment on the future of the airline, either of success of of failure. Two contradicting forces are on play. On one hand is the familiarity of the Indian aviation environment which is more attuned to be like a Ripper, good at bleeding the airlines to death and on the other hand, lies the proven ability of the JV partners to prove the doomsayers wrong. But, one thing is for sure. The path before AirAsia is not easy to tread. The providers of the cheapest air tickets in south-east Asia would not be getting the same environment here to operate, unless steps are taken to make it more conducive.
Some of the main impediments for the airline would be in the form of high incidence of taxation, a cut-throat competition from the existing carriers which are also on a rapid expansion path and a rather unsupportive infrastructure which facilitates the low cost airline operation. While AirAsia has been successfully reaping the profits by offering lowest air fare, the product and service offerings from the carrier have been very limited. Whether the customers would be able to find favor with these services remains to be seen.
On the operational front, it is the higher costs of fuel due to heavy taxation, as compared with the south-east Asia which will increase the costs for the airline. Further, AirAsia’s entry into other markets such as Philippines and Japan has been rather rough and non-profitable. This has stretched its resources far enough. Entering into the Indian market will definitely give initial jitters.
Another problem area will be its ability to sell the tickets to passengers since its exclusivity agreement with Expedia, the world’s largest online travel agency (OTA), prohibits it from doing so. It will have to engage in web-based sale on its own website or through Expedia. Most of the ticket sales in India are through the agents and the OTAs. This will make the going tough on the sales front as well.