Why it will be difficult for AirAsia to offer cheap air tickets in India?

AirAsia’s entry into the India aviation market as a joint venture partner has been a matter of speculation from the first day. The experts have pointed out that the domestic players will feel the heat and there will be alterations in the market share statistics as AirAsia makes inroads into market. While it is anybody’s guess as to what will be the airlines offerings to the Indians, it is a fact that carrier will be using its expertise and experience in offering cheap air tickets. However, life is not going to be all that easy for AirAsia. Some of the noteworthy points in this regard are:

  1. Indian aviation market is price-sensitive but it also the one which would fall for the things offered free. So, free check-in baggage with some upper weight limit, which is rule of the carriers till now and which the customers have tasted a lot in the last few years, would most likely to be gone with the entry of AirAsia. This is value-erosion might not go down well with the existing flyers. Flight booking for AirAsia might not pick as expected with the free allowances are done away with.
  2. General aviation environment which is already like a slow poison for many carriers due to higher costs of inputs including that of the infrastructure will put pressure on its margins which might be unsustainable even in the long run. AirAsia might be willing to take some hits early on but the general climate needs to improve significantly for it to have some hope for the future. Given the conditions existing today, this is unlikely to happen in future. While the government is concerned with improving air connectivity to the non-metro cities, it will take a daunting effort to create the required infrastructure.
  3. It will be difficult to wean away customers of those domestic carriers which have well established reputation for operational efficiency and punctuality. Cheap air tickets might not be the right carrot to dangle before them. Another worrisome trend is that of declining air traffic since last year. This makes the market finite in size and this means that the new entrant will have to wean away customers from other carriers.
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