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How AirAsia India plans to generate revenue on its own

By Arindam Majumder
March 03, 2017 11:23 IST
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The company has charted out a three step process in achieving the target

AirAsia India wants to become financially independent of its promoters and generate enough revenue to sustain itself.

The airline which is yet to record a profitable quarter will follow a three step target to be in green said the airline’s CEO Amar Abrol. Air Asia India is a joint venture between Malayasian low cost carrier AirAsia Bhd and Indian salt-to-steel conglomerate Tata Sons.

“At one point of time we have to generate enough cash flow ourself and not remain dependent on the promoter’s investment,” said Abrol refusing to give a timeline by when the company can achieve the target.

The airline which aims to double its revenue by FY18 recorded a loss of Rs 181.70 crore (Rs 1.82 billion) in FY 16 higher than Rs 133.31 crore (Rs 1.33 billion) it suffered in the previous fiscal.

“The promoters have invested money and it is natural for them to expect a return of investment after some time, we are on that right path towards profitability,” Abrol said mentioning that as CEO, convincing the promoters for adequate funding is one of his crucial role.

“We are a board run company, you have to convince the board about your plans, about the requirement of more money, it’s a very hands-on operational experience,” he said.

The company has charted out a three step process in achieving the target- clock a positive gross profit margin at the first level , then become cash flow positive and next become profitable at EBIT (Earnings before Interest and Taxes) level.

According to Abrol, the company has recorded positive gross profit margin for the month of December and January and also expects similar results for February, accounts for which is yet to be closed. Gross profit margin measures the profit a company makes from its sale of goods.

For the month of December, the airline revenue from sales crossed Rs 100 crore - the first time in its history carrying 2,60,000 passengers. Similarly it was able to increase its pricing power recording a RASK (Revenue per Available Seat Kilometer) of Rs 2.85 - also its highest since inception.

“From aircraft spare parts to the napkins in the cabin, we are renegotiating every contract with the vendors, we are trying to keep our planes in the air for as much as long possible,” Abrol said.

The company which has eight aircraft and 58 daily flights aims to have 20 aircraft by middle of 2018.

For that the airline has selected Dublin-based Avolon Aerospace for its new aircraft through a competitive bidding process, a change from the earlier practice of leasing planes from parent AirAsia Bhd.

"30 companies responded to the global tender, the AirAsia brand obviously helped us to get it a comparatively lower leasing rate but we are convinced that in future we will be able to bargain based on our own merit,” Abrol said.

Tony Fernandes-owned AirAsia’s four subsidiaries in Malaysia, Thailand, Indonesia and Philippines recorded operational profit for the December quarter whereas the India unit suffered an operational loss of Rs 10.24 crore.

Photograph: Enny Nuraheni/Reuters

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Arindam Majumder in New Delhi
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