AirAsia’s entry may reduce airfares to India

Petaling Jaya: A decline in airfares is a given with the entry of AirAsia and AirAsia X on the major routes to India, some of which were once tightly held by the incumbent.
Previously, Indian Airlines operated certain routes but it ceased over a year ago, following which Malaysia Airlines (MAS) has been the sole carrier for some of the points.
Now things will change and it is “normal to expect a drastic drop in airfares” with competition coming from the low-cost carrier, said an analyst.
How low fares could go is not clear but as a promotional offer, AirAsia is offering a one-way fare of RM199 and analysts believe the incumbent will also drop fares very soon in response to the RM199 offering.
A check on the respective airlines’ websites revealed that a round trip from KLIA to New Delhi on August 5 to 15 is RM719 on a low-cost carrier; AirAsia X is more than 50% lower than MAS, whose online fare was RM1,592, but MAS is a full service carrier.
“The incumbent will not drop fares to RM199 but a reasonable discount can be expected as it would want to safeguard its market share. Initially, the drop will be bigger but in the longer term and prices will stabilise. However, yields will come under pressure,” an industry source said.
The RM199 offer is for a limited period only.
The cutting of airfares to combat competition is nothing new as this was seen when AirAsia X began mounting flights to Melbourne and Perth.
AirAsia and its sister airline, AirAsia X, finally got the nod to fly to New Delhi, Mumbai, Bangalore, Hyderabad and Chennai beginning April.
This will set a new wave of competition which is necessary for the Indian routes and gives more choices to consumers.
The low-cost carrier will fly from Penang to Chennai on April 28 and from Kuala Lumpur to Mumbai (May 6), Chennai (May 17), Bangalore (May 20), Hyderabad (July 20) and New Delhi (Aug 4).
28/01/10 BK Sidhu/The Star Online, Malaysia

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Categories: Foreign Jan 2010, Low Cost General Jan 2010