AirAsia's unique selling proposition (USP) is its low fares and the airline can afford to offer those round-the-year because its unit costs are among the lowest. The airline earns 18 per cent of all revenue from ancillary sources. Experts say replicating the business model in India will be a challenge because of a high-cost structure and taxes.
AirAsia's unit costs are significantly lower than Indian carriers on low-cost terminals, lower distribution costs, single aircraft type operation, higher aircraft utilisation, etc. Unit costs or cost per available seat kilometre (CASK) refers to expenses on flying a seat (filled or empty) over a kilometre. A J P Morgan report shows AirAsia's Cask as very low. One of the reasons for low operating costs is that fuel is not taxed in Malaysia.
So, how does the airline keep its cost under control? About 85 per cent of AirAsia tickets are sold through its website, limiting agents' commission. (In India, 70-80 per cent of tickets are sold through offline agents and portals). In Kuala Lumpur and Bangkok, AirAsia flies to low-cost terminals (there are none in India).
26/02/13 Aneesh Phadnis/Business Standard
