NEW DELHI: Budget carrier AirAsia’s decision to review its India operations at a time when airlines are showing some signs of revival indicates that India will continue to remain a difficult market with minimal margins for many players in the aviation sector.
“India’s leading carrier IndiGo now control 55-60 per cent of domestic market, leaving very little for smaller players such as AirAsia and GoAir. Cut throat competition and price war among carriers has had previously led to the closure of few established players,” says a leading aviation analyst requesting anonymity.
He added, “Air Asia’s decision to exit the domestic market despite having a partnership with the Tatas says a lot about the industry. It is difficult to generate profits here. Add to it, the statement came after two Covid-19 vaccines have shown promising results, sending airline stocks upward all over the globe.”
The Malaysian carrier’s review of its India operations follows its exodus from Japanese market.
“Our businesses in Japan and India have been draining cash, causing the group much financial stress...Cost containment and reducing cash burns remain key priorities, evident by the recent closure of AirAsia Japan and an ongoing review of our investment in AirAsia India,” said AirAsia Group president (airlines) Bo Lingam on Tuesday.
Hit hard by the pandemic, airlines in India have taken drastic measures to remain operational. Closure of an airline due to accumulating losses is not a new thing in the market.
Last year, India’s oldest private carrier Jet Airways ceased operations while debt-ladden Air India, which is up for sale, is yet to find a buyer.
According DGCA data, IndiGo recorded a 55.5 per cent market share in domestic aviation market while SpiceJet’s market share was at 13.4 per cent at the end of October.
AirAsia India JV between AirAsia and Tata Sons has 7 per cent.