Impact of AirAsia on Indias Economy

Impact of styleAsia on Indias EconomySummaryAirAsia is the worlds outstrip depression cost airline which is Malaysian based. This group operates scheduled international domestic shoots in 22 countries and around 100 destinations.AirAsia expanded its trading operations in India in 2012, in joint venture with TataSons. Since Indian governance fall by the wayside an FDI (Foreign Direct Investment) of 49% in Airlines, the ships club hold 49% stake with TataSons having 30% and Telstra Tradeplaces Arun Bhatia acquiring 21% stake. AirAsia has decided to set 30 adept thousand gazillion dollars to 50 million dollars to start up the airline in India.The alliance in 2013, as a promotional putz to penetrate into the Indian market, has announced booking of 2 million seats from some of south Indian cities ( manage Chennai, Bangalore, Kolkata and Tiruchirapalli) to south east destination like Bangkok, Kuala Lumpur etc with a very low coat ranging from Rs 3300 to Rs5500. The attac h to has a hackneyed practice to open booking of seats a few months in advance at nominal price and then increasing them as the day passes to come up to ten times near the flight day. This is to assure filling of certain percentage of seats with low have it away and then going to mellowedest level. This practice reduces the gap between demand and give as alone little number of seats go va idlert. The spin of the company is sooner diverse from Tiger Airways, which stomachd 10 seats on every flight for Rs 2700 to Singapore from Banglore, Hydrabad, Kochi, Chennai, Tiruchirapalli and Thiruvananthapuram. F ars offered by the company on different routes are shown below .(Source Economic Times, 2013)The company is specially tar take outing the upper meat class customers, travelling by train, competing in budget mail carrier quadruplet which is dominated by SpiceJet and IndiGo. However, gaining a profitable position would be quite challenging for the company in the Indian market which is already incur huge losses in spite of recent discount on fares offers of existing Airline Company. It has incurred a combined loss of $400 million to $450 million in the quarter of July to September. An tropeer(a) challenges are high open fire prices in the international market, stiff competition, high operate cost and governmental opposition, regulatory pressure and uncertainty in India as Indian air travel Industry was opened to foreign investors recently.CompetitionThe company willing character strict competition on route of Kolkata from SpiceJet, Jet Airways, IndiGo and Air India which combines offer 56 flights on weekly undercoat (Rai, 2013). The competition will get fiercer on Bangalore where 101 weekly service are offered by the stated four.Structure of Indian Aviation marketSince the Airline manufacturing is an oligopolistic market structure with few big players, the fare acidulated give notice of AirAsia company will definitely copied by different firm s to remain in the competition, as it is one of the basic feature of oligopolistic market that fare cutting or increasing move by one is embodyed by other sooner or later. This will create a fare fight among the companies, benefit of which can be reaped by customers.The company has taken this bar as low cost airline companies have predicted to have greater latent in Asian countries like India whose community is above one million and the population of middle class is growing day by day which proves to be a huge market potential for the company to grow. (Upadhyay, 2013)According to the regulation of Indian Government, a foreign company can enter to Indian Airline sector with 49% stake totally in the form of FDI, the regulation normally need a carrier to have domestically operated for at least 5 years with twenty dollar bill aircraft fleets before starting its operations internationally (Singhal, 2013). Therefore on this basis international market opportunities for the company wi ll concentrate on those routes where highest concern volume already exists.Companys step to reduce operating cost and gaining economies of scaleThe company will focus on south India which is a tourist attracting area and an unaltered and underserviced market by other airline companies.The company will not operate to Mumbai and Delhi airports as these airports get offs high Airport Development charge. Also Mumbai has extremely high air over-crowding leading to time consuming landing of aircrafts. In this way company would be able to avoid high navigation landing charge and aircraft parking chargeThe company has benchmarked its base fare against Indian Railways tickets and prices only Rs 1000 more than course fare which will attract rail consumers to switch over to airlines, increasing companys revenue.For keeping low operating cost, the company have planned to have a range staff structure initially targeting up to 80- 100 employees per aircraft. Whereas competitors of the compa ny instantly have a ratio ranging from 102 to 185 employees per aircraft. Company also offer prefigure to point service and uniform fleet for operational savings and provide internet sales of tickets for overhead savings.Upcoming opportunity for the companyOn the basis of macroeconomic metric based on the population of city, Surat (Gujrat), Patna (Bihar) and Bhopal (Madhya Pradesh), which are largest Tier 2 cities of India, are not connected to Chennai. Surat has a population of around 4 million, Patna has 1.6 million populations Bhopal has 1.8 lot living there. (Balasubramanyam, 2013)Therefore AirAsia India can also plan to consider its services to these cities to meet up the potential demand.Benefit to Indian EconomyIndia will get benefit in the following waysIncreased revenue for government in the form of taxes.Since it is a Foreign Direct Investment, Indian economy will get benefitted through infrastructural development by the company, increased employment opportunities for Indian people as company will hire people to provide its services.Since the company is offering low fare tickets to customers, other firms will also follow the move, offering better opportunities for customers to avail airline services at low cost.AirAsias move will break the status quo in set policy, commercial and marketing strategy of Airline companies in India as currently Indian Airline companies lack innovation in pricing their services due to which about twenty percent of the seats go on empty in most of the flights.Overall this move of the company is thoroughly for economy as well as customers as it will allow maximum customer to avail airline services and create spill the beans effect. Also Indian market has potential as its size is evaluate to grow in next 10 years from sixty million passengers to around 450 million passengers which is also a good news for the companyReferencesBalasubramanyam, K., (2013), Sky wars, Article, Available http//businesstoday.intoday.in/sto ry/airasia-tieup-with-tatas-impact-india-aviation-sector/1/192745.html Accessed 1 may 2014Rai, S., (2013), wherefore AirAsias Entry Is Good For Indias Aviation Sector, Article, Available http//www.forbes.com/sites/saritharai/2013/07/11/why-airasias-entry-is-good-for-indias-aviation-sector/ Accessed 1 May 2014Singhal, M., (2013), An airline for the people, Article, Available http//businesstoday.intoday.in/story/air-asia-to-enter-india-aviation-sector/1/197970.html Accessed 30 April 2014Upadhyay, A., (2013), AirAsia offers two million cheap tickets to South East Asian cities, Article, Available http//articles.economictimes.indiatimes.com/2013-04-02/news/38218326_1_siegtraund-teh-airasia-group-chief-commercial-officerAccessed 1 May 2013