AirAsia’s plans for a joint venture airline in
India would impact the pricing and yields of domestic carriers. It would also
be a wake-up call for Singapore Airlines, said a JP Morgan research report.
“We think it (the
alliance) is negative for Indian carriers, especially SpiceJet, given its major
presence in Tier II/III cities. With traffic under pressure, it would be a
challenge to sustain higher yields. The entry of new players could put pressure
on pricing,” JP Morgan analyst Corrine Ping said.
Expanding sales
network
AirAsia is expanding its distribution network
and increasing its offline travel partners. It has tied up with various online
portals, including MakeMyTrip and Yatra.com. Currently, its distribution
network is small — it sells tickets through its own website, 20-25 travel
agents and online portal Expedia, with which it has a joint venture.
“AirAsia has
become aggressive in distribution and is signing more trade partners across
India,” said an aviation source.
A few months
earlier, the airline had hired Malaysian Airlines marketing manager Devinder
Singh Bindra to head its sales in India.
Unlike full-service
airlines, AirAsia doesn’t use global distribution systems to sell tickets and
doesn’t pay regular commission to agents. As an incentive, it allows agents to
sell tickets at prices higher than the agreed purchase costs, the source said.
Sharat Dhall, chief operating officer of
Yatra.com, said the airline was integrating its booking system with the portal.
Soon, passengers would be able to book tickets on their site, he added.
“It is evident if
AirAsia has to succeed in India and achieve a scale similar to that of SpiceJet
or IndiGo, it would have to expand its distribution. It has tied up with us and
is looking for other partners, too,” said Keyur Joshi, chief commercial officer
of MakeMyTrip. He added distribution costs in India were declining, with agency
commissions falling to one per cent. “Paramount Airways had begun operations
with a select distribution network, comprising few agents. But that didn’t
yield results,” Joshi said.
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