AirAsia's will face intense competition from SpiceJet and IndiGo which control over 50% capacity share from Chennai and have network strategy similar to Malaysian-based carrier, according to Centre for Asia Pacific Aviation report.
"AirAsia India will connect tier II and III cities where price is the key driver. The carrier also said it would look at opening up new markets where there is no connectivity (50% of the routes it operates on currently are new routes). In this strategy, the new venture will face competition from IndiGo and also SpiceJet, both of which have network strategies which cover these markets,'' CAPA said in its report.
AirAsia, which received an approval from Foreign Investment Promotion Board earlier this week plans to launch operations by year end. The airline plans to connect tier II-III cities from Chennai and group CEO Tony Fernandes has earlier said that it will skip Delhi and Mumbai airports because of high costs.
"SpiceJet is the largest operator domestically from Chennai, with a 30% domestic capacity share in the current week. Jet Airways and IndiGo both have a 21% stake at Chennai, with Air India having a 17% domestic share, meaning there is a relatively even distribution of domestic capacity at the airport. These carriers will likely strengthen their network from Chennai before the launch of AirAsia's domestic service, with Chennai Airport and consumers to be the key beneficiaries of this increased competition,'' CAPA has said.
|Chennai Airport capacity share (domestic seats per week)|
|Air India Express||2.3|
|All figures in percentages|
|Source - CAPA|
It states that the selection of Chennai as the operational base for AirAsia India is a logical move given the brand’s presence in this part of India. AirAsia launched Kuala Lumpur-Chennai service in Apr-2010 with Thai AirAsia adding Bangkok-Chennai service in Mar-2012.