Start up airline AirAsia is considering making Bhopal its hub in central India
. It has already held a first round of talks with the Madhya Pradesh government to do so, offering more flights to Bhopal, a person familiar with the talks said.
The venture, in which the Tata Group is a dominant Indian partner and holds equity, will also offer flights to Indore in the same state, from other destinations like Nagpur in Maharashtra.
AirAsia is in the process of submitting the necessary documents required for an Air Operating Permit or AOP to the to the Director General of Civil Aviation. It also awaits a clearance from the ministry of civil aviation, without which a launch is not possible. The airline is behind schedule
and will not be able to stick to its previously announced launch date of November this year.
"Keeping in mind the various clearances that are still to come in, a December launch seems stretched. But AirAsia is definitely targeting a launch not beyond March this financial year," said the person, not wanting to be identified.
The airline has already announced Chennai as its base for initial operations
in India. It is also exploring setting up additional hubs in other parts of the country as it scales up and adds more aircraft by the end of 2014.
Bhopal has been a tricky bet for other Indian carriers and adding capacity on the route has been a challenge as the volumes are not sufficient to make the route viable. This is the reason rival India carriers are skeptical of the success of AirAsia's move.
"They (AirAsia) are just shooting off the hip. Bhopal is a very difficult market, though it might be a good destination. Indore is a better bet but they will struggle to pull off Bhopal as a hub," said an official with a rival carrier.
But AirAsia's move on Bhopal may well have been influenced by a recent MP government announcement that it will slash the value added tax on aviation turbine fuel at its airports to 5 per cent from the existing 23 per cent.
This is a huge incentive for airlines as fuel costs are increasingly becoming unmanageable for the airlines due to the volatility of international crude prices and the high tax charged by state governments.
September saw the steepest increase in ATF prices forcing the airlines to hike fares by at least 25 per cent to 30 per cent.
AirAsia is also known to develop destinations as a strategy and has successfully developed virgin routes in countries where it operates its other joint ventures. In India too its long-haul airline AirAsiaX developed the routes connecting South East Asia to religious centres in the South.
Madhya Pradesh has been very aggressive in promoting tourism and hence a tie-up with AirAsia might be fruitful for both.