AirAsia India gets approval to fly

AirAsia plane AirAsia is one the region's biggest and most successful low-cost airlines

AirAsia India, a budget airline set up by one of Asia's biggest low-cost carriers AirAsia and India's Tata Group, has won approval for operations.

It will be the first airline with foreign investment to operate in India.

India opened up its aviation market to foreign investment in 2012 in an attempt to boost growth in the sector and the overall economy.

Indian airlines have been mired in losses because of rising fuel costs as well as intense price competition.

Only one of India's six main carriers - IndiGo - has been making profits.

'Lowest cost'

India has seen a surge in demand for air travel in recent years, making it one of the faster-growing aviation markets in the region.

Start Quote

Domestic airlines continue to be very precariously placed and AirAsia's entry will further challenge the existing airlines”

End Quote Kapil Kaul CAPA

However, in an attempt to capture a bigger share of the growing market, airlines have been slashing their fares to attract more customers.

That, coupled with volatile fuel prices, has hurt profits at most of the leading carriers.

AirAsia - which has been one of the most successful low-cost carriers in the region - said it was planning to offer fares in India far lower than those of competitors.

Mittu Chandilya, chief executive of AirAsia India, said it was working on being "the lowest-cost" airline in the country.

He said he was confident the airline would be able to make money despite lowering the fares.

However, some analysts said that AirAsia India's entry may trigger a new price war between carriers and harm their profitability.

"Domestic airlines continue to be very precariously placed, and AirAsia's entry will further challenge the existing airlines," said Kapil Kaul, South Asia chief executive at the Centre for Asia Pacific Aviation (CAPA).

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