Today, we all know that the aviation industry has suffered the most because of the Covid-19 pandemic. Indian Aviation Industry alone has already incurred a loss of 8 billion dollars in the last 2 years. While the already existing players are struggling to survive, who is the one coming up with the thought of a new airline? Strange right. When the entire world is going through a pandemic with travel being almost banned and the already existing airlines struggling the most from it, who is the one planning to enter into this bleeding sector. It is none other than the Big Bull. Yes, it’s the Ace Investor Mr. Rakesh Jhunjhunwala.
“Be Fearful When Others Are Greedy and Greedy When Others Are Fearful”
― Warren Buffett
So, What is Akasa?
Akasa is an upcoming “ultra-low-cost carrier”, or ULCC. It means that travel through this airline will be available at cheaper rates than its peers. Mr. Rakesh Jhunjhunwala has planned to invest USD 35 million and hold a 40% stake in the airline company. It is proposed to be based in India. It is planning to commence its operations in approximately mid-2022. They have applied to the Ministry of Civil Aviation for its No Objection Certificate (NOC) and it is currently under review. They are planning to acquire around70 aircrafts within the span of the next 4 years. It is aiming to accommodate approximately 180 passengers in a single flight.
The ultra-low-cost carrier or the ULCC focuses on keeping operating costs lower than typical airlines like IndiGo and SpiceJet. The biggest competitor of Akasa will be the market leader Indigo. It is by far the biggest player and also the one having the highest market share. Although they have suffered losses due to the pandemic but are still in a favorable and better position than most of the airlines and especially the newly added airline.
In a recent interview with Bloomberg TV, Mr. Rakesh Jhunjhunwala said: “I’m very bullish on the Indian aviation sector in terms of demand and I think some of the players will not recover”. Akasa Airline has also got its first overseas investment from Dubai, which picked up 17% stake in the new airlines. Even legendary investor, Warren Buffett, had turned bullish on the sector after staying away from it for years by investing USD 4 Billion.
What turns out to be a major positive for the newly added Akasa Airlines is that India is one of the biggest markets for aviation and even after the pandemic it will bounce back and continue to be the biggest and fast-growing. Also, under the Udaan Scheme, the Government of India aims to build another 100 airports in mainly tier-2 and tier-3 cities. To further advantage, the government is also going to provide subsidized travel to citizens to boost air travel. This will be a win-win situation for both, the airlines, and the customers. All this clearly indicates the potential that the Indian Aviation Industry has.
Some sources also mention that they are going to place an order for about 70 Boeing 737 Max Aircrafts. To their advantage, these aircrafts are available at cheaper lease rates than before due to lack of demand. So, they have saved a good amount on the lease, which will be beneficial in reducing their costs.
They have onboarded the veterans from the industry such as former JetAirways CEO Vinay Dube and the ex-President of Indigo, Mr. Aditya Ghosh to run the airline. Dube is expected to be the CEO of the company and Ghosh is expected to be on the board as Jhunjhunwala’s nominee. Such experienced and strong management can definitely add a huge advantage to the airline.
However, it will not be easy for Akasa to operate in spite of its low costs because it will be operating in one of the most competitive markets for aviation in India. The profit margins are very bleak and any change in prices or policy can disrupt the airlines.
The goal of this ultra-low-cost carrier is not an easy one to achieve. But backing the ability of the ace investor Mr. Rakesh Jhunjhunwala, people can expect and hope this to be a reality. If this turns out to be a success, it will fulfill the dream of Indians to travel economically.
Written by- Jainam Shah
Edited by- Riya Shah