Wednesday, November 17, 2021

Rakesh Jhunjhunwala backed Akasa gets set to takeoff in one of the world's most turbulent market

Akasa Air has announced a total of over $13 billion worth of deals for 72 aircrafts and engines ahead of its slated summer launch. The airline will have to compete in a market where the lowest fare wins.

Mumbai: India's aviation market is considered one of the toughest in the world that has seen several airlines including Kingfisher and Jet sink. Factors such as high taxes on Air turbine fuel, price sensitive customers who go for the cheapest tickets and more recently lower and upper caps on fares have made this a tough market to compete for several international aviation companies as well. The newest entrant to this space will be Akasa Air backed by stock market investor and billionaire Rakesh Jhunjhunwala and has industry veterans like Vinay Dube and Aditya Ghosh on board. Both have worked earlier with Jet Airways and Indigo. Akasa Air made its intent clear with announcements of two strategic deals this week. The first is a $ 9 billion deal with Boeing for seventy two 737 Max aircrafts and the second is $4.5 billion with CFM for their Leap 1B engines.

"For Akasa this deal and the timing of starting a new airline could have not come at better time . All the factors line up for them", says Ajay Atwaney, aviation expert. Ajay says that the 737 Max's return after a ban of over 2 years due to earlier crashes means Akasa has probably got a great discount on the $ 9 billion price tag. Secondly, Jet closing down means there is a ready pool of talent including pilots, captains and cabin crew ready to fly another fleet of Boeing aircrafts.

" Had they gone for an Airbus family aircraft they would have had to poach talent from other airlines, but here there is a ready made pool from Jet Airways, Spice Jet and Air India express that they can actually bring in very quickly", remarks Atawney.

Akasa Air has made it clear they want to launch an 'ultra low cost carrier'. In the Indian aviation space, that is more the norm than the exception with market leader, Indigo also pitching itself as a ULCC. The 200 seater aircrafts Akasa has ordered could help in this regard with a larger capacity leading to lower costs per passenger.

"There is nothing like ultra low cost in India", remarks Jitendra Bhargava , former ED of Air India. "Airport charges and fuel prices are the same unlike in Europe and US where low cost carriers have a secondary airport in which they can land therefore the costs are low", he explains. Moreover Akasa will have to face a dominant player in Indigo Airlines that has over 50% of market share. The questions is, where will they find the competitive edge on costs?

17/11/21 Tamanna Inamdar/

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