Rakesh Jhunjhunwala’s Plan to Disrupt Indian Aviation Market

Vrinda Gupta
Vrinda Gupta

Akasa Air is being launched by Mr. Rakesh Jhunjhunwala; he is the holder of 40% stakes in the company. To run the airline, Jhunjhunwala has partnered with the shining stars of the aviation industry such as former Jet Airways CEO Vinay Dube and ex-Indigo President Aditya Ghosh. Dube had been assigned the post of CEO. Meanwhile, Ghosh is expected to be joining the board as the nominee of Mr. Jhunjhunwala. Investors based in Mumbai will also pump in $35 Million, They are discussing having a fleet of 70 Airplanes over the period of 4 years. Mr. Dube said in one of his speeches that “Akasa Air will serve all Indians regardless of their socio-economic or cultural backgrounds…

The Airline plans to start in the summer of 2022.

What is ULCC?

ULCC stands for Ultra Low-Cost Carriers; in this model, the company focuses on lowering the operating cost than the typical budget airlines such as Indigo, Spicejet. The ULCC model contains more filtering of services ahead such as checked-in baggage, cabin baggage, etc.

Primarily, where LCCs operate at low costs and only a bit lower than the full-service airlines. Meanwhile, ULCC’s run on minimal fares to ensure profitability.  Nevertheless, experts have mentioned that operating on the ULCC model in a country like India is tough due to the lack of no-frill airport terminals from where the lower costs are derived. These types of terminals are used by big airlines like Ryan Air, Easy jet, etc., and are very much prevalent in Europe.

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Is there a GAP in this market for the new players?

Jet Airways Closure in 2019, the disinvestment of Air India to Tata’s, and the terrible position of other existing players in the market, the airline industry is facing its most dangerous and biggest threat of consolidation of the market share with the major players. Further, as the vaccination process is pacing up airline experts expected this industry to bounce back.” I’m very bullish on the Indian aviation sector in terms of demand and I think some of the increment players will not recover” said Mr. Rakesh Jhunjhunwala in an interview with Bloomberg TV.

How is India’s airline space shaped?

Nowadays, IndiGo is India’s largest airline with over half the market share in the domestic passenger market. It is followed by Air India, SpiceJet, GoAir, Vistara, and AirAsia India. GoAir changed its name to GoFirst recently and also plans to retrieve its business model to become a ULCC. Along with that, they have also started to prepare for their IPO.

Due to Covid-19, the airline industry faced huge losses in the fiscal year 2020-2021. These losses are continued in the next 2021-2022 fiscal year also. An aviation consultancy reported,  “Massive, perennial losses have created a debt trap which has resulted in most airlines having very limited means of recapitalization. The Government of India is providing almost no direct support; lenders have by and large closed their doors to airlines, even for restructuring purposes; and lessors will soon have no option but to start applying pressure on defaulting airlines. Simultaneously we are heading into a higher cost environment, while staff morale is declining”

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