Rakesh Jhunjhunwala’s bold bet on Akasa Air: Is Indian market ready for another low-cost airline?

By Times Now

Akasa Air, the new kid in the Indian aviation market, backed by ace investor Rakesh Jhunjhunwala on Monday received the no objection certificate (NOC) from the aviation ministry and is planning to start ultra low-cost airline service across the country from the summer of 2022. But before that it needs Air Operating Permit (AOP) from the aviation regulator DGCA, which will issue the licence once it gets satisfied with all the aspects of operations and safety.

SNV Aviation Pvt Ltd, the company that will launch Akasa Air is also backed by former Jet Airways CEO Vinay Dube and Aditya Ghosh, who has spent over 10-years as president and whole-time director at InterGlobe Aviation, the company that runs India’s largest carrier IndiGo.

While it is true that Aditya Ghosh has a formidable experience in running a low cost airline, Vinay Dube, who was at the helm of Air Jet Airways and will be the CEO of Akasa Air, has not yet got any success in running a low-cost airline. But still the company has taken a bold bet to compete with established players like IndiGo and SpiceJet in the low-cost carrier (LCC) space. Analysts believe Akasa Air is going to have a tough time to keep control on costs given the fact that crude oil, which accounts for nearly 40% of an airline’s operating cost, is at an over four-year high. Also the company has to shell out more to hire pilots as the situation in the aviation industry is changing fast with airlines world-wide resuming international flights and have started offering jobs to pilots who were laid off. If it hires expats, it has to pay more, increasing cost.

In the past as well we have seen low-cost airlines such as AirAsia India, which started operations in June 2014, has not seen a break-even year yet and AirAsia Bhd is no longer infusing funds into the airline after the Covid pandemic made the situation worse for the aviation sector, that has huge fixed costs and need a fixed regular cash inflow to sustain operations.

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