The aviation world is watching Akasa with its fingers crossed

Jhunjhunwala-promoted Akasa Air is landing wings in extraordinary times. The global aviation industry was decimated two years after the pandemic, with many airlines shutting down shop and those taking huge losses. India was no different. According to government data, the airlines combined took heavy losses 19,564 crore in 2020-21.

It seemed that this year was changing. Domestic airlines carried 57.2 million passengers in the January-June 2022 period as compared to 34.3 million passengers in the same period last year, translating to an annual growth rate of 66 per cent. But volume doesn’t necessarily translate into profits. With Russia’s invasion of Ukraine, rising global energy prices, especially aviation turbine fuel, the highly competitive market saw margins thinning or getting worse.

Union Civil Aviation Minister Jyotiraditya Scindia recently told news agency PTI in an interview, “It has been eight years since an airline was launched in India. In the last almost two decades, we have heard how difficult it has been. For airlines to function, they have faced many issues internally and we have seen seven airlines shut down (during this period).”

Scindia sees the launch of Akasa as a sign of a sea change in the fortunes of the sector, with the re-birth of Jet Airways and the re-launch of a rejuvenated Air India under Tata ownership.

Scindia expects the total number of passengers to rise to 400 million by 2027, compared to 60 million when the BJP came to power in 2013-14. Despite the global and local slowdown in the pace of overall economic growth, air traffic in India has maintained a healthy growth, with the number of aircraft nearly doubling from the current 700 to around 1,200 by 2027, according to estimates from the Ministry of Civil Aviation. .

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This is the reason why the entire aviation industry is looking towards India in general and Akasa Air in particular. Especially American plan maker Boeing. Akasa’s order of 72 Boeing 737 MAX 8 airliners has been a virtual lifeline for its struggling 737 MAX 8 program, as aviation regulators around the world halted the 737 MAX in 2019 after two consecutive crashes that killed 346 people was. The suspension was the longest grounding of an aircraft type in aviation history.

Not only did this virtually eliminate many airlines that had bet on the highly fuel-efficient 737 MAX 8, but it also badly affected Boeing and led to Airbus’ rival A320neo dominating the short-haul skies. Floodgates were opened for So, at a list price of $9 billion (though Jhunjhunwala has squeezed a hefty discount from Boeing), Akasa’s 72-plane order at the Dubai Airshow last year would have been a lifesaver for Boeing.

The industry will also be watching how well Akasa’s brand of ultra-low-cost no-frills flying does in a very price-sensitive market. While the market is dominated by low-cost carrier IndiGo, which ferryes one in two domestic passengers to India, reborn Jet Airways, along with Tata Air India and Vistara, is betting the opposite on a return to full-service . the carrier

In the end though, the long-term survival in a turbulent market is determined by the depth of the pockets of the promoters. From Air Deccan to Kingfisher to Sahara to Paramount to Jet Airways to SpiceJet’s three previous incarnations, the inability of their promoters – for one reason or another, some not directly linked to the airlines’ fortunes – to meet their losses eventually led till his death.

Jhunjhunwala has deep pockets. As of the end of last month, his portfolio’s assets were estimated at 30,614.43 crores. But then again, he has been an investor so far, not operating any business directly. And he is notorious against booking losses on investments—in fact, his magic touch in picking out the winners of the stock market has earned him the name of India’s Warren Buffett. Akasa’s future will depend on how much Jhunjhunwala is prepared to tarnish that reputation.

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