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Industry executives said that Indian billionaire Rakesh Jhunjhunwala plans to launch an ultra-low-cost airline, which may give aircraft manufacturer Boeing a chance to regain lost ground in India after the collapse of one of its largest customers, Jet Airways, two years ago.
Known as the “Warren Buffett of India” because of his successful stock investment, Jhunjhunwala plans to work with the country’s largest airlines IndiGo and former CEOs of Jet Airways to tap domestic air travel demand.
Although the Akasa Air proposed by Jhunjhunwala was at a time when the Indian aviation industry was faltering due to the COVID pandemic and airlines lost billions of dollars, the long-term prospects of the industry made it a popular market for aircraft manufacturers Boeing and Airbus .
Nitin Sarin, managing partner of Sarin & Co, a law firm that advises lessors and airlines, said: “There will be a big battle between Airbus and Boeing.”
“For Boeing, this is a great opportunity to step in and improve their game, because apart from SpiceJet, they don’t have any other major 737 operator in India,” said Sarin, referring to Boeing’s Narrow body aircraft.
An industry source said that the new company is already moving towards what may become one of the largest acquisitions or leases of 737 aircraft outside the United States this year.
Boeing did not comment on Akasa’s plans, but said it is always looking for opportunities and discussing with current and potential customers how to best support their fleet and operational needs.
Fare wars and high costs
In an interview with Bloomberg TV on Wednesday, he said that Jhunjhunwala is considering investing 35 million US dollars and owning a 40% stake in the airline, and is expected to obtain a certificate of no objection from the Ministry of Aviation of India within the next 15 days. He said that the ultra-low-cost airline’s team includes a former senior executive of Delta Air Lines, and they are considering building a fleet of 70 180 passengers within four years.
Jhunjhunwala, whose wealth is rated at $4.6 billion by Forbes, did not respond to an interview request.
The Indian Sky is dominated by low-cost airlines (LCC), including IndiGo, SpiceJet, GoFirst and India AirAsia, most of which operate an Airbus fleet of narrow-body aircraft.
Boeing dominates the wide-body aircraft market with 51 aircraft in India, but fare wars and high costs have led to casualties on full-service airlines, including Kingfisher Airlines in 2012 and Jet Airways in 2019 , Making low-cost airlines and Airbus more dominant.
According to data from the consulting company CAPA India, after the collapse of Jet, Boeing’s share of India’s 570 narrow-body aircraft dropped from 35% in 2018 to 18%. Jet was recently rescued from bankruptcy and is expected to fly again.
Air India has ordered more than 900 aircraft, of which 185 are Boeing 737 aircraft and 710 are Airbus. The latter regards IndiGo as one of its largest customers in the world.
Sarin said: “If you have to lease an aircraft, there are many aircraft leases, and the lessor is happy to provide competitive prices, even better than the price before the new crown pneumonia epidemic.”
‘long haul’
However, he warned that India is still a difficult place to do business. Regulatory barriers and expensive and underdeveloped airports make low-cost airlines less efficient than other places.
Even if Akasa faces fierce competition in the battered post-COVID market, which has prompted airlines to renegotiate terms with lessors and suppliers, raise new funds and cut costs, starting from the ground up, good capital will give it an advantage.
The other co-founders of Akasa are Aditya Ghosh, who worked for IndiGo for ten years and was praised for its early success, and Vinay Dube, the former CEO of Jet, who worked with Delta Air Lines.
“This will be a long process, and the new airline will be very rigorously tested, but the capitalization and start-up team convinced them that they have the potential to succeed,” said Kapil Kaul, head of CAPA India.
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