NEW DELHI: Despite the closure of two major airlines (Kingfisher Airlines and Jet Airways) in the past decade, ace investor Rakesh Jhunjhunwala is planning to start a new one and is confident of receiving a no-objection certificate from the aviation ministry in the next 15 days.
In an interview to Bloomberg TV, Jhunjhunwala said that he plans on having 70 aircraft within four years for the new airline which will be called Akasa Air. The new airline will be an ultra-low cost carrier.
Jhunjhunwala, who heads the private equity and asset management firm Rare Enterprises, is considering to invest $35 million for a 40% stake. He said that the airline’s management team would include a former senior executive of USA’s Delta Air.
Jhunjhunwala’s bet on the aviation sector comes at a time when the industry is ransacked by the Covid-19 pandemic. India’s largest carrier IndiGo on Tuesday reported its biggest quarterly loss at Rs 3,174 crore. Other private airlines such as SpiceJet and GoAir (now Go First) are ladened with high debts and are looking ways to raise new funds.
As of June 30, 2021, IndiGo had a fleet of 277 aircraft. According to GoFirst’s website, it has a fleet of 56 aircraft and SpicetJet’s website says it has 91 aircraft. Jhunjhunwala hasn’t specified whether Akasa would go international. Ultra low-cost carriers mostly focus on domestic market. However, they also cater to short haul international routes.
Even before the pandemic, airlines in India were in a difficult spot. High fuel prices and cut-throat competition in an extremely price-sensitive market led to closure of Jet Airways in 2019 (Jet is now owned by a different group and is eyeing a comeback) and Kingfisher Airlines in 2012. National Carrier Air India hasn’t reported profit since FY2008 and has accumulated total debt of around Rs 60,000 crore.
Analysts and experts feel domestic airlines would continue to report losses in near future and it would take 3-4 years for the traffic to reach pre-covid level. Ratings agency ICRA estimates a net loss of Rs 12,700 crore for domestic carriers in FY22 after they would have incurred Rs 21,000 crore loss in FY21.