Rakesh Jhunjhunwala’s new bet: Ultra-low-cost airline with 70 planes

Rakesh Jhunjhunwala, the billionaire of India, stated that he intends to establish a new ultra-low-cost airline in India in an interview with Bloomberg. The airline plans to have 70 planes in the next four years in the hopes that more people will travel by plane.

Rakesh Jhunjhunwala

According to a Bloomberg interview, Jhunjhunwala expects to receive a no-objection certificate from India’s aviation ministry in the next 15 days. Akasa Air will be the name of the ultra-low-cost airline, which will carry a minimum of 180 passengers. According to the source, the Akasa Air team comprises a former Delta Airlines Inc. senior executive. According to sources, Jhunjhunwala plans to join this large market under a new identity and with inexpensive rates in the hopes of luring customers.

Jhunjhunwala, the founder of the private equity and asset management firm Rare Enterprises, is exploring a USD 35 million investment for a 40% stake in the airline. “For a company’s culture to be frugal, you have to start from scratch,” Jhunjhunwala said, adding, “I’m very, very bullish on India’s aviation sector in terms of demand.”

Rakesh Jhunjhunwala, dubbed “India’s Warren Buffett” by locals, is taking a hazardous bet in a field where other airlines have failed owing to price wars and expensive expenditures. Even so, the once-fastest-growing aviation sector has its allure, and Jhunjhunwala is looking for fresh ways to tempt visitors with a brand new low-cost carrier.

While demand for air travel has been affected worldwide, India’s aviation industry faces a longer recovery time as the third wave of illnesses approaches. The impact is being seen by airlines. Airlines in India were already struggling before the outbreak.  Kingfisher Airlines Ltd., once the country’s second-largest domestic carrier, ceased operations in 2012, while Jet Airways India Ltd., which had recently been granted permission to resume operations, went bankrupt in 2019.

Vistara, which Singapore Airlines Ltd. and conglomerate Tata Group jointly own, talks with Boeing Co. and Airbus SE to postpone aircraft deliveries and adjust payment schedules. IndiGo, India’s largest airline, claimed a larger-than-expected loss as a result of the Covid interruption.

“I fear some of the incremental players may not recover,” Jhunjhunwala told Bloomberg when asked about competing with the existing competition in the sky. “I have some of the top airline people in the world as my partners,” he continued.

A new airline entry would raise competition in a market where IndiGo now owns the lion’s share. IndiGo recorded a loss for the sixth quarter in a row on Tuesday, as travel restrictions remained in place due to the return of Covid-19 cases. Jhunjhunwala, on the other hand, appears unfazed.

Jhunjhunwala hasn’t said if Akasa will expand internationally. The majority of ultra-low-cost carriers focus on the domestic market. They do, however, service short-haul international routes. InterGlobe Aviation Ltd. and Delta Air Lines Inc. industry veterans would join him in creating an aviation business in India, he said. He did not, however, provide their names.

He and former Jet Airways CEO Vinay Dube are aiming to create Akasa Air. Aditya Ghosh, a veteran of the aviation industry and the former president of IndiGo, will work with ace investor Rakesh Jhunjhunwala to launch an ultra-low-cost airline. After speaking with sources acquainted with the development, The Economic Times stated that Ghosh will control less than 10% of the airline and will be Rakesh Jhunjhunwala’s nomination to the board.

Praveen Iyer, who has worked for Jet Airways in several capacities, is expected to be named Akasa Air’s chief commercial officer. Meanwhile, Anand Srinivasan, the former VP of revenue management of GoAir, is expected to be the new airline’s CTO. According to reports, the airline will be modeled after Ryanair, the Irish ultra-low-cost carrier. It’s worth noting that it’s one of the world’s most successful and aggressive low-cost airlines.

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