TAKING AKASA TO THE AIR - Abhidyu Adukia

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The aviation sector has been struggling for quite some time. There was the exit of Kingfisher Airways, followed by the NCLT proceedings of Jet Airways and the mounting debt on Air India. The pandemic added to the woes of the airlines. The sector reported huge losses during 2020-21. This situation persisted with the advent of the second wave across the country. This pushed many airlines into a debt trap as they were forced to pay all types of fixed costs without a healthy stream of revenue and with limited resources to crawl out of it. 

Despite the ever-growing list of challenges faced by the aviation sector, there is one person also known as the 'Big Bull of India' who is bullish on the sector. Mr. Rakesh Jhunjhunwala always puts his money where his mouth is. This was evident when he decided to invest close to Rs. 250 crore into his upcoming venture called Akasa Airlines. He also has onboarded aviation veterans, namely former Jet Airways CEO Mr Vinay Dube and ex-Indigo president Aditya Ghosh to run the airline. Recently, the airlines obtained a No Objection Certificate (NOC) from the Directorate General of Civil Aviation (DGCA). The airline will start its operations in 2022.

Akasa airlines is an Ultra-Low Cost Carrier (ULCC) whose differentiation strategy is the price itself. Their objective would be to keep their operating costs even lower than the likes of Indigo and Spicejet. The low prices would be achieved by making services like cabin baggage, checked-in baggage, etc. chargeable. This would enable them to charge an even lower air ticket fare from their customers. They aim to target the untapped middle-income households and this is evident from the statement made byMr Vinay Dube stated, “Akasa Air will serve all Indians regardless of their socio-economic or cultural backgrounds…”

I think that Akasa will get a huge boost when it enters the market as the pandemic has rendered major airlines weak but the challenges that they will face will be too hard to overcome. Firstly, there is immense competition by the existing players namely Indigo, SpiceJet, Vistara, etc and they won’t let a new player push them around. Along with this Air India and Jet Airways would also be operational soon which adds to the competition basket. Secondly, the sector is still recovering from the shock. Airlines had borrowed heavily just to stay afloat. Now, it is expected that they will increase ticket costs to repay the loans. This price rise might affect the traffic. Even a McKinsey article stated that they expect the passenger traffic to return back to normal by 2024. Finally, it will be very expensive for Asaka Air to purchase slots in tier 1 cities because they want to maintain a low operating cost while purchasing slots in tier 3 cities might not provide the footfall to become profitable. 

I hope that my stance is wrong and we see Akasa fly into tomorrow. A well-run ULCC is what India needs.

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