India investor joins the airline club with Akasa
JHUNJHUNWALA’S NEW VENTURE STARTS OPERATIONS
INDIAN billionaire Rakesh Jhunjhunwala said he was “prepared for failure” as he launched his airline in the country last Sunday (7).
Jhunjhunwala, 62, who made his fortune on the stock exchange as a value share investor, launched Akasa Air with an inaugural flight from Mumbai, Maharashtra to Ahmedabad, Gujarat. “A lot of people question why I’ve started an airline. Rather than answer them, I say I’m prepared for failure,” the billionaire said at an industry event in February.
“It’s better to have tried and failed than not tried at all.”
The 62-year-old’s entry into the capital-intensive sector has raised eyebrows, with many pointing to the chequered history of billionaire-backed airlines in India as well as the daunting global economic outlook.
Several such ventures have failed in recent years.
Fugitive businessman Vijay Mallya is fighting extradition from Britain on charges of financial fraud after his pet project Kingfisher Airlines went bankrupt in 2012, losing Indian banks more than $1 billion (£827.13m).
Disgraced entrepreneur Subrata Roy counted Air Sahara as a part of his empire for more than a decade, until consecutive losses forced a sale to fellow self-made billionaire Naresh Goyal’s Jet Airways in 2007.
Jet collapsed in 2019, with many blaming the Air Sahara deal for its downfall.
For Jhunjhunwala the challenge is personal: “I hope to prove people wrong,” he said. “Now it’s become a matter of ego.”
Jhunjhunwala invested some $35 million (£29m) for an estimated 40 per cent stake in the new airline. He is India’s 52nd richest person, with a net worth of $3.5 billion (£2.9bn) and significant holdings in more than 30 Indian stocks, but rarely starts his own companies.
“He’s a street-smart investor and a very savvy trader,” market analyst Arun Kejriwal said. “But running an airline is not the same as stock trading.”
Analysts expect Jhunjhunwala will leave day-to-day operations to a management team of industry veterans, who are modelling Akasa on the likes of Ryanair and Southwest Airlines.
But sharp rises in jet fuel prices and a weakening Indian rupee cloud the outlook for an industry still recovering from the Covid-19 pandemic. “India does not produce even a nut or even a screw. Everything has to be imported from the US or Europe,” said aviation analyst Mark Martin.
The pandemic saw India’s air travel industry lose an estimated $8bn (£6.61bn) over two years, according to research by aviation market research firm CAPA. Government estimates peg losses at $2.5bn (£2bn).
Nonetheless, several airlines are vying to serve a growing middle class, and prime minister Narendra Modi’s government has pledged to build 80 airports by 2025, making it a key market for manufacturers Boeing and Airbus. Akasa – sky in Sanskrit – is pitching itself as an ultra-lowcost carrier with tickets 10 per cent cheaper than competitors.
It will operate two single-aisle Boeing 737 MAX aircraft between four Indian cities and hopes to have a fleet of 18 by the end of next year. It also claims to be the world’s “greenest” airline, with staff uniforms including sneakers with recycled rubber soles and fabric made of marine waste.
However, analysts point out that the Boeing 737 MAX remains restricted in some countries after two crashes that killed 346 people in total.
“An airline business can make you a tremendous amount of money,” said Martin. “But it also can make you extremely open and susceptible to risk.”