Rakesh Jhunjhunwala’s New Airline To Have 70 Aircraft In Four Years

Jhunjhunwala - aviatorsbuzz

Akasa Air, the ultra-low cost airline that billionaire investor Rakesh Jhunjhunwala is planning to start will have 70 aircraft within four years of being set up on optimism that more people will travel by air.

Mr. Jhunjhunwala, who is considering investing $35 million and would own 40% of the carrier, said in a Bloomberg Television interview that he expects to receive a no-objection certificate from the Union Civil Aviation Ministry in the next 15 days.

Akasa Air is set to include a former senior executive of Delta Air Lines Inc. and is looking at planes that can carry 180 passengers, he said.

Jhunjhunwala’s Bold Move

In a market that has seen some airlines collapse in the face of intense fare wars and high costs, Mr. Jhunjhunwala’s move is being seen as a bold one. The billionaire investor is looking at the opportunity to woo flyers with a brand new carrier offering low fares.

Often referred to as India’s Warren Buffett, Mr. Jhunjhunwala said, “For the culture of a company to be frugal you’ve to start off fresh. I’m very, very bullish on India’s aviation sector in terms of demand.”

Even before the pandemic, airlines in India were struggling. Kingfisher Airlines Ltd., once the country’s second-largest domestic carrier, ended operations in 2012, and Jet Airways India Ltd., which was recently approved to fly again, collapsed in 2019.

While demand for air travel has been hit globally, India’s aviation industry is at greater risk of delayed recovery as the threat of a third wave of infections looms. Airlines are feeling the impact.

Vistara, which Singapore Airlines Ltd. jointly owns with conglomerate Tata Group, is in discussions with Boeing Co. and Airbus SE to delay aircraft deliveries and make changes to the payment timetables. IndiGo, India’s largest airline, reported a wider-than-anticipated loss as COVID disruption crimped its revenue.

Undeterred

That’s not deterring Mr. Jhunjhunwala, who according to Forbes has an estimated net worth of about $4.6 billion.

“I think some of the increment players may not recover,” he said adding that he has got some of the best airline people in the world as partners.

Mr. Jhunjhunwala is estimated to have a net worth in excess of $4 billion, while his shareholding of about 5% in jewellery to perfume maker Titan Company Limited is alone worth $1 billion.

“By the way, one-third of my wealth is in unlisted equities. I also invested in 14 to 15 companies and am now promoting a new airline,” he was quoted as saying by Fortune India, while speaking at the virtual panel that was organised by investment bank Equirus.

On July 13, The Economic Times had reported that Jhunjhunwala “is understood to be exploring a plan to back a new, low-fare airline venture” and had held “preliminary talks for an investment of up to $35 million” in the airline.

Mr. Jhunjhunwala has in the past placed bets on listed domestic airline stocks of IndiGo, Jet Airways and SpiceJet. In fact, in May 2017, he had famously grilled the top brass of InterGlobe Aviation, the owners of IndiGo, for their poor performance.

Debt Levels Grow

In the current scenario of COVID-19, according to rating agency ICRA, Indian airlines had seen net losses of ₹21,000 crore in FY21. ICRA estimates a net loss of ₹ 12,700 crore for domestic carriers in FY22, with the industry debt level increasing to around ₹50,000 crore.

Experts have always said that unending competition, cheap fares and high costs will in all likelihood drive you to an unfortunate end, unless one has the passion, determination, risk appetite, deep pockets and patience.

But for now, also known as the ‘Big Bull’, Mr. Jhunjhunwala has officially made public his entry into India’s aviation sector, which has been hit hard by several restrictions around the COVID-19 pandemic.

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