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by 5paisa Research Team 12/10/2021

Stock market big bull Rakesh Jhunjhunwala, who recently had a private meeting with Prime Minister Narendra Modi, is set to fly high—literally. 

Akasa Air, an upcoming airline in which Jhunjhunwala is one of the principal shareholders, has received the no-objection-certificate (NOC) from the civil aviation ministry, which is headed by Jyotiraditya Scindia. 

The new airline comes at a time when the travel and tourism sector has just started recovering after a prolonged slowdown due to restrictions imposed to curb the spread of the Covid-19 pandemic.

Here’s all you need to know about the new airline.

Who will operate Akasa Air?

Akasa Air will be owned and operated by SNV Aviation Pvt Ltd. 

By when will the airline take to the skies?

The company said Monday that it will be operational by the summer of 2022. It said it is working with the regulatory authorities on all additional compliances required to successfully launch Akasa Air.

Who are the investors behind Akasa Air?

Apart from Jhunjhunwala, Akasa Air is also reportedly backed by former IndiGo president Aditya Ghosh as well as former Jet Airways chief executive officer Vinay Dube.

IndiGo is the country’s biggest airline at present. Jet Airways was promoted by businessman Naresh Goyal but was grounded in April 2019 because of high debt. It is all but defunct as plans to revive it have not fructified till now. 

News reports have said that Jet Airways could restart operations next year under a consortium comprising the UAE-based investor Murari Lal Jalan and the UK-based Kalrock Capital.

What business model is Akasa Air likely to follow?

Akasa Air will likely be an ultra-low-cost carrier (ULCC). A ULCC airline operates with a low-cost business model and has both lower unit costs and revenue compared to low-cost carriers (LCCs) and full-service carriers (FSCs).

According to a report by the Mint newspaper, ULCCs such as Ryanair and Spirit Airlines represent a business model that is different from the LCC model followed by IndiGo.

ULCCs often opt for unbundling of fares, making tickets cheaper than those of LCCs. Any extras such as baggage, selecting one’s seat or food are subject to a charge, Mint said. These airlines also typically have cheaper operating costs as they operate out of secondary airports and have lower distribution costs.

India’s aviation sector is currently dominated by low-carrier IndiGo, which is operated by Mumbai-listed InterGlobe Aviation Ltd. Other local airlines in India include SpiceJet, GoFirst and Tata Group-run Air Asia India as well as Vistara. Tata Group is also taking over state-run Air India.

How well is the ULCC model likely to succeed?

That depends on the cost structure, which in India, is higher than that in the US or Europe. This could negate any advantage the ULCC might have been able to generate over the LCCs or even full-service carriers. 

How big could Akasa Air’s fleet size be?

A report in the news website The Print said that Akasa Air could have a fleet size of 70 aircraft in four years, comprising Boeing 737 Max jets. This, the report said, could give Boeing a foothold in the Indian market, which is currently dominated by rival Airbus. 

An order for 70 units of 737 Max-8 jets — the most popular model — would be valued at $8.5 billion at sticker prices, although discounts are common in large plane orders. Boeing is likely to offer steeper-than-usual discounts on this deal, The Print reported.

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