What is Akasa?
- The airline is being launched by Jhunjhunwala, who will hold a 40% stake in the company.
- Jhunjhunwala has onboarded aviation industry veterans such as former Jet Airways CEO Vinay Dube and ex-IndiGo president Aditya Ghosh to run the airline.
- While Dube is the CEO of the company, Ghosh is expected to be on the board as Jhunjhunwala’s nominee.
What has happened?
- Rakesh Jhunjhunwala-backed budget carrier Akasa Air Friday announced it would launch its maiden commercial flight on August 7.
- The airline will fly from Mumbai, Ahmedabad, Bengaluru and Kochi with two Boeing 737 Max aircraft to begin with, and is expected to add more routes as it inducts more capacity.
Which routes Akasa Air fly?
- In the inaugural phase of its network development, Akasa Air will launch its operations by offering 28 weekly flights between Mumbai and Ahmedabad starting August 7.
- Following this, from August 13, the airline will start operating an additional 28 weekly flights between Bengaluru and Kochi.
- All flights are open for sale with immediate effect.
What Akasa air is offering?
- Akasa Air has positioned itself as a low-cost airline, and in the launch phase is competing with existing airlines on low fares.
- The carrier’s fares on the Mumbai-Ahmedabad route are lesser by around Rs 500 to Rs 600, compared to the lowest fares by other airlines on the same dates.
- The airline has also unveiled a menu for onboard meals and snacks that will be available for pre-booking and onboard purchase.
What is ULCC airline?
- In the ULCC (ultra low cost carriers ) airline business model, the company focuses on keeping operating costs even lower than typical budget airlines like IndiGo and SpiceJet.
- In the low-cost model, airlines unbundle certain amenities that are usually associated with the full-service airline experience — like seat selection, food and beverages, etc.
- In the ultra low-cost model, there is an even further unbundling of services like checked-in baggage, cabin baggage, etc.
- Traditionally, while LCCs operate with significantly lower fares and only somewhat lower costs than full-service carriers, ULCCs operate with minimal costs to ensure profitability.
- However, experts have pegged that for a market like India, operating on a ULCC model is tough because of lack of availability of no-frill airport terminals from where the lower costs are derived.
- Examples of such terminals are prevalent across Europe, and are used by airlines such as Ryan Air, EasyJet, etc.
Is there a case for new players in the sector?
- With the 2019 closure of Jet Airways, the disinvestment of Air India to the Tata Group, and the weakened position of other existing players,
- The airlines industry is facing a threat of consolidation of market share with the major players.
- Additionally, with vaccination rollout, market participants expect the sector to bounce back.
- In an interview with Bloomberg TV, Jhunjhunwala said:
- “I’m very bullish on the Indian aviation sector in terms of demand and I think some of the increment players will not recover”.
India’s airline sector
- Currently, InterGlobe Aviation Ltd-run budget airline IndiGo is India’s largest airline with over half the market share in the domestic passenger market followed by Air India, SpiceJet, GoAir, Vistara and AirAsia India.
- GoAir, which has filed papers for its initial public offering, recently rebranded itself to GoFirst and plans to revamp its business model to become a ULCC.
- The upheaval of the Indian airline industry has largely been on the back of deep losses reported in 2020-21 (April-March) because of Covid19.
- Massive, perennial losses have created a debt trap which has resulted in most airlines having very limited means of recapitalisation.
- The Government of India is providing almost no direct support; lenders have by and large closed their doors to airlines, even for restructuring purposes; and lessors will soon have no option but to start applying pressure on defaulting airlines.
- Simultaneously we are heading into a higher cost environment, while staff morale is declining, aviation consultancy firm CAPA noted in its India airline outlook for 2021-22.
Q) Which of the following is correct regarding Air India?
- Tata Airlines became Air India just before Independence
- Air India International was launched just after Independence
- NDA govt in 2001 sold minority stake in Air India
- 1 & 2 only
- 2 & 3 only
- 3 only
- All of the above