Akasa Air in no mood to take aircraft on lease despite delays in deliveries by Boeing: Sources

Akash Air has a market share of 4.7 percent as of October 2024 in the domestic aviation space and operates 26 737 MAX aircraft.

Akasa Air, the newest entrant to India's aviation landscape, is in no mood to lease aircraft from the secondary market even though delay in deliveries from Boeing has deferred its fleet expansion to April 2025, multiple executives told Moneycontrol.

"Akasa Air is likely to get deliveries of five aircraft in the first quarter of 2025-26, seven months after it received its 26th aircraft in September 2024," a senior executive aware of the discussions between the airline and the original equipment maker (OEM) told Moneycontrol.

The airline, however, is not looking at the secondary market for leasing planes and, instead, stepping up its focus on operational performance, network consolidation, and market share. "Akasa Air is looking at the short-haul international market from India for profitability and expansion before tapping into the Tier-II and Tier-III markets in India," another executive said.

He added that Akasa has identified many unused international bilateral flying rights and will look at network expansion on those routes only when the new aircraft arrive. The airline expects bilateral deals to increase in the next few years and will focus on international routes as they offer a higher yield when compared to flying similar distances back home.

"Until the new planes arrive, or the airline is compensated for a delay in deliveries by OEMs, Akasa Air is not looking to increase it expenses to bleed cash by leasing from the secondary market," the second executive said, adding that international lessors are wary of leasing new planes to smaller airlines in India, after the liquidation of both Jet Airways and Go First was ordered by courts in 2024.

"Leasing a new plane from the secondary market for an Indian carrier apart from the big two is a lot more expensive now when compared to 2022 or even 2023. International lessors have been taken aback by the insolvency process of airlines in India and are vary of the ability of smaller domestic carriers to sustain operations," the first official added.

Emails sent to Akasa Air remained unanswered till the time of publishing this story.

A senior executive from an aircraft lessor based in the United Arab Emirates echoed similar concerns, stating that leasing to smaller Indian carriers has become riskier, despite the expected growth of the domestic aviation market. "The Indian government needs to look at implementing more Cape Town Convention (CTC) complaint norms for arbitration cases in India, before global lessors would be willing to offer smaller carriers in the country higher discounts," the executive said.

India's CTC compliance index rating has fallen from 69 in December 2022 to 61 in December 2024, according to latest data released by the Aviation Working Group (AWG) this month.

"CTC does not prevail over conflicting national law. IDERA recordation and enforcement regulations have been enacted. There are precedents with mixed outcomes relating to compliance with the terms and intent of CTC (SpiceJet, Supertech, Jet Airways insolvency, Go Air insolvency). Such precedents have medium predictive value for the outcome of future cases with similar facts," the AWG has said as part of its report released in December 2024.

The report had added that India is not eligible for "the Organisation for Economic Co-operation and Development (OECD) discount" as further action is required to fully implement CTC. "The government has established a communications channel with AWG," it said.

The UK-based global aviation watchdog  had last year downgraded India to 'negative' from 'positive' after lessors were unable to repossess their aircraft from embattled Go First after it filed for insolvency in May 2023.

Sources mentioned that Akasa Air's aircraft leasing costs are expected to rise from $80-90 million per year (for 26 aircraft) to around $250-300 million per year for 74 aircraft, over the next three years. "While Akasa Air is gradually moving towards profitability, the airline will need a strong cash reserve to maintain its operations and has begun discussions to raise funds," the first executive said. He also noted that while the airline is well-positioned to raise debt from the market, it is looking to onboard prominent investors to build confidence among global lessors.

In August, Moneycontrol had reported that Akasa Air was planning to raise as much as $1 billion through debt and equity over the next three years to expand its fleet size and boost market share.

The airline's plans for rapid expansion have faced disruptions due to supply chain issues, challenges at aircraft manufacturer Boeing Co, and increased competition for aircraft deliveries. The airline had initially planned to have a fleet of 28 aircraft by March 2024 but had taken delivery of only 24.

The airline had a market share of 4.7 percent as of October 2024 in the domestic aviation space and operates 26 737 MAX aircraft. The airline made its first aircraft order at the Dubai Airshow 2021 for 72 Boeing 737 -8 and -8-200 aircraft and later added four more aircraft to make it 76 on order. In January 2024, the airline disclosed another 150 737 MAX aircraft orders.

The airline had in August indicated that it was still two years away from profitability as it looked to expand its services  in the domestic and international markets. On August 2, Akasa Air Chief Financial Officer Ankur Goel said that the airline is looking at becoming profitable in the next two years, and has plans for aggressive capacity addition and expansion to new destinations.

"As the RASK (revenue per available seat kilometre) continues to improve and CASK (cost of available seat kilometre) continues to go down, it (turning profitable) will happen very soon, and faster than our expectations. Our FY25 numbers will be better than FY24, and we're looking at being profitable by FY26. IndiGo took four years to become profitable, we won’t be very far from that number," Goel said.

Akasa Air parent SNV Aviation had posted a net loss of Rs 744 crore in FY23. The budget airline posted a net loss of Rs 1,670 crore in FY24, despite its revenue grewing more than fourfold to Rs 3,069.58 crore from Rs 698.67 crore in FY23, the company’s filings with the Registrar of Companies (RoC) showed.

Since the blowout of the door on Alaska Airlines 1282 earlier this year, Boeing has been in the middle of intense scrutiny from the US government about the practices followed at the Renton plant, where the 737 aircraft are assembled.

The US regulators had put a cap on Boeing to assemble no more than 38 aircraft of 737 MAX category in a month until they were satisfied that the quality issues were resolved. The aircraft major suffered the next setback when its Seattle factory workers called a strike. All these caused the delay in delivery of 737 Max flying machines which impacted Akasa Air as well.

The US manufacturer was due to hand over 981 Max jets to various carriers in Asia, led by Air India and Indonesia’s Lion Air, by 2030, according to data from Cirium. That’s close to a third of all scheduled deliveries of the aircraft worldwide over that period.

Last month, Air India Chief Executive Officer and Managing Director Campbell Wilson had cited the same reasons to Moneycontrol to explain the delay in deliveries to the Air India group. Deliveries of some ready jets that were earlier scheduled by December stretched up to June of 2025.

Alok Singh, the chief executive of the Tatas-run budget carrier Air India Express, had told Moneycontrol in November that although Boeing had slowed down on the delivery of aircraft, its fleet expansion drive was flying high on planes from parent Air India.