Akasa Air plans to raise $1 bn in 3 years; Jhunjhunwala family may sit this one out

Akasa Air's aircraft leasing bill is expected to grow from the current $ 80-90 million annually for 24 aircraft to around $ 250-300 million annually for 75 aircraft in the next three years.

Akasa Air, India’s newest airline, is 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, multiple people aware of ongoing internal discussions at the airline said.

Rekha Jhunjhunwala, wife of the late billionaire investor Rakesh Jhunjhunwala, is unlikely to participate in the upcoming equity rounds, one of the executives said, requesting anonymity.

"Akasa Air is on course to take delivery of around 50 new aircraft in the next 2-3 years and is also looking to expand its domestic and international network during the same period. The airline's management estimates that around $1 billion will be needed to support this growth," a senior airline executive said.

Emails sent to a spokesperson for Akasa Air, Rekha Jhunjhunwala, the Jhunjhunwala family, and Akasa Air CEO Vinay Dube remained unanswered at the time of publishing.

Jhunjhunwala family to sit out

Despite Akasa Air attracting significant attention during its launch due to the backing of the renowned Rakesh Jhunjhunwala, often referred to as the `Big Bull' of Indian stock markets, the airline is not expected to receive additional funds from the Jhunjhunwala family, according to the second executive.

The Jhunjhunwala family and Akasa’s founder and CEO Vinay Dube collectively own over 65 percent of the airline, with the family currently holding 40 percent, making them the largest shareholder.

"The Jhunjhunwala family is waiting for the airline to break even before considering further fund infusion," said an official. He added that while the family is confident about the airline's ability to expand operations and navigate the challenging Indian market, they are waiting for the airline to achieve certain milestones before considering additional funding.

Last week, the Economic Times reported that a consortium led by Premji Invest and Claypond Capital, the family offices of Wipro’s Azim Premji and Manipal Group’s Ranjan Pai, is in advanced talks to invest approximately $125 million in Akasa Air. This investment would secure a minority stake in the airline.

Expansion plans

The airline's plans for rapid expansion have faced disruptions due to supply chain issues, challenges at aircraft manufacturer Boeing, 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.

Akasa Air now expects Boeing 737 MAX 10 deliveries by 2027. The airline had ordered 150 737 MAX narrow-body planes in January 2024, including the MAX 10 and MAX 8-200 versions.

Sources have said that Akasa Air aims to fly approximately 20 million domestic passengers annually by the end of 2027, capturing 12-15 percent of the domestic market, while also catering to nearly 1.5 million international passengers annually. The airline is working towards increasing its fleet size to about 74 aircraft by the end of 2027.

Sources mentioned that Akasa Air's aircraft leasing costs are expected to rise from $80-90 million per annum at present (for 24 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 already begun discussions to raise funds," an official 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.

"Following the collapse of Go First and considering the history of new domestic carriers in India, the global leasing industry is wary of new players. A well-known investor would not only reassure lessors that their assets are safe but also give the airline negotiating power when discussing future leasing contracts," the official explained.

In February, Moneycontrol reported Akasa Air plans to raise about $300 million in structured credit to fund its growth. The airline mandated Swiss bank UBS, which acquired Credit Suisse last year, to help raise the funds.

The airline expects to receive deliveries of 202 aircraft over eight years, giving it a steady stream of new aircraft to support its domestic and international expansion plans.

Financial performance

In FY23, its first year of operations, Akasa’s parent, SNV Aviation, reported a net loss of Rs 744 crore and an operating loss of Rs 602.84 crore. The airline generated operating revenues of Rs 777.85 crore against operating expenses of about Rs 1,380 crore. The financial data for FY24 will be available in a few weeks.

On August 2, Akasa Air's Chief Financial Officer (CFO) Ankur Goel mentioned that the airline aims to become 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 kilometer) continues to improve and the CASK (cost of available seat kilometer) continues to decrease, we will turn profitable soon, 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 had said.

Compared to the first two years of other carriers like IndiGo, SpiceJet, and Go First, Akasa Air has grown its operations faster. It has also successfully catered to niche markets, such as travellers with pets, through its in-flight pet policy.

Akasa Air two-year performance

Based on data shared by the Directorate General of Civil Aviation (DGCA) since January 2023, Akasa has had the best on-time performance (OTP) among scheduled domestic airlines at four metro airports—Bengaluru, Delhi, Hyderabad, and Mumbai — in 11 of the last 19 months and was the second-best in four months.

Since its launch, the airline has also maintained a clean record in terms of fines imposed by DGCA for operational issues. The airline has flown over 11 million passengers and currently connects 27 destinations, including five overseas.

In August and September 2023, the airline was forced to cancel nearly 700 flights after 43 pilots left for rival carriers. Akasa's low flying hours was said to be a major reason for the exodus.

According to the DGCA's flight duty-time rules, Akasa needs about 12 pilots (plus two or three in case of emergencies) to operate each aircraft. With 24 aircraft, the airline requires about 350 pilots to operate its fleet. However, Akasa has close to 800 pilots, resulting in fewer flying hours per pilot, affecting their pay and promotion prospects.