Akasa Air plans to raise $300 million in structured credit

Akasa Air operates 22 aircraft and will get deliveries of a total of 204 aircraft over eight years.

Akasa Air, India’s youngest airline, plans to raise about $300 million in structured credit to fund growth, said two people aware of the development.

The airline mandated Swiss bank UBS, which acquired Credit Suisse last year including its Indian investment banking business, to help raise the funds, the people said. The airline had earlier looked to raise equity but the plan changed to raising structured debt, they added.

Akasa ordered 150 Boeing 737 Max aircraft worth about $20 billion last month, taking the number of planes it plans to purchase to 226. In 2021, the airline placed its initial order for 72 Boeing 737 MAX aircraft, which was followed up with an order of four Boeing 737 MAX 8 aircraft in June 2023.

Akasa Air operates a fleet of 22 aircraft and will receive deliveries of a total of 204 aircraft over the course of eight years, providing the airline a steady aircraft delivery stream to support domestic and international expansion plans.

The carrier posted an operating loss of Rs 602.84 crore in FY23, its first year of operations. The airline reported operating revenue of Rs 777.85 crore and operating expenses of about Rs 1,400 crore.

“Akasa Air is a well-run, professionally managed airline with strong finances and a solid growth plan,” an Akasa Air spokesperson said in response to a query sent by Moneycontrol. “We are confident about our future and continue to invest prudently, with longer-term financial success in focus.”

Domestic traffic

The airline has generated cash from its first day of operations as a result of which the initial investment by investors (including the investment made by late Rakesh Jhunjhunwala) remains secure in its bank account, the spokesperson said.

An email sent to UBS did not elicit a response.

Since its launch in August 2022, Akasa Air has served over 6.3 million passengers and connects 18 cities across India, including Mumbai, Ahmedabad, Bengaluru, Chennai, Kochi, New Delhi, Goa, and Hyderabad.

Domestic air traffic has surged, with airlines flying 152 million passengers in 2023, more than the pre-Covid high of 144 million in 2019. However, some domestic airlines continue to struggle.

SpiceJet reported a loss of Rs 449.4 crore in the September quarter, against a net loss of Rs 833.2 crore a year ago. Total income fell 18 percent year-on-year to Rs 1,725.8 crore. The airline is fighting legal battles with creditors and lessors.

Amid these challenges, SpiceJet raised Rs 744 crore last month in the first tranche of its Rs 2,250 crore capital infusion plan, which is expected to provide the company a fresh lifeline.

Jet Airways continues to face headwinds to revival. The Supreme Court has dismissed a plea filed by Jalan Kalrock Consortium, the winning bidder, which sought the court's direction to lenders to release the existing bank guarantee of Rs 150 crore, and replace it with a new one.

Wadia group owned Go First is also in the National Company Law Tribunal going through an insolvency resolution.

IndiGo, India’s largest airline, led the industry with a market share of 61.8 percent in December. Tata-owned Air India group had the second largest market share with Air India’s share standing at 11.2 percent, Vistara at 9.5 percent and AIX Connect at 6.2 percent.