After days of murmurs, ace investor Rakesh Jhunjhunwala himself confirmed that he is investing in an airline venture in India. Social media was flooded with memes and jokes with the most famous being replayed time and again - the best way to be a millionaire is to be a billionaire and start an airline! Yet, this is not what is likely to be with this new venture!
With sketchy details and speculations at best, a team of industry veterans such as Aditya Ghosh, former president of IndiGo and Vinay Dube, who previously helmed Jet Airways and advised GoAir, is being put in place and the first flight will still be a year away if not more! What strikes out and shows hope is that there have not been any loose talk, yet or claims of profitability or changing the civil aviation landscape. This is unlike the last LCC which started in India, AirAsia India.
With the announcement by Jhunjhunwala coming a day after IndiGo’s record losses, everybody wonders if this is the right time to start an airline?
Not the only airline to start operations
Starting an airline in India is a slow process. From the No Objection Certificate (NOC) to the AOP (Air Operating Permit), the winding road takes one through the corridors of power multiple times.
Even at its fastest, it could take over a year to get the AOP and start operating. The airline is yet to finalise its fleet and availability of aircraft and trained manpower could be a factor in deciding which way it would swing.
Boeing continues to face headwinds with the B737 MAX now yet allowed to fly with Indian carriers but Boeing has few white tails available which can be made available to the new airline. Airbus on the other hand said that there are no white tails (a reference to aircraft which are not taken up by airline) and with a solid pipeline of orders, one wonders if they have slots to accommodate newer planes. The way out always is the lessors who place large orders and can slot an aircraft for new carriers.
But the pandemic has led to another change in the aircraft market. Older aircraft are available at huge discounts. Airlines have returned them in dozens and without any significant uptick in aviation activity, they are sitting idle. IndiGo alone will return over 80 aircraft in the next two years and not all of them are old enough to be scrapped! Will the lower cost of older aircraft outweigh the benefits of fuel efficient newer aircraft? With access to some best financial brains, Mr Jhunjhunwala knows the answer better than any of us!
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A decision on fleet type is also influenced by availability of trained manpower in the country.
A couple of airlines have started recently across the world. It includes Breeze from the founder of jetBlue! Clearly as others bleed, few are seeing opportunities to enter small and make it big!
Indian scenario
With domination of IndiGo in India, the real question always is how does one take on IndiGo? IndiGo has built itself brick by brick or lets say flight by flight over the last fifteen years. It is impossible to compete with IndiGo? No, but it definitely is tough and to compete you cannot be another IndiGo - you have to differentiate the offering.
Vistara tried differentiating but the bottomline tells a different story about the market accepting the differentiating. With Akasa largely expected to be a ULCC (Ultra Low Cost Carrier) it will be interesting to watch what it brings to the table!
But with two weaker carriers, there definitely is a market to nibble around and everything will then boil down to the markets and flight timings which gets the focus back on slots - an area which the owners of Jet Airways 2.0 are struggling to wrap their head around! There are umpteen possibilities - will the airline prefer Navi Mumbai and Jewar and extract concessions from both operators or will it go after the usual markets?
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This could well impact the decision making of the TATA group to invest in Air India. The last thing they would want to see is another carrier with deep pockets take to the air and compete with Vistara and AirAsia India - which is already relegated to the bottom of most KPIs recently.
Indian aviation always comes with a word of caution and one is pointed towards the failures of Kingfisher Airlines and Jet Airways. As in the case of Vijay Mallya, everybody knew he had deep pockets but nobody knew how deep they were! Likewise, Jhunjhunwala’s net worth is known but nobody knows how much he would be willing to invest going forward or is it another smart investment where he can gain when the airline lists!
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