What does the nod for Akasa Air’s international flights mean?

This will be the first time an airline will make the most of liberalised rules that allow an Indian carrier to fly overseas with a fleet of 20 aircraft.

While Akasa Air was embroiled in a legal battle with pilots who left the airline, came news of the carrier getting approval from the regulator and the ministry to start international operations.

This will be the first time an airline will make the most of liberalised rules that allow an Indian carrier to fly overseas with a fleet of 20 aircraft. Earlier, airlines were required to have operated for five years domestically and have a fleet of 20 aircraft before being allowed to fly internationally.

AirAsia India and Vistara were already operating when the revised rules came into effect as part of the National Aviation Policy 2016. Vistara started international operations in 2019, before completing five years of domestic operations. AirAsia India never started scheduled international flights and is now in the process of merging with Air India Express, which is likely to be completed in the next few months.

The approval could not have come on a better day for Akasa Air. The day started with gloom after news reports that the airline told the court “it may shut down” if more pilots leave. The court was hearing the case against 43 pilots who the airline said left without serving their notice periods. This forced Akasa to cancel flights, leading to loss of revenue, the airline said.

Why does it matter?

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Flying overseas can give domestic airlines a cost advantage. The domestic market in India has worked largely on profit margins as thin as boarding passes. On international routes, competition is not abrupt and unlimited because most routes are governed by a quota of either seats or frequencies or both under Bilateral Air Services Agreements.

Tax on jet fuel in the country is high, although the government has been pushing states to reduce it since it is a state subject. However, taxation for overseas flights is at par with international carriers, giving Indian carriers scope to expand and compete.

The relatively longer flights increase utilisation, which helps distribution of costs. In an environment where leasing costs are dollar denominated, fuel accounts for over 35 percent of expenses, fuel prices are rising and the rupee is sliding, sales in foreign currency create a buffer for operations.

Where will the airline fly?

Akasa Air has always indicated it will fly to destinations in the neighbourhood, within the five to six hour range of the Boeing 737 MAX aircraft it operates. This would possibly include the United Arab Emirates, Qatar, and Saudi Arabia in the west, Sri Lanka and the Maldives in the Indian Ocean, and Singapore, Malaysia, and Thailand in the east.

The final decision will be based on available flying rights and the level of competition on the routes. IndiGo is chasing a blue ocean strategy – where there is little or no competition – with flights to destinations where other Indian carriers are absent. As IndiGo prepares another push, it is likely to strengthen its international presence and it will not be surprising if it adds capacity on routes where Akasa Air starts flights, subject to rights being available.

Tail Note

Go First’s fall has opened a small window of opportunity for flights to some countries where rights have been exhausted. This includes flights to Dubai and Singapore along with some points in Thailand. There are very few points where the rights from both foreign and Indian sides are exhausted and this includes Dubai as well as Singapore, pre-COVID.

Repeated requests from the UAE side to add flights to India from Dubai have not yielded results. Unlike Singapore, which has some scope to expand with 18 points in India being part of the Open Skies arrangement, airlines from Dubai (Emirates and Flydubai) do not have this opportunity.

If there is one point where rights are always available from the Indian side, it is Abu Dhabi. The city had seen exponential growth in rights that were timed with Etihad’s investment in Jet Airways. After the fall of Jet Airways, the Indian side has sparsely utilised those rights.

Likewise, a stabilising situation in Sri Lanka could mean the airline has the potential to operate to Colombo as part of the Open Skies arrangement.

The international designation has come as much-needed positive news for Akasa Air after the crisis over pilot departures in the past few days.

The time frame for Akasa to start flying overseas could be anywhere from 45 to 60 days – from being designated international to getting allocated with rights and then applying for slots. A year-end launch would etch Akasa Air’s name in the record books as the fastest to start international services from India, barring Air India Express, which, as a government entity when it was formed, was allowed to start international operations immediately.

It will be interesting to see if Akasa will time its overseas operations with the three-digit aircraft order that the airline has been talking about for a while and says it is committed to by the end of the year.