Why Akasa Air chose Mumbai and Bengaluru for its inaugural flights

Akasa, the newest kid on the aviation block in India, has opened reservations for its flights. The airline received its Air Operating Certificate (AOC) on July 7, after carrying out five successful proving flights over two days.

The last two major airlines to get AOCs were Vistara, which got its certificate 11 days after its first proving flight, and AirAsia India, which got the AOC five days after its first proving flight. Akasa, on the other hand, got the AOC three days after the first proving flight.

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The airline will be the latest entrant in a market typified by losses, struggling carriers and in some cases failures.

To begin with, Akasa has chosen Mumbai and Bengaluru as its bases, with one aircraft each.

The airline will launch the Mumbai to Ahmedabad sector with 26 weekly flights from August 7. This will be followed by 28 weekly flights from Bengaluru to Kochi from August 13. Both sectors are fiercely competitive but short.

Ready… Steady… Akasa!

Akasa Air is starting small, but will it be able to attract enough loads? The airline is commencing operations in the lean season, the last few weeks of which have seen a steady decline in flights deployed and passenger numbers.

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AirAsia India started commercial operations on June 12, 2014, and saw its load factor touch 80 in the very first month of operations. The airline then suffered a slump in load factors for the next six months.

Vistara, also from the Tata group like AirAsia India, started operations in January 2015. The first few months were disastrous with the airline recording a load factor of only 45.4. Both AirAsia India and Vistara have not been profitable since inception.

While Vistara had to make multiple rounds of variations to its configuration, AirAsia India has closed routes and stations. In this backdrop, will Akasa learn from the past mistakes of others or commit the same mistakes?

The airline had initially talked about being an Ultra Low Cost Carrier, but categorically denied going that route later.

Why Mumbai and Bengaluru?

Akasa Air has chosen Mumbai and Bengaluru to base one aircraft each. One set of crew at each base will give it time to ramp up departments such as rostering and operations, among others.

Night parking and any slot in Mumbai is good enough to begin with. As for Bengaluru, a city where AirAsia India also started with its base, the second runway, second terminal and ability to grow are clear. Among the metros, Bengaluru is best placed to have a foot in the door and then make the most of expansion enabled slots.

Mumbai is balanced in terms of slot holding, but Bengaluru is literally the den of IndiGo. The market leader has non-stop flights to 53 destinations from Bengaluru, two more than what it has from its largest base, Delhi. Since IndiGo operates three-fourths of the operational airports in the country, it is very difficult to find an airport where one would not compete with it.

In terms of departures, IndiGo operates 60 of all domestic departures from Bengaluru. Another way to look at this data is that other players are small and it would be easier to push the weaker ones around than land up at Delhi and Mumbai where the inequality is not prominent.

Choice of routes

The choice of routes is surprising to say the least. The Mumbai-Ahmedabad sector is very competitive and Akasa Air will have a small slice in terms of capacity.

The Bengaluru-Kochi sector is a duopoly with six flights a day from IndiGo and four from AirAsia India. Every other airline has had to retreat from this market, while the two rivals have held on.

But a short route helps in two ways. There is a fare cap in place for a rolling 15-day period, where airlines cannot drop fares below a certain level mandated by the government. This will help avoid the cut-throat competitions of the past. There have been times when IndiGo and AirAsia India were selling flights between Bengaluru and Kochi at levels below bus fares, in a game of one-upmanship.

Secondly, if the load factors do not pick up, a short flight has lower trip costs and loses less money than a longer flight.

Another factor that would have been considered in route selection is adherence to Route Dispersal Guidelines (RDG). The RDG, which is unique to India, mandates airlines to fly 10 percent of their deployed capacity on 20 metro routes to the North East or Jammu & Kashmir, and 1 percent of that capacity within the North East or Jammu and Kashmir. Over the years routes to Uttarakhand and Himachal Pradesh have been included in the RDG. So, starting metro routes would mean having to start flights to either Jammu and Kashmir or the North East. These stations would most likely come up when a base at Delhi takes shape.

Tail Note

It is too early to predict the success or failure of the new venture. One thing we know is that the airline is well capitalised. Success will also depend on market conditions. IndiGo made it big as it occupied the space left by Kingfisher Airlines and then made some gains when SpiceJet shrank. Vistara made it big when Jet Airways left.

Will any of the incumbent players collapse and make way for Akasa?