They say one way to become a millionaire is to start off as a billionaire and then start a new airline, but it seems that Rakesh Jhunjhunwala is made of sterner stuff.
Stock market billionaire Rakesh Jhunjhunwala is reportedly planning to launch an “ultra-low budget airline” named Akasa Air. The airline will acquire a fleet of 70 aircraft over the next four years. Jhunjhunwala will invest $35 million (Rs. 260 crore) in the new airline, and will hold a 40% stake in the company.
“For the culture of a company to be frugal you’ve to start off fresh,” said Jhunjhunwala in an interview with Bloomberg TV. “I’m very, very bullish on India’s aviation sector in terms of demand,” he added. Jhunjhunwala has reportedly already approached the Aviation Ministry to obtain a no-objection certificate (NoC) to launch the airline.
India’s airline space is currently being battered by the coronavirus pandemic, and airline stocks are trading at record low levels. Also, there are concerns that business travel might be severely curtailed because of the coronavirus pandemic, with businesspeople preferring to conduct meetings on Zoom calls instead of flying to meet people in person going forward. But amidst this doom and gloom, Jhunjhunwala seems to have taken a contrarian bet on the space.
He’s come up with a business unique model though — while most of India’s current airlines are Low Cost Carriers, he plans to launch an Ultra Low Cost Carrier. An Ultra Low Cost Carrier tries to cut back on all expendable costs, and will stuff as many seats as possible into planes, fly more hours a day, and keep seat prices separate from all goods and services, including checked in and carry-on luggage. Ultra Low Cost Carriers also try to make money by advertising on every possible service, including the luggage bins, the foldable trays, and even paper cups and packaging. This is the model that Ryan Air famously follows in Europe with great success, and it seems that Jhunjhunwala seems to want to bring it to India.
Rakesh Jhunjhunwala, of course, is one of India’s most famous investors, and has seen his stock holdings give him a net worth of more than $1 billion. While he has a proven track record of spotting opportunities, he also seems to be getting some big names on board to run the airline — former Indigo President Aditya Ghosh will reportedly team up with Jhunjhunwala to run the airline. Ghosh knows a thing or two about Indian aviation — he’s grown Indigo into India’s largest airline before joining Oyo Rooms.
Ghosh now seems to want to take another stab at India’s aviation space. There does seem to be room for a new airline — Jet Airways had shut operations in 2019, and there could be room for a new entrant. Also, India’s biggest airline implosion was with Vijay Mallya’s Kingfisher Airlines, and that had catered to the exact opposite segment — Kingfisher had been an ultra luxury airline, while Akasa Air plans to cater to low budget travelers. Still Jhunjhunwala would be cognizant of the fact that the airline space has previously been the graveyard of a fellow outspoken billionaire, but customers wouldn’t be complaining — a new airline could possibly result in a lowering of consumer fares across the board in India.