The United States based plane maker Boeing could have a chance to regain lost ground in the Indian aviation market because of the plans of Indian billionaire Rakesh Jhunjhunwala to launch an ultra-low-cost airline in the country. Boeing got a rude shock for its business in India two years ago with the failure of the one of its biggest customers of Boeing – Jet Airways.
According to reports, Jhunjhunwala is partnering with former CEOs of IndiGo, the biggest carrier of India, and Jet Airways to launch the new company. Jhunjhunwala is poften referred to as “India’s Warren Buffett” because of his very successful investments in stocks.
The long term prospects of the Indian aviation industry make it a lucrative market for plane makers Boeing and Airbus even though the new venture from Jhunjhunwala, called Akasa Air, is being launched at a time when the industry in the country is reeliung form the pandemic hit with billions of dollars lost by airlines.
“There will be a big fight between Airbus and Boeing,” said Nitin Sarin, managing partner at law firm Sarin & Co, which advises lessors and airlines.
“For Boeing this is a great opportunity to step in and up their game, considering they don’t have any other major operator for their 737 aircraft in India apart from SpiceJet,” Sarin said, referring to Boeing’s narrowbody aircraft.
This new venture was set to possibly become one of the biggest deals for Boeing for this year outside of its home market of United States in terms of acquisition of purchased or leased 737s, said reports quoting industry sources.
There was no comment available from Boeing on the development except for it reiterating that the company “always seeks opportunities and talks to current and potential customers about how it can best support their fleet and operational needs.”
No formal disclosure of the details of the venture, including any decision on plane orders, has been made. However, in an interview to Bloomberg Jhunjhunwala discussed his plans for taking up a 40 per cent stake in Akasa and the planned airline to have 70 aircraft of up to 180 seats within the next four years.
Jhunjhunwala was last valued at $4.6 billion by Forbes.
No other comment from Jhunjhunwala was available on his planed venture.
Low-cost carriers (LCCs) are the dominant players in the Indian aviation industry with players like IndiGo, SpiceJet, GoFirst and AirAsia India. Majority of these airlines operate narrowbody planes made by Boeing’s European rival Airbus.
However, with 51 planes, the widebody plane market of India is dominated by Boeing. However, full service carriers have suffered because of fare wars and high costs. Kingfisher Airlines in 2012 and Jet Airways in 2019 collapsed which made LCCs and Airbus even more dominant in the market.
“If you have to lease an aircraft there is an abundance and lessors would be happy to provide competitive rates, even better than pre-COVID times,” Sarin said.
However he also warned that the Indian aviation market is not an easy place to do business because of regulatory hurdles and expensive and under-developed airports which makes LCCs much less efficient than elsewhere.
“It will be a long haul and the new airline will be very severely tested but the capitalisation and the start team gives confidence that it is possible for them to be successful,” CAPA India head Kapil Kaul said.
(Adapted from USNews.com)