India’s Warren Buffett Proposes to Launch Ultra-Low-Cost-Carrier

India’s Warren Buffett, Rakesh Jhunjhunwala proposes to partner with former CEOs of IndiGo, the nation’s largest carrier, and Jet Airways to penetrate demand for domestic flights. Rakesh Jhunjhunwala’s idea to launch an ultra-low-cost airline can possibly provide planemaker Boeing with a fortune to recover lost ground in India after defeating one of its biggest customers, Jet Airways, two years ago.

India’s airline industry is staggering from the consequence of the pandemic as airlines are suffering from the loss of billions of dollars. The aviation sector’s long-term view makes it a booming market for plane makers like Boeing and Airbus. The airline market of India has regularly had a tremendous influence on airlines due to its size, but profitability has continued to be elusive. On the national front, intense competition and potential surplus growth have hindered financial returns, and on the international side, international airlines are more flourishing than regional airlines in penetrating this market.

Nevertheless, the airline industry has a great opportunity to come out of the pandemic in more competent shape for long-term accomplishment.

Airbus and Boeing will be crossing swords against each other, and this is an excellent opportunity for Boeing to step in and up their game, considering the fact that they lack in having a significant operator for their 737 aircraft in India if not for SpiceJet.

Any specific details about the venture that includes any judgment on plane orders have not been formally revealed. However, Rakesh Jhunjhunwala says that he intends to have a 40% stake in Akasa, with 70 aircraft of up to 180 seats within the next four years. Domestic travel in India is ruled by low-cost carriers (LCCs), including IndiGo, GoFirst, SpiceJet and AirAsia India, with the majority of them managing a fleet of Airbus’ narrowbody flights.

The data from consultancy CAPA India shows that Boeing’s 570 narrowbody flights in India fell after Jet’s demise from 35% to 18% in 2018. The Jet was latterly retrieved from liquidation and is assumed to travel again. Out of 900 Indian carriers on order, 185 are Boeing.

If you would like to lease a flight, then some abundant lessors would be glad to present competitive prices, which are also better than pre-COVID circumstances. However, experts predict that India is still challenging to do business, with administrative barricades and expensive & under-developed airports, making low-cost carriers less profitable than in international markets.

While Akasa fronts robust competition, the post-COVID market has driven airlines to renegotiate terms with the partners, propose fresh funds and compromise costs. Commencing from scratch and having sufficient capital will furnish it with an advantage. The novel airline will be very critically tested. Still, the capitalisation and the sourcing team boost confidence that they can be successful.