MUMBAI- India’s newest airline, Akasa Air (QP), plans to raise $1 billion in debt and equity over the next three years to expand its fleet and market share, according to Moneycontrol sources.
However, co-founder Rekha Jhunjhunwala, wife of the late billionaire Rakesh Jhunjhunwala, is not expected to participate in the upcoming equity rounds.
Akasa Air Billion Dollar Raise
Akasa Air plans to take delivery of about 50 new aircraft within the next two to three years and expand its domestic and international network. The airline’s management estimates that $1 billion will be needed to support this growth, according to a senior executive.
Akasa Air, Rekha Jhunjhunwala, the Jhunjhunwala family, and CEO Vinay Dube did not respond to emails at the time of publishing.
Akasa Air gained attention during its launch due to the backing of Rakesh Jhunjhunwala, but the airline is not expected to receive additional funds from the Jhunjhunwala family, according to an executive.
Jhunjhunwala Family discussion
The Jhunjhunwala family, along with Co-Founder and CEO Vinay Dube, owns over 65% of the airline, with the family holding a 40% stake as the largest shareholder.
The family is waiting for the airline to break even before considering further funding, confident in its ability to expand and navigate the Indian market, the official added.
A consortium led by Premji Invest and Claypond Capital is in advanced talks to invest around $125 million in Akasa Air, according to a report from the Economic Times last week. This investment would secure a minority stake in the airline.
Akasa Air’s Future Plans
Akasa Air’s rapid expansion plans have been disrupted by supply chain issues, challenges at Boeing, and increased competition for aircraft deliveries.
The airline aimed for a fleet of 28 aircraft by March 2024 but has only received 24. Akasa Air now expects Boeing 737 MAX 10 deliveries by 2027, following its order of 150 737 MAX planes in January 2024.
The airline plans to serve 20 million domestic passengers annually by 2027, capturing 12-15% of the domestic market and aims to serve 1.5 million international passengers yearly. Akasa Air targets a fleet of about 74 aircraft by 2027.
Akasa Air’s aircraft leasing costs are projected to rise from $80-90 million annually for 24 aircraft to $250-300 million per year for 74 aircraft over the next three years.
The airline is moving toward profitability but needs a strong cash reserve to sustain operations and is already in talks to raise funds. While Akasa Air can raise debt, it aims to attract prominent investors to boost confidence among global lessors.
Given the collapse of Go First and the cautious stance of global lessors toward new domestic carriers in India, having a well-known investor would reassure lessors and strengthen the airline’s negotiating position for future leases.
Akasa Air Performance Reports
According to the Directorate General of Civil Aviation (DGCA), Akasa Air has had the best on-time performance (OTP) among scheduled domestic airlines in Bengaluru, Delhi, Hyderabad, and Mumbai in 11 of the last 19 months and ranked second in four months.
The airline has avoided fines from the DGCA for operational issues and has served over 10 million passengers, connecting 26 destinations, including five international ones.
In August and September 2023, Akasa Air canceled nearly 700 flights due to 43 pilots leaving for rival carriers, partly because of low flying hours. DGCA flight duty-time rules require Akasa to have about 12 pilots per aircraft, plus two or three for emergencies.
With 24 aircraft, the airline needs around 350 pilots but has nearly 800, leading to lower flying hours per pilot and impacting their pay and promotion prospects.
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