Thursday, October 6, 2022

Akasa Must Look Into The Little Things To Make It Work

By Bikram Vohra

Bikram Vohra, IA&D Consulting Editor

Airlines are not run by individuals, much as Rakesh Jhunjhunwala’s absence on the tiller and as an inspiration to strive, to seek and not to yield the carrier per se will be missed. Akasa must continue to add aircraft and routes according to its earlier schedule…or so it should. In that lies its credibility. Sentiment and emotion are elements currently in the mix, but hard-core decisions must be made and acted upon to not just fill the vacuum but also to honour the man and his dream.

Suffice it to say, neither Vinay Dube nor Ashutosh Ghosh are slouches, and they have the experience of making magic. Even though there are naysayers who might sound warnings and express concerns among them other carriers in that category, the fact is Dube, with his Jet and GoAir years, and Ghosh, with the inside track on IndiGo, should carry the day.

If there is an area that may take some spooling, it is the presence and power Rakesh had to get doors opened, especially with financial institutions and obtain low-interest loans. You didn’t say no to him, not with him being a billion-dollar man.

While the two senior executives do not have that fiscal stature, they have learnt the business from scratch, and the decision to add two new routes as planned is a tribute to intent. The new routes are Bengaluru – Ahmedabad started from August 23, whereas Mumbai – Chennai will be available from September 15.

It all depends on the level of service, on-time performance and the whole flying experience for the passenger.

The airline is well financed and ready to pick up its options on the 72 Boeing 737 max aircraft, and you really do not need more planes to establish your credentials. It was not just a Rakesh concept to take on Indigo in its own ultra-low-cost carrier category but also as much as $35 million of his own cold cash as part of his 40% stake, which now may have to be reworked even though it has not gone. 

With only three aircraft at present, Akasa aims to have 18 aircraft by the end of 2022 and to add around 12-14 aircraft per year. If Akasa can cross 3% of the market in the next three years and there is no cause to doubt it is on a good wicket. As Dube has been extensively quoted: “In terms of growth in demand, it’s going to be staggering for the next 20 years plus in India. We don’t need to take someone else’s market share or steal someone else’s traffic!”

According to the DGCA, domestic airlines carried 57.2 million passengers in the January-June 2022 period, registering an annual growth of more than 66 per cent and monthly growth of over 237 per cent, says data from aviation regulator the Directorate General of Civil Aviation (DGCA). Double-digit growth annually for at least the next five years is expected, and Akasa can dip into this pool.

The biggest error they could make is to imitate IndiGo which now controls 57% of the Indian market as of the latest figures. A copycat Akasa will be perilous, and this duo has to find a formula and an image that sets it apart from IndiGo. It is not going to be easy, nor would it have been so if Jhunjhunwala was still in the captain’s seat.

IndiGo has been a success story with only trained staff shortage poking a few holes in its immaculate reputation in recent weeks.

It’s the little things. They may not singly amount to much but collectively could have the competition scrambling to catch up. The USB port in every seat is an example, and it adds to the convenience. It is likely to offer a streaming service on the Max fleet and connectivity in the air, which would give the carrier an edge with short-haul business passengers and, in fact, just about everyone on board.

Obviously, cheaper fares, rewards and incentives while offering a comparable service will add to the loyalty factor; the on-ground service, especially in check-in and baggage unification at the exit, will make a qualitative difference because it is here where passenger discomfort is at its highest.

At present Akasa is about 10% less in its fare but with rising fuel prices this opening gambit may not have sustaining power. Food and beverages with greater variety on board, even if paid for and not tasting like cardboard, will add to the good impression. A small item like JetBlue’s Mint ice cream becomes a rare enjoyment in the air and adds flavour to the flight, a good talking point.

Alternatively Akasa can also evaluate potential tie-ups with global airlines wanting to invest in India’s aviation sector. 

A few quotes gleaned from various reactions may be well meant, but in reality, there seems no cause to be fearful at this juncture. 

A senior executive with an Indian carrier, again declining to be named, told Business Today, “Jhunjhunwala was critical to Akasa as he was not only an investor in the company but also could arrange cheap financing. His enormous clout in the market also made him intimidating to a behemoth like IndiGo.”

“With him gone, Akasa will be under tremendous stress and may turn out to be a different animal than what was originally envisaged. Also, IndiGo may be a lot more ruthless in dealing with it in sectors where it launches operations,” said the senior airline executive.

Meanwhile, IndiGo, in a statement, said, “Mr. Jhunjhunwala was a towering figure in India’s financial world, and we also commend his recent contribution to Indian aviation with the launch of Akasa Air.”

Even if he has gone, Rakesh was known to be a deft and very smart operator. Never a loser. So he must have put several necessary safeguards into place. We may not be privy to the details, but a battery of lawyers and accountants would have sewn up every loophole. The baron himself knew he was critically unwell and would have ensured continuity across the spectrum.

After all, these gentlemen left their airlines for the current position, and they are still running.

The one major reason behind the possible coyness of purchases beyond the Boeing order is to get a better deal and make the demand so sweet that no manufacturer would dare deny ‘favourite customer’ rights to such a party and probably willingly allow it to jump the queue. Seeing as how delivery is the biggest problem at present in the industry with supply chains fragile, getting preferential treatment is an ace that can be played to advantage.

Rakesh Jhunjhunwala was known to be a tough and canny negotiator and would have been playing his cards close to the chest. With little background on aviation and a cynical industry telling him he was asking for trouble, he was determined to go for broke. He was once quoted saying,” “A lot of people question why I’ve started an airline. Rather than answer them, I say I’m prepared for failure. It is better to have tried and failed than to have not tried at all.”

For Rakesh, the challenge of going for it was incentive enough. He believed there is room in the Indian sky for another ultra low cost ‘don’t wait for the train’ carrier and efficiently run even in a Covid era it could spin into profit very soon. Sensible routing, high frequency, no frills, but the urgency to be on time and create reliability as a reputation will be of the essence. That is his legacy, and it should fly high, too soon to be crying wolf.

Bikram Vohra is a Consulting Editor with IA&D

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