Co-founding a new Indian startup airline, Akasa Air, was a hat trick for Rakesh Jhunjhunwala, who was more well-known for being in the stock market as a value share investor. Paired with starting an airline in such dire economic times when the world is held hostage by recession fears and soaring fuel prices, several analysts had doubts about the co-founder's success. Ahead of the airline's anticipated launch, Jhunjhunwala is well aware of the skepticism surrounding Akasa Air, as he shares the same views but is still willing to try.

Bring on the failures

India has long been one of the world's fastest-growing aviation markets, given its massive population of over 1.4 billion people. These factors undoubtedly create endless opportunities for wealthy people to try their hand at becoming airline entrepreneurs to make a more significant buck to their name and net worth. With the example of Jhunjhunwala, he stands as India's 52nd richest person, with a net worth of $3.5 billion and significant holdings in more than 30 Indian stocks.

Though he rarely invests and starts his own companies, Jhunjhunwala went as far as investing $35 million for an approximate 40% stake in Akasa Air. Should the startup do remarkably well, the co-founder's financials and rankings would increase substantially. However, this same mindset has unquestionably caused the downfall of several such ventures in the past, causing the history of millionaire- and billionaire-backed Indian airlines to have numerous holes.

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The consistently sharp rise in jet fuel prices and a weak Indian Rupee has clouded the outlook of the Indian aviation industry, which is still struggling to recover from the pandemic. Photo: Akasa Air

Analysts have noticed that even with his reputation as a street-smart investor and a savvy trader, running an airline still differentiates significantly from stock trading. Yet despite how daunting the future of Akasa Air may look given current circumstances, Jhunjhunwala remains unfazed as he says:

"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."

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Turbulent skies ahead

Though Jhunjhunwala may still seem optimistic about the success of Akasa Air, the startup would have to fly through stormy weather as the Indian aviation industry lost an estimated $8 billion in the last two years. And even with the government's promise to build 80 airports by 2025 to make India a significant market for aircraft manufacturers, the estimates still foresee an incoming loss of at least $2.5 billion due to inflation. The fate of Akasa Air could go about two ways, success beyond analysts' doubts or joining the list of failed millionaire- and billionaire-backed ventures in India.

One example is businessman Vijay Mallya, who is still fighting extradition from Britain on charges of financial fraud after his venture of Kingfisher Airlines went bankrupt in 2012, costing Indian banks more than $1 billion. Entrepreneur Subrata Roy had Air Sahara in his empire for over a decade until consecutive losses forced the sale of fellow billionaire Naresh Goyal’s Jet Airways in 2007. Eventually, Jet Airways collapsed in 2019 but has since been revived this year.

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Akasa Air will enter an already crowded, highly competitive Indian market. Photo: Getty Images

Even if Akasa Air avoids the spotty list of failed ventures, the startup will be facing tough competition, especially from India's largest airline and fellow low-cost carrier, IndiGo. There's also heat from Air India Express, Go First, SpiceJet, and AirAsia India. As with the doubts expressed by analysts, Jhunjhunwala welcomes the competition for Akasa Air, saying:

“I hope to prove people wrong. Now, it has become a matter of ego."

Akasa Air is ready to launch

Flying with the airline code QP, Akasa Air will begin commercial operations with two aircraft from tomorrow, August 7th. The airline will be flying its inaugural flight between Mumbai and Ahmedabad, scheduled to depart at 10:05. Undoubtedly, the maiden flight will be taking off with a full passenger load as when the tickets went on sale, the airline sold out amid relatively strong bookings.

And besides preparing for launch day, Akasa Air is boldly expanding its route network with Chennai as its fifth destination, in addition to the existing destinations of Ahmedabad, Bengaluru, Kochi, and Mumbai. The newly commencing daily flights between Chennai and Mumbai will start from September 15th.

Its boldness does not stop there, as the startup is further strengthening its pan-India network by adding a new route between Ahmedabad and Bengaluru, set to begin on August 23rd. Akasa Air had also earlier announced direct daily flights between Bengaluru and Mumbai starting August 19th but is already ready to bolster the capacity on this route with additional daily flights, beginning August 30th and September 19th, respectively.

The airline will also expand its fleet by adding an extra two aircraft each month, and by the end of next year, it will have inducted 18 aircraft. It then plans to add another 12 to 14 aircraft every 12 months, making up its order of 72 Boeing 737 MAX aircraft delivered over the next five years. These seem like big ambitions for the low-cost startup, but with Jhunjhunwala's confidence, and considering the inaugural flight appears to be at full capacity, Akasa Air seems to be on an indicative path to probable success.

Source: LiveMint