India May See A New Low-Cost Carrier Backed By Investor Rakesh Jhunjhunwala

India might be looking at a new low-cost carrier entering the market next year. Startup Akasa is backed by legendary investor Rakesh Jhunjhunwala and will be run by former Jet Airways CEO Vinay Dube. The upcoming carrier has filed for its initial permissions from the Ministry of Civil Aviation and is hoping for approval soon.

While discussions of a new domestic airline have been mentioned since the Spring, the new investments could prove to be the catalyst. Photo: Getty Images

New player

According to reports in Moneycontrol, India might see its newest low-cost airline take to the skies in mid-2022. The airline will be named Akasa, which translates to ‘the sky,’ and is currently applying for its No Objection Certificate (NOC) from the Ministry of Civil Aviation. This is the first of many steps to officially launching the airline and receiving the crucial Air Operators Certificate (AOC).

However, this particular startup has caught the public’s attention thanks to the backing of one person: Rakesh Jhunjhuwala. The legendary investor is often described as the Warren Buffett of India (a comparison he disagrees with) and is known for its bullish outlook on the Indian markets. His investment would undoubtedly bring star power to the startup airline and give it much-needed funding in this tough time.

Rakesh Jhunjhunwala
Jhunjhuwala has previously invested in low-cost carrier SpiceJet and Jet Airways before its collapse in 2019. Photo: Getty Images

Jhunjhunwala plans to invest up to $35 million (₹260.7 crores) in the low-cost airline for a 40% stake. Akasa has also lined up another foreign investor for fundraising, according to sources. These funds will give the carrier the startup capital it needs to meet regulatory hurdles and hire a management team.

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Akasa will be led by former Jet Airways and GoAir CEO Vinay Dube, along with other experienced aviation leaders. The leadership of known faces will help the carrier during its early stages and when flights take off next year. In March, Simple Flying discussed a new airline being pursued by Dube.

When it comes to a timeline, Akasa is hoping to launch operations by the middle of 2022. This will depend on how fast the airline can raise funds and receive its AOC from the government. According to one unnamed source, the process is ongoing and added,

“The aviation ministry’s NOC is just the first approval. For further applications, the team needs to draw up a firm business plan for which it needs funds. Everything depends on when and how much money they can raise. The aim is to start the airline by the middle of next year.” 

Indian Civil Aviation Minister Getty
The Ministry of Civil Aviation (led by the newly inducted Jyotiraditya Scindia(L)) and the DGCA control the approval process. Photo: Getty Images

While it might be surprising that there is a new airline in the works after the crushing second wave, there is a case to be made for starting an airline during the pandemic. Moreover, Rakesh Jhunjhunwala is known for betting on startups and airlines in the past. His belief that a third wave of COVID-19 is unlikely in India goes against other airlines’ views but explains his rationale to invest in a new airline right now.

More to come

Currently, little is known about Akasa, its fleet, network. Once it receives its NOC, will we know more about the future of the airline and how it will compete in the crowded Indian domestic market, dominated by the likes of IndiGo and SpiceJet.

What do you think of the new Jhunjhunwala-backed airline? Is there space for another budget carrier in India? Let us know in the comments!