[xcentrk]

Originally Posted by TKMCE

I heard about this so called VOLK Airlines. Was this really a start up? No professionalism, promoters who appeared to know NOTHING, and going back on joining dates after people quit their jobs and even relocated. Well that is what I heard anyway,

Well, you got something right. It was a startup, no professionalism because FOUNDERS know nothing about how corporate works. The founders are really caring, helpful guys who helped me personally when I am in need. But that tendency became a reason for their fallout. People started using their trust. And people cheated them and looted some good money and get settled.

There was a news at some point around 2013, where some one from procurement would come and says they bought 10 A320 and promoters would give them party and bonus. But the truth is, they never bought any planes and it was all a detailed plan from the beginning.

I have known them personally for some time and I have seen them regretting for not paying salaries and going back on joining dates. But it was too late to salvage.

TLDR is, they have gotten into something very big in which they have zero experience. So everyone who knew the business looted them!

[V.Narayan]

Originally Posted by GTO

I fail to understand the glamour in today's aviation, V.Narayan.

Low cost carriers and jam packed passengers is only one piece of the world of aviation. It may be the only piece many see. There is design, manufacture, business jets, defence aircraft and services to them and of course general aviation for business or leisure. I am taking about the kick in owning, buying, selling and running aircraft {which is what RJ ostensibly wishes to do} not the experience of a low cost pax. Not a sensible decision by RJ I'd say

[Rahul235]

I see an opportunity here for Akasa that most people are overlooking, the low lease cost of aircrafts due to Covid and the huge debt of other airlines, they could offer prices that are hard to match by other competitors, like how the Chinese took over our smartphone market.

[bmw_lover]

While it is true that Mr Jhunjhunwala Who has made his reputation as an investor now has been bitten by The businessman bug just like Mr Damani, There is no way that he has been Lured by the glamour quotient of the airline industry. He is a shrewd investor who knows that you don’t fund the project you fund the man. And the reason why he’s betting on Vinay Dubey is because he has worked closely both with Jet and Go Airways. Therefore he knows all the pros and cons of both business models in airlines which is of a full-service one and low-cost model. Not to forget that Akasa is going to be an ultra-lowcost carrier. The air traffic of the country is expected to double by 2030. The government is repeatedly reiterating their commitment to develop 200 additional airports in next 10 years. Considering all of this And with the vacuum created by Jet and Air India there is all the room for exponential growth of this airline. If Mr Jhunjhunwala is capable of creating such a massive wealth by investing in other companies why can’t he repeat this success by investing in his own company.

Of course there are more investors along with him. For a 40% stake Mr Jhunjhunwala is investing around 260 crores which is about 0.5% of his net worth. So he can also afford to infuse additional equity in case the need arises. And as an investor in fact a really successful investor he knows how and when to book losses and call it quits in case things don’t go as planned. Not to forget that the failures of Kingfisher and Jet Airways was more of a result of their promoter’s own doing. I in fact see it as yet another start-up. Mr Jhunjhunwala may try to grow exponentially in quick time, increase its valuation and then exit making a good profit. He in many of his interviews has repeatedly said that he only looks to earn 20% per annum in his investments.

Mr Jhunjhunwala at this age having created such massive wealth is out there to enjoy it now and why not. Taking risk is the biggest High one can experience. A man with billions can certainly afford to lose sorry spend a few millions for fun.

[ksakotai]

I don't know why this gloom and doom. Anyone with even a casual ear to ground reality will realise that airline travel has become nearly as ubiquitous as train. Even with the hassle of long travel to the airport, etc no of travellers has increased many fold. Time is at a premium for most ppl.

Gone are the days when airline travel was the domain of "elites". Today even economic lower middle class travels by air. The other day I was on Indigo to BLR and behind me were 2 guys from Odisha talking to some1 on phone, coordinating some plumbing work with the guy on the other end. Turned out they were hired by Nagarjuna Real Estate to do some work in one of their projects. They were Specialist Plumbers. I have seen tons of ppl who, one would not even dream of "affording" air fare even a few years ago. There is a definite shift upward of economic classes and so is the affordability.

That said this is only going to trend up. ComeOn guys, RJ is a very shrewd guy, with far more resources than you and me. We may rant and rave without hard facts in our hand but that is not the case with him. This is a sweet spot, and an inflection point. Airline industry valuations have taken a hit. There are a lot of talented airline specialists looking for a job. Pent up demand is high and will rise, given that biz travel is looking to improve in the near future. Personal travel has already picked up. I have made at least 20 trips to BLR, MAS, etc in the past 3 months and flight is always full. Delhi /MUM flights are also full. Even middle seats are taken.

I would say the planets are all aligned. Key is execution. RJ is good in spotting trends. Mind you all based on hard data. Whether he hires the right ppl to execute is the question. With Aditya Ghosh ex Indigo by his side I think he is in a great position.

Of course, can't predict the future, but based on studying the "tea leaves" Indigos position is going to be seriously challenged. RJ has deep pockets. With his reputation, track record and Aditya Ghosh's track record at Indigo this will be a magnet for "smart money" in the form of PE and Sovereign funds.

I would strongly bet on this horse !!

[rajivr1612]

I pray to God that this venture turns successful and allows millions more of middle class Indians to fly and the aviation market to prosper. The more operators the better, unlike the present monopolistic telecom industry. I would like to visit this thread in a few years time to see how the forum experts' predictions turns out.

[mmxylorider]

The civil aviation market is most definitely growing. Relatives of mine who had never flown and were used to travelling 2SL are now jetting around. Add to it the recent announcement from IR who are scaling down on coach production in coming years since the population is moving towards road and air travel (The Bharatmala project of course is to 'blame' for it). But affordable air travel and a higher disposable income along with the aspect of saving time is making people travel more. I see Indian aviation market going along the lines of China. Unless there is alternative fast travel other than by air, the aviation sector will grow.

[SnS_12]

If you’re a middle class man never invest in airline stocks and if you’re super rich never start an airline and loose your fortune.

At a time when giants like Emirates and Lufthansa are struggling and reporting Billions in losses I struggle to see the Investment opportunity by starting an airline of all places like India.

Biggest challenge for RJ will be Indigo, who hold a monopoly of sorts in India with their size and bank balance and have themselves moved down to a budget airline by charging for food and seats and what will Akasa Air do differently to be competitive? Allow no baggage at all as every less kg on airplane means fuel savings?

Cost of fuel is another thing which can ruin an airline financially and I don’t see our poor government bringing down the taxes anytime on these fossil fuels or the OPEC bringing down the price to a level where airline can make profits thanks to cheap fuel.

Even if Akasa Air finds some hidden unserviced routes in India to start off their operations and make profits, Indigo and the likes will just enter and offer better as there is no customer loyalty in airline business.

Airlines have a large fixed-asset base that needs to be paid for whether they are using it or not and I am sure of all people RJ understands better that realising a capital loss before it gets out of hand separates successful investors from the rest.

[DigitalOne]

Let me give a gist of the capacity expansion that will happen in the Indian aviation in the next 5-6 years:

New Greenfield airports in Mumbai, NCR (Jewar), and Goa. New bigger airport terminal in Bengaluru and a metro line to connect to the airport. Couple of new airports in Gujarat (Rajkot, and Dholera). Also every state government is now talking of airports in tier-2 or tier-3 towns. The central government has also said there will be 100 new airports by 2024. While this is may be very ambitious target, even achieving a third of it would be significant expansion of the market.

Perhaps RJ being the forward looking investor that he is, sees the potential in Indian aviation. Biggest challenge would be to compete with Indigo in the same market. All the best to him!!

[VT-RNS]

Originally Posted by bmw_lover

He is a shrewd investor who knows that you don’t fund the project you fund the man. And the reason why he’s betting on Vinay Dubey is because he has worked closely both with Jet and Go Airways. Therefore he knows all the pros and cons of both business models in airlines which is of a full-service one and low-cost model. Not to forget that Akasa is going to be an ultra-lowcost carrier.

Bingo!

While RJ is the face you see all around, the man who incubated the idea was Vinay Dube, who then created a core team of experienced airline professionals around it. Vinay is a career airlines guy, having worked at Delta for majority of the years. And if you are into aviation, you know Delta is one of the best at operations globally (which itself acquired this skillset thanks to the Northwest acquisition, which an AvGeek will agree was the prima donna in operations).

Once Vinay had the team, they build the biz plan and went for funding. As is quoted above, RJ knows a bit or two about aviation but not enough. He knows Vinay well, and very well knows why Jet folded (open secret: the promoter wasn't willing to give up control).

I don't have confirmed source on this, but Aditya Gosh is only going to be a board member, not into day-to-day ops. I strongly believe RJ brought him on given his experience at Indigo. However, let us be clear that Indigo's major success is attributed to the very shy Rakesh Gangwal (former CEO of US Airways, which was combined into American Airlines), with his deep airline expertise & negotiatios, and Rahul Bhatia's strong influence in Delhi. That combo has made Indigo this big today, after 15 years of well planned growth (where Aditya played a strong role, though I don't know more to comment).

Vinay & team have strong experience with Boeing, and given the dire situation of Boeing in India (Spicejet is in doldrums as well), they will offer a solid deal to Akasa. This, combined with the massive long term opportunity on offer, there is definitely a market for a well run airline in India.

Due to regulations in India, ULCC or LCC don't really have much difference, so call it what you want. And it will NOT be easy to fight Indigo. So the task is cut out for them.
However, if there is a team that can mount a challenge to Indigo, i will bet on this team at Akasa.

PS: Vistara has a great backing in Tata/SIA but its clear they are not looking at fighting Indigo. As FSC, they want to target a different market, even if it means competing on certain metro routes.

PPS: I was really hoping the A220 might come into play, having experienced it in Europe and feel the capacity might work brilliantly on some routes. But I can see why it would struggle to break in just yet, esp as B737M must have been offered on real good terms.


Cheers!
The AvGeek in me was so excited to find a thread on aviation on T-BHP!

[sramanat]

There was a quote in one of the Harvard cases I did in grad school. Something along the lines - a manager who has never failed hasn't worked in airlines industry. Innovation in airlines is inherently around the bottom-line. There's constant pressure on topline from competition. Essentially they are selling a perishable commodity (you can't sell seats when the doors are sealed and the jet begins to taxi) and I don't see how different it is from problems faced by other perishable businesses. That said, I don't have a track record of successful investments to even understand what RJ is thinking.

[SmartCat]

By the way, RJ's numbers don't add up at all -

- $35 million investment
- 40% stake
- 70 aircraft with ability to carry 180 passengers



The planes have to be either Airbus A320 or Boeing 737, each costing $100 million each. So we are looking at an investment of $7 billion over 4 years. Where is the capital coming from?



A quick Google search tells me that leasing an old aircraft can cost anywhere between $150,000 to $250,000 per month depending on the season. Running an airline with 100% leased aircraft is risky, because lease rates are volatile.

[Mafia]

Airline business did have a glamour quotient long ago when it was an aspirational mode of travel.

Now more people can afford it, the glamour has long faded. In fact, I dread flights longer than a couple of hours as you cannot avoid using the onboard loo.

The airline industry is the first to take a hit in any market up and down. The assets burn money sitting idle.

Hugely risky move to start an airlines when we don't see an end to the current pandemic.

[srini1785]

Originally Posted by SmartCat

By the way, RJ's numbers don't add up at all -

Say's something doesn't it?. RJ will be the face of the Airline but it would be owned by some company registered in an island whose location would be difficult to point: Isle of man, Macau, Bermuda, Mauritius, Seychelles etc. Nothing new actually, Jet airways was owned by Tailwinds which was registered in Isle of man. The island is famous only for two things, Favorable ownership laws and Motocross TT. RJ is certainly not interested in the TT.

So while RJ appears to control it, there would be no clarity on who's investing. Its a case of guessing who's under the King's long robe.

[aadya]

Originally Posted by V.Narayan

Low cost carriers and jam packed passengers is only one piece of the world of aviation. It may be the only piece many see. There is design, manufacture, business jets, defence aircraft and services to them and of course general aviation for business or leisure. I am taking about the kick in owning, buying, selling and running aircraft {which is what RJ ostensibly wishes to do} not the experience of a low cost pax. Not a sensible decision by RJ I'd say

You got the gist right away sir. All the optimists consider market, RJs acumen, Mr.Dubey's experience. Two major modifiable factors which can modify the future of these businesses are Regulators and Consumers. Both are first class category in India.

When I was cleaning my almirah I found out one KF earphone and felt bad that I am one of the person responsible for the fall of airline. When I expressed this feeling to one of my friend he joked about having 6 of the earphones with him. I have travelled in KF/Deccan 12 times and he has travelled twice.