Akasa Air: Aiming To Be a Cost Leader We are heads down focused on our particular strategy, which is cost leadership, service excellence and employee centricity, says, Vinay Dube, founder and CEO, Akasa Air

It was in October 2021, the world was recouping from an unprecedented crisis:The effects of the second wave of COVID-19. The economy was dwindling, however, the quandary did not deter Vinay Dube from realizing his dreams. SNV Aviation, which will fly under the brand name Akasa Air, finally got the no objection certificate (NOC) from the ministry of civil aviation in 2021.

Soon, Dube, founder and CEO Akasa Air, started to prepare for the maiden flight scheduled on 07 August 2022. The low-cost carrier (LCC), aimed to be a category-defining airline…so, how successful has it been in achieving the targets? The delivery of 18 aircraft within the first eight months made it the fastest growing airline globally, today, its fleet size stands at 19. Within nine months of operation, its market share stands at five per cent. The airline topped the on-time performance(OTP) in the month of April and had been consistent since the beginning of its operations. The airline also clocked an increase in its passenger load factor in April, at 84.9 per cent.

The CEO attributes the success to its management team, "A professional management team is the secret behind our smooth operations, they're the ones that lay the foundation," says Dube.

His nearly three-decade experience in the aviation sector across the US (with stints at Delta Air Lines, American Airlines) and India meant that he knew the air travel business backwards and forwards.

Business expansion

As travel demand grows, India expects to add over 2,200 aircraft in the next 20 years. Akasa Air placed an order of 72 aircraft, which will be delivered by March of 2027. "The objective is really to be an airline that people trust, our consumers trust, our employees trust. We will soon be placing a larger triple digit order before the end of this calendar year," Dube adds.

The airline prefers a sales and lease back model for all its aircraft, currently its entire fleet is under the same. A sale-leaseback enables a company to sell an asset to raise capital, then lets the company lease that asset back from the purchaser. In this way, a company can get both the cash and the asset it needs to operate its business.

Commenting on how new airlines should plan their business model, Shakti Lumba, an aviation expert and former vice president operations, IndiGo Airline, says, "New airlines need to plan a comfortable ratio of owned and leased airplanes so as to have an asset base. Airlines need to be more than adequately funded and not depend on ticket sales cash flows to meet its operating costs."

"Airlines that have a business plan with only leased aircraft are at the mercy of the US dollar and deprecation of the Indian rupee. Airlines should never sell below cost–just to satisfy an argument that the most perishable commodity in an aircraft is its empty seat– it perishes when the airplane doors close," Lumba adds.

When it comes to expansion plans, hiring and employee policies are salient. The airline started with around 250 employees, "Today we are over 2,500 employees, we've been hiring at a pace of over 175 employees per month. By the end of this fiscal year, we'll have around 3,500 employees."

As part of expanding its fleet size, the airline is planning to hire 125 employees per aircraft. "Generally, airlines hire 14 to 15 pilots and 25 to 30 cabin crew per aircraft. We will be hiring in advance of our need because for a growing airline you don't hire based on your current fleet, you hire based on the fleet that you will have in the next three or four months. So, we'll be hiring 300 pilots over the course of the next few months and multiples of that in terms of cabin crew,airport customer service, security staff as well as engineers," Dube explains.

Akasa Air recently closed its Visakhapatnam station temporarily, "In particular for new airlines which are rapidly growing, change in network from time to time is inevitable as new opportunities open up in other destinations. This is a temporary closure, which means we will get back. As an employee-centric company, not a single employee will lose their job and we will accommodate all of them."

Competition: How important is Innovation?

One of the famous sayings of Thomas Edison stresses that innovation involves more than just great ideas. Vinay Dube is an ardent believer of this. When asked about how the airline is innovating to stay ahead of the growing competition, Vinay says, "Being innovative is viewed as incredibly intelligent and smart, but honestly in aviation having the humility just to copy is what wins in the long run: We are just copying from global best practices, we don't have to innovate just to feel intelligent. Having a professional empowered management team that is able to implement global best practices is what we are focused on."

"The fortitude to be able to actually implement is based on the 10 per cent inspiration and 90 per cent perspiration rule and we're very much focused on the latter as well," the CEO adds.

Even after cornering a market share of about five per cent within nine months of operation, the airline is not much focused on it. "We are backed by a well capitalized company with a strong set of finances, the aircraft order will lead to a numerical market share and I wouldn't predict because we don't know what our competitors are doing and we're not actively chasing it."

The airline had set itself a task that no airline in the history of global aviation had ever done– Going from zero to 20 aircraft within 12 months. With the delivery of its 20th aircraft from Boeing in the next 45 to 60 days, the airline maintains its target of launching its maiden international flight by the end of this year. "We are working hard towards it, we will be getting our 24th aircraft all before December of this year and by the end of this year, we will launch our international destination," he says adding that global services could be anywhere in the Middle East, in Nepal, East Coast of Africa, Indonasia, Thailand, Malaysia, Sri Lanka, Bangladesh or in several other destinations.

Currently, the airline's domestic network include Mumbai, Ahmedabad, Bengaluru, Chennai, Kochi, Delhi, Guwahati, Agartala, Pune, Lucknow, Goa, Hyderabad, Varanasi, Bagdogra, Bhubaneswar and Kolkata connecting 36 routes with over 900 weekly flights. The airline has managed to build a sizable network connecting key cities, despite slot constraints. "We will continue to fly from metros to tier two and tier three cities," Vinay says.

India is expected to overtake China and the United States as the world's third-largest air passenger market in the next ten years, by 2030, according to the International Air Transport Association (IATA). In FY22, airports in India pegged the domestic passenger traffic to reach 166.8 million, a 58.5 per cent year-on-year (YoY) increase and international passenger traffic to reach 22.1 million, a 118 per cent YoY increase, as compared to FY21. Domestic traffic contributes around 69 per cent of the total airline traffic in South Asia and India's airport capacity is expected to handle 1 billion trips annually by 2023. India aims to have 220 new airports by 2025, said Jyotiraditya Scindia, minister of civil aviation.

As air travel is at its peak, there is a lot of demand. Airlines might have huge capacities coming in, but does the infrastructure support it? "In the last few years the government has been extremely proactive in developing aviation infrastructure. We have close to 150 airports now with a target to 200 airports, there will be a balanced equilibrium of demand, supply and infrastructure in the next 20 to 30 years," Dube explains.

Profitability & consumers expectation

The International Air Transport Association (IATA) expects a return to profitability for the global airline industry in 2023 as airlines continue to cut losses stemming from the effects of the COVID-19 pandemic to their business in 2022. In 2023, airlines are expected to post a small net profit of $4.7 billion—a 0.6 per cent net profit margin.

"Each airline is different, profitability depends on the business model– growth and environment. We are highly confident that we have structured our airline correctly and we are confident of making a profit: We are building a franchise that's gonna be around for decades to come."

Airfares play a major role in the airline revenue, recently, the union minister Jyotiraditya Scindia emphasized the importance of maintaining reasonable airline ticket prices following the resumption of domestic air travel. The minister had earlier at a meeting with the Airlines Advisory Group, expressed the need for maximum ticket prices to be within an acceptable range and had conveyed this message clearly to the airlines. "We are heads down focused on our particular strategy, which is cost leadership, service excellence and employee centricity."

Today, passengers are increasingly seeking environmentally friendly options to travel and in this regard, Akasa is an environmentally progressive airline. Powered by CFM International LEAP- 1B engines that incorporate advanced technology winglets, the 737 MAX offers excellent economics, reducing fuel use and emissions by 20 per cent compared to the aircraft it replaces. Further, the Boeing 737 is a quieter aircraft, with 50 per cent smaller noise footprint offering 20 per cent lower airframe maintenance costs. Even the uniform designed for cabin crew uses sustainable and recycled materials. Café Akasa meals are served in 100 per cent recyclable packaging.

Talking about the need for sustainable aviation fuel (SAF), Vinay says, "At this point, SAF is four times more expensive than regular aviation turbine fuel. So, we'll need governmental organizations to help encourage us to be able to spend the exorbitant amount."

What can flyers expect from Akasa in the coming months? "We have got USB ports on some of our aircraft today. Unfortunately, we weren't able to put them on all of our aircraft, because of supply chain constraints. But now, within the course of the next four to five months, every single aircraft is gonna have a USB port, a device holder, larger overhead bin and industry-defining food standards," the CEO says, adding that the airline doesn't want to be pigeonholed into a particular type of carrier.