Business / Rakesh Jhunjhunwala-backed Akasa Air orders 72 Boeing 737 MAX jets valued at $9 bn

New Delhi: Akasa - the Indian startup airline which has been backed by billionaire investor Rakesh Jhunjhunwala - has finally placed an order with Boeing for 72 aircraft.

In a statement commenting on the deal, Akasa said the carrier plans to offer commercial flights starting in the summer of 2022 and use its new fleet of 737s to meet the growing demand across India.

“Valued at nearly $9 billion at list prices, the order is a key endorsement of the 737 family's capability to serve the rapidly growing Indian market,” Boeing said in a separate statement. “Akasa Air’s order includes two variants from the 737 MAX family, the 737-8 and the high-capacity 737-8-200. Providing the lowest seat-mile costs for a single-aisle airplane as well as high dispatch reliability and an enhanced passenger experience, the 737 MAX will ensure Akasa Air has a competitive edge in its dynamic home market.”

This is a major step forward for Akasa and a giant leap for Boeing - which has been trying to find a foothold in the Indian narrow body aircraft market.

The US aircraft maker was late to the market with its re-engineered aircraft - the 737 MAX. The two fatal crashes and subsequent grounding had dealt a further blow to the manufacturer.

With Jet Airways out, Boeing currently has only one customer for narrow body aircraft in India, which is SpiceJet. While SpiceJet has over 200 737 MAX on order, the airline hasn't restarted flying the MAX, even after the regulator allowed operating the aircraft.

What do the market numbers say?

A mid-October update by the DGCA on its website shows India to have a little less than 700 passenger aircraft in the country. About 65% of these are Airbus. Boeing dominates the wide body market in India with 100% share, but there are very few wide bodies in the country.

When the total passenger fleet is analysed, narrow body aircraft comprise 78%, followed by turbo props at 14%, wide body at 7% and regional jets at 1%. In the narrow body segment - there are 540 aircraft registered in India, of which 83% (451) were Airbus while only 89 were Boeing.

Not just India, neighbours are also dominated by Airbus

It is rare for an airline to switch from one aircraft type to another, it is not unheard off. Silk Air - a subsidiary of Singapore Airlines, moved from A320 family to the 737s. Larger aircraft like the United Airlines have a mix of both A320 family and 737 series. But India isn’t that large and the costs associated with the switch are too high for an industry which is already under pressure.

With IndiGo and Go First, formerly known as Go Air, firmly with Airbus and the Tata group carriers - Vistara, AirAsia India and Air India having an all-Airbus fleet, Boeing has found it tough to make an entry into the Indian market.

Ironic as it may seem, but the neighbourhood is no different!

SriLankan Airlines has an all-Airbus fleet and so is the case in Pakistan where the narrow body fleet is majorly Airbus. Nepal Airlines also operates A320 family while only Bangladesh has 737s being the mainstay for local carriers.

Under such a scenario, for Boeing this one has been a consolation prize!

What does it mean for Akasa?

Almost all of the top leadership at Akasa is ex-Jet Airways, which had a large order of the 737 MAX, five of which were already part of its fleet when the global grounding was announced in March 2019. The team has experience of the 737s and can quickly develop procedures, manuals and everything else needed for certification, AOP and customer service.

But the most important factor could be trained manpower. SpiceJet - the only other 737 operator in the country - could see an exodus of pilots due to salary issues and that means ready availability of manpower for Akasa. There also is a lot of trained manpower, which haven't found opportunities post Jet Airways.

The Airbus A320neo family as well as the A220 family has a long waiting list for delivery, which also could have been a reason to shy away from Airbus.

The order

Like all orders, the exact value and delivery schedule has not been shared by either the airline or Boeing.

IndiGo - the largest player in India and one to have sustained the aviation momentum and growth had been very slow with the deliveries, taking in less than 10 aircraft a year in the initial years.

The order will also help Boeing better leverage with SpiceJet as SpiceJet would no more be the only 737 operator in the country. Vistara has a small fleet of 737, which is on its way out and no orders for the MAX.

Tail Note

Akasa has a long way to go! Airline industry attracts disproportionate attention and more so when one of the founders is a maverick! In the case of Akasa, the fact that Jhunjhunwala has raised eyebrows and hopes!

One would wonder how the number 72 came up for the order! Go First had placed its initial order for 72 A320neo and repeated it with another 72!