Why The 150 Boeing 737 MAX Deal Brings Akasa Air Back In Reckoning

At an informal gathering, organised by a major global aircraft manufacturer in New Delhi recently, the dinner table conversation veered towards the upcoming WINGS 2024 in Hyderabad.

The consensus was that like its previous editions, the airshow might turn out to be a damp squib with hardly any serious business being transacted.

However, the firm order by Akasa Air of 150 fuel-efficient Boeing 737 MAX aircraft has firmly put the spotlight back on India’s untapped potential as the fastest-growing civil aviation market in the world as well as brought the low-cost carrier (LCC) back in the game.

Not only is such a large deal a first for Asia’s largest civil aviation event but it is also the first time that a newly-launched airline has signalled plans to significantly expand its fleet to over 200 aircraft within 17 months of launching in August 2022.

Terming it a landmark order, Jyotiraditya Scindia, Minister of Civil Aviation noted, “as India’s newest airline, Akasa Air has firmly established its presence in the aviation ecosystem, enhancing connectivity across the country.”

The deal will also help shut up those who were doubting the LCC’s survival following the sudden demise of its principal investor, the stock market Big Bull Rakesh Jhunjhunwala within days of the airline starting commercial operations.

This must have certainly been at the back of Vinay Dube, founder and chief executive officer of Akasa Air when he averred, “this large and historic aircraft order puts Akasa on a path of becoming one of the top 30 leading airlines in the world, by the turn of this decade,” adding, “we are at a cusp where it is natural for our ecosystem to celebrate our financial stability, growth potential and market share.”

The addition of the aircraft will particularly help the carrier expand its footprint as it gears up to commence international operations as the next step in its growth trajectory.

“This couldn’t have come at a better time for both Akasa Air and Boeing. Given last year’s pilot crisis and resulting flight cancellations at the airline, many had started doubting the founders’ vision and business plan. What they have effectively achieved through this deal is ‘Don’t write us off; we are still around’,” an aviation consultant told Swarajya requesting anonymity.

The deal will also help the Virginia-based Boeing that received a lot of flak after an emergency exit door on the US-based carrier Alaska Airlines operated by a Boeing 737-9 MAX aircraft flight blew out at over 16,000 feet within minutes of takeoff from Portland.

Back In The Reckoning

Even as the global aviation industry battles high fuel prices and supply-side challenges, India has emerged as the largest buyer of aircraft from the Big Two — Airbus and Boeing — of the global aviation industry. The Covid-19-induced lockdowns followed by the Russian military action in Ukraine, and the return of demand for air travel have all resulted in shortages of aircraft, engines and components the world over.

Industry insiders like Sean Doyle, chief executive officer of British Airways have told this writer during an earlier interaction, “there has been a broader supply chain disruption as economies have recovered in various places at different paces. We haven’t seen the global supply chain function as optimally as during pre-pandemic.”

Doyle was, however, quick to add that he sees supply constraints start easing out in 2024. Thus, there couldn’t have been a better time for Akasa to make the announcement.

The tone for big-ticket aircraft acquisitions was first set by a privatised Air India with the announcement of a mega-order of 470 Airbus and Boeing aircraft to both replace and replenish its ageing fleet in February last year.

Three months later, this was followed by the country’s largest airline by market share and fleet ordering a whopping 500 Airbus A320neo aircraft at the Paris Air Show in June. At the same event, Akasa also placed an order for an additional four Boeing 737 MAX jets.

With this order, the total number of aircraft on order in the last year by major India-based scheduled carriers has now reached a staggering 1,124. As for Akasa Air, it will boast a fleet of 226 narrowbody jets once deliveries are completed. This would make it a bigger airline than SpiceJet (99) and the now defunct Go First (53) combined as well as India’s third-largest airline by fleet size.

“Whenever an airline is set up right like when IndiGo announced their intent to launch with a 100 aircraft order and then regularly followed them up with more orders, you get a big advantage in set up costs, which then impacts the rest of your cost structure,” the consultant, cited earlier, said.

The cost-benefit comes from easier access to spares and maintenance reserves, the person explained.

Akasa Air can now look at proactively putting in place other critical pieces such as getting a sufficient number of pilots and maintaining their operational integrity.