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Akasa and Jet 2.0 are coming. Will fares drop?
Summary
- The launch of new services will impact fares in some sectors, say experts
- Akasa has placed an order for 72 Boeing planes for $9 bn, paving the way for a summer launch
- Jet 2.0 is likely to launch by early next year; it plans to induct 50 aircraft in the next three years
The launch of two new airlines, Akasa and Jet Airways 2.0, early next year, is expected to have an immediate impact on air fares in certain sectors, though it is likely to disrupt the market only in the next two to three years when these airlines increase their scale, industry experts said.
SNV Aviation, which is backed by billionaire Rakesh Jhunjhunwala and will operate ultra-low-cost airline Akasa, has placed an order for 72 Boeing 737-8 Max aircraft for $9 billion, paving the way for the airline’s summer 2022 launch.
“Akasa is expected to disrupt the low-cost carrier market, which is led by IndiGo but only after reaching substantial scale. In the short term, the airline, which is well-funded, may cause a churn in top talent in the industry and impact air fares on certain sectors," said a senior official with a Gurugram-based airline, who spoke on the condition of anonymity.
“Akasa’s entry may cause disruptions similar to the ones caused by Kingfisher Airways after its launch in 2005-06 when the market was dominated by full-service carriers," the official said.
Jet Airways 2.0 is likely to launch by early next year, with its new promoters hoping to induct as many as 50 aircraft in the next three years.
“The pent-up demand will continue to grow and the new players entering the market will bring in more benefits and options to travellers," said Nishant Pitti, CEO and co-founder of online travel company EaseMyTrip.com.
“The market will become more dynamic in terms of prices and offers that will further help in reaching the pre-pandemic level quickly," he said.
It must, however, be noted that both Akasa and Jet Airways 2.0 will find it difficult to get prime slots at busy airports such as Mumbai immediately after their launch. This in turn may make it difficult for them to compete with incumbents on busy routes such as Mumbai-New Delhi.
Aviation consultancy Capa India expects Akasa to disrupt the market only by FY25, once it reaches scale and achieves a competitive cost base.
However, Tata Group’s acquisition of Air India and the entry of two new players will see airlines fight to retain talent and IndiGo is expected to face significant impact on this front, Capa India said in its recently released FY22 mid-year outlook.
“Since, the launches (of Akasa and Jet Airways 2.0) are happening in the aftermath of covid, one can expect certain amount of maturity and balance in pricing in the market," said Mark Martin, chief executive of Martin Consulting LLC. “However, the new entrants will be entering a market dominated by two players, IndiGo and Tata Group airlines (Air India, Vistara and AirAsia India) and is likely to stir up competition in the long run."
Market leader IndiGo, which has about 278 aircraft in its fleet, commands a market share of about 53.5%, as of October 2021.
Tata Group, which won the bid for Air India and its low-cost subsidiary Air India Express, is expected to gain control of these airlines by December-end. This will leapfrog the Tata Group to the position of the second-largest airline player in the market with a combined market share of 25-30%.
Spokespersons of IndiGo, SpiceJet, Air India, Vistara, GoFirst and AirAsia India did not comment on the story.
