Jhunjhunwala reaches for the sky

Rakesh Jhunjhunwala, one of India’s largest individual investors known for his audacious bets, is understood to be exploring a plan to back a new, low-fare airline venture pursued by a team of senior aviation professionals.Jhunjhunwala, who has a cult following among stock traders, has had preliminary talks for an investment of up to $35 million (₹260.7 crore) in the new airline, two persons close to him told ET.According to sources in the aviation industry, a team led by former Jet Airways CEO Vinay Dube has held an initial round of discussions with Jhunjhunwala and a foreign investor. The airline, tentatively named ‘Akasa’ — meaning, the sky — applied for the aviation ministry’s no-objection certificate earlier this year. If the proposed investment fructifies, it would give Jhunjhunwala around 40% equity holding in the new company. 84328757Other members of the team of professionals include Praveen Iyer, former vice president at Jet and ex chief commercial officer at GoAir, and Anand Srinivasan, former head of revenue management at GoAir.“The aviation ministry’s NOC is just the first approval. For further applications, the team needs to draw up a firm business plan for which it needs funds. Everything depends on when and how much money they can raise. The aim is to start the airline by the middle of next year,” said an industry source.An email sent to Jhunjhunwala on Saturday evening didn’t elicit a response before the story went to press. Dube was unreachable.Jhunjhunwala had earlier made smaller, successful bets in the Indian airline industry. He owned slightly more than 1% of SpiceJet at a time when the airline was being turned around by its current owner Ajay Singh, leading to an upward surge in its stock price. He also owned close to 1% of Jet Airways, which shut down in 2019 due to cash and debt troubles.Jhunjhunwala, who has often taken big bets on local entrepreneurs, is mulling the proposal at a time India’s aviation industry is going through its one of its worst phases in recorded history. Like its global peers, the businesses of Indian carriers have been battered by the Covid19 pandemic. All of them have suffered record losses, had to cut large swathes of their flight operations, lay off staff and slash salaries. Some like SpiceJet have allegedly defaulted on payments to aircraft leasing companies.Sydney-based consultant CAPA-Centre for Aviation has estimated that the country’s carriers could lose $4.1 billion in FY22, similar to the loss they incurred in the previous financial year. There are fears of a deeper financial impact if the apprehended third wave of the pandemic is as deadly as the currently waning second wave.Almost no new airline, barring Tata Sons’ joint venture carriers Vistara and AirAsia India, have survived in the Indian aviation industry in the last decade, thanks to a combination of cut-throat competition, price wars, high taxes and low margins. Some regional carriers have tried hard to take off.The only one to survive, TruJet, has been hit hard by the pandemic having to ground most of its planes, despite a recent 49% stake purchase by US-based investor Interups.Dube and his team are probably betting on an upswing in demand post the pandemic, said an industry official. “There is indeed space for a new well-run low fare airline. And remember, this one is formed by seasoned aviation professionals,” said the person.Before his stint in India, Dube was V-P, Asia Pacific at US-based Delta Air Lines. Dube headed Jet in its last years, trying hard to keep operations going, pacifying unpaid employees and keeping angry debtors at bay. He was then appointed a consultant at GoAir and subsequently, its CEO. He quit Go in August 2020, six months after taking over as CEO. Iyer held several positions at Jet and finally quit as its senior vice-president, revenue management and network planning. Post that, he was the chief operating officer at visa enabler VFS and then the chief commercial officer at GoAir for six months till September 2020. Srinivasan was V-P, revenue management at GoAir for two years till June 2020 and has been an independent consultant since.

from Economic Times https://ift.tt/3r38Qiu