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UPDATE 1-Indian billionaire's new airline may give Boeing a chance to regain lost ground

Fri 30th July, 2021 1:02pm
(Adds Boeing statement in paragraph 6)
    By Aditi Shah
    NEW DELHI, July 30 (Reuters) - Indian billionaire Rakesh
Jhunjhunwala's plan to launch an ultra low-cost airline could
give planemaker Boeing  BA.N  a chance to regain lost ground in
India after the fall of one of its biggest customers, Jet
Airways, two years ago, industry executives say.
    Jhunjhunwala, known as India's Warren Buffett for his
successful stock investments, plans to team up with former CEOs
of IndiGo  INGL.NS , the country's biggest carrier, and Jet
Airways  JET.NS  to tap into demand for domestic air travel.
    While plans to launch Akasa Air come at a time when India's
aviation industry is reeling from the impact of the pandemic,
with airlines losing billions of dollars, the sector's long-term
prospect makes it a hot market for planemakers Boeing and Airbus
 AIR.PA .
    "There will be a big fight between Airbus and Boeing," said
Nitin Sarin, managing partner at law firm Sarin & Co, which
advises lessors and airlines.  
    "For Boeing this is a great opportunity to step in and up
their game, considering they don't have any other major operator
for their 737 aircraft in India apart from SpiceJet," Sarin
said, referring to Boeing's narrowbody aircraft.
    Boeing did not comment on Akasa's plans, but in a statement
to Reuters said it always sought opportunities and talks with
current and potential customers about how it can best support
their fleet and operational needs. 
    Details of the venture, including any decision on plane
orders, have not been formally disclosed, but Jhunjhunwala told
Bloomberg he plans to have a 40% stake in Akasa, which will have
70 aircraft of up to 180 seats within four years. 
    Jhunjhunwala, valued at $4.6 billion by Forbes, did not
respond to an interview request. 
    Indian skies are dominated by low-cost carriers (LCCs)
including IndiGo, SpiceJet  SPJT.NS , GoFirst and AirAsia India,
with the majority of them operating a fleet of Airbus'
narrowbody planes.
    Boeing dominates India's widebody market of 51 planes but
fare wars and high costs have led to casualties among
full-service carriers, including Kingfisher Airlines in 2012 and
Jet in 2019, making LCCs and Airbus even more dominant. 
    Boeing's share of India's 570 narrowbody planes fell to 18%
after Jet's demise from 35% in 2018, data from consultancy CAPA
India shows. Jet was recently rescued from bankruptcy and is
expected to fly again.  urn:newsml:reuters.com:*:nL3N2O42F1
    Indian carriers have over 900 planes on order of which 185
are Boeing 737 aircraft and 710 are Airbus, which counts IndiGo
as one of its biggest customers globally.
    "If you have to lease an aircraft there is an abundance and
lessors would be happy to provide competitive rates, even better
than pre-COVID times," Sarin said. 
    He, however, warned that India is still a difficult place to
do business, with regulatory hurdles and expensive and
under-developed airports making LCCs less efficient than in
overseas markets.
    Even as Akasa faces tough competition in a battered,
post-COVID market which has pushed airlines to renegotiate terms
with lessors and vendors, raise fresh funds and trim costs,
starting with a clean slate and good capital will give it an
advantage.
    Akasa's other co-founders are Aditya Ghosh, who spent a
decade with IndiGo and was credited with its early success, and
Vinay Dube, former CEO of Jet who has also worked with Delta. 
    "It will be a long haul and the new airline will be very
severely tested but the capitalisation and the start team gives
confidence that it is possible for them to be successful," CAPA
India head Kapil Kaul said.

 (Reporting by Aditi Shah; Editing by Anil D'Silva)
 ((aditi.shah@tr.com; +91-11-4954 8023, +91-11-3015 8023;
Reuters Messaging: twitter: @aditishahsays))
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