New Delhi: As Indian billionaire, Rakesh Jhunjhunwala, plans to launch an ultra-low-cost Akasa airline and Kalrock-Jalan backed Jet Airways 2.0 are preparing to enter the Indian airspace, rating agency ICRA on Monday said that coming up of new airlines will only add to the oral competition in the industry and curtail the pricing power of the airlines.
Speaking to ETV Bharat, Kinjal Shah, vice president of rating agency ICRA, said, "Currently, the passenger demand is already very subdued because of the pandemic and the airlines definitely have very high capacity on their routes and many of these aircrafts are already grounded. In that scenario, it will take time to revert to the pre-COVID level."
"So, coming up of the new airline will just add to the intensely competitive industry and we have already seen that because of this atmosphere in the industry, we have not been able to have that driving power. Despite the rising Aviation Turbine Fuel (ATF) prices, they are not able to pass that on by way of increasing fares," she added.
Also read: Air travel to get costlier as jet fuel rates rise
Notably, the prices of ATF were once again hiked on Sunday with oil marketing companies increasing the prices by about 1.28% over the past month and by more than 57.37% on an annual basis.
The vice president of ICRA further reiterated that the increased competitiveness would only add to the oral competition in the industry. It will again only curtail the pricing power of the airlines which will definitely be detrimental to the credit profile of the airlines.
Meanwhile, aviation consultancy and research firm CAPA, in a statement on Sunday said, "Plans to launch start-up airline Akasa, and to revive Jet Airways reflect both confidence in India's long-term market fundamentals, as well as a view that some incumbent airlines will not be able to secure solvent recapitalisation leading to consolidation."
Jhunjhunwala, known as "India's Warren Buffet" for his successful stock investments, proposed Akasa Air at a time when India's aviation industry is reeling from the impact of the COVID-19 pandemic. He is considering investing $35 million (about Rs 260 crore) and would own 40 per cent of the carrier. Akasa airline is expected to get a no-objection certificate from the Ministry of Civil Aviation in the next 15 days.
Also read: Rakesh Jhunjhunwala plans 70 planes for ultra-low cost airline
While the Jalan Kalrock consortium, the winning bidder for the grounded Jet Airways, will make a total cash infusion of Rs 1,375 crore and lenders will take a steep haircut on their admitted claims of over Rs 8,700 crore under the approved resolution plan. As per the sources, the company expects to start receiving slots at airports within 45 days.
