“India’s Warren Buffett” to take off with new airline

MUMBAI: The world is gripped by recession fears, jet fuel prices are sky-high and aviation is a notoriously volatile industry. But the billionaire dubbed “India’s Warren Buffett” is launching an airline on Sunday. Co-founding Akasa Air was a rare leap into entrepreneurship for Rakesh Jhunjhunwala, who made his fortune in the stock market as a value-share investor and is often compared to the chairman and CEO of Berkshire Hathaway.

The 62-year-old’s entry into the capital-intensive sector has raised eyebrows, with many citing the checkered history of India’s billionaire-backed airlines as well as the frightening global economic outlook. “A lot of people wonder why I started an airline. Instead of answering them, I’m saying I’m prepared to fail,” the billionaire said at an industry event in February.

“It’s better to have tried and failed than not tried at all.” Several such endeavors have failed in recent years. Fugitive businessman Vijay Mallya is fighting extradition from the UK on financial fraud charges after his pet project Kingfisher Airlines went bankrupt in 2012 and Indian banks lost more than $1 billion.

Rakesh Jhunjhunwala

Disgraced entrepreneur Subrata Roy counted Air Sahara as part of his empire for more than a decade, until multiple losses forced a sale to self-made billionaire Naresh Goyal’s Jet Airways in 2007. Jet collapsed in 2019, with many blaming the Air Sahara deal for its downfall. “People say that to become a millionaire, you first have to become a billionaire and start an airline company,” quips Anas Rahman Junaid, founder and CEO of wealthy list Hurun India.

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But as one of the fastest growing aviation markets in the world, the country of 1.4 billion people has also proven to be a wealth creator for some airline entrepreneurs. “The world’s richest aviation billionaires come from India: the founders of IndiGo,” says Junaid, referring to Rakesh Gangwal and Rahul Bhatia – whose airline, founded in 2006, is India’s leading domestic carrier.

With the exception of British entrepreneur Richard Branson, whose $6 billion net worth comes from diversified Virgin Group businesses, Junaid says Gangwal and Bhatia – each worth over $4 billion – have the most wealth from a “pure aviation business”. And for Jhunjhunwala, the challenge is personal: “I hope to be able to prove people wrong,” he said. “Now it has become a matter of ego.”

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Bullish in aviation

Jhunjhunwala, nicknamed the “Oracle of Dalal Street” – a nod to Buffett’s nickname and the location of the Bombay Stock Exchange – has invested $35 million for an estimated 40 percent stake in the new airline. He is India’s 52nd richest person with a net worth of $3.5 billion and significant holdings in more than 30 Indian stocks, but rarely founds his own companies. “He’s a savvy investor and a very accomplished trader,” market analyst Arun Kejriwal told AFP.

“But running an airline is not the same as trading stocks.” Analysts believe Jhunjhunwala will hand day-to-day operations to a management team of industry veterans who will model Akasa on the likes of Ryanair and Southwest Airlines. But a sharp rise in jet fuel prices and a flagging Indian rupee are clouding prospects for an industry still recovering from the COVID-19 pandemic.

“India doesn’t even produce a nut or bolt in India. Everything has to be imported from the US or Europe,” said aviation analyst Mark Martin. India’s air travel industry lost an estimated $8 billion in two years to the pandemic, according to research by aviation market research firm CAPA. The government estimates peg losses at $2.5 billion.

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Still, several airlines are vying to serve a growing middle class, and Narendra Modi’s government has pledged to build 80 airports by 2025, making it a key market for makers Boeing and Airbus.

“Greenest Airline in the World”

Akasa – heaven in Sanskrit – presents itself as an ultra-low-cost carrier with 10 percent cheaper tickets than the competition. The company will operate two Boeing 737 MAX single-aisle aircraft between four Indian cities starting Sunday and hopes to have a fleet of 18 aircraft by the end of next year.

It also claims to be the world’s “greenest” airline, with staff uniforms including trainers with recycled rubber soles and fabrics made from ocean litter. But analysts point out that the Boeing 737 MAX remains restricted in some countries after two crashes that killed a total of 346 people. “An airline deal can make you a tremendous amount of money,” Martin said. “But it can also make you extremely open and risk-prone.” – AFP