Early to talk Air India-IndiGo duopoly: Akasa co-founder Praveen Iyer

It is too early to talk about a duopoly of IndiGo and Air India in the domestic aviation market as Indian carriers’ fleet size and load factors are evolving, Akasa Air’s Co-founder and chief commercial officer Praveen Iyer said on Monday. 

Moreover, he said that airfares in India were affordable, with perfect equilibrium between demand and supply, and these would continue in the foreseeable future. The airfares were high in May and June, especially after Go First stopped operating flights from May 3 onwards, following which the civil aviation ministry had asked the carriers to bring down fares to a moderate level.

Iyer told Business Standard that the airline was fully capitalised and there was no plan to raise any funds right now. The airline currently has 19 planes in its fleet.

“If and when it is needed, there is a process and we will have a conversation about this at the right time, whenever is the right time,” he said.

“We have been talking about monopoly (of IndiGo) all along,” Iyer said. “Now, it has come down to duopoly (Air India and IndiGo). The way I see it, it is not about a monopoly or a duopoly. It is about what you are creating for consumers at large.”

“There are a lot of articles I am reading about us being already the third largest carrier in the country but it all comes down to how much capacity do you deploy, and how many passengers are you carrying, and how your load factors are evolving,” he added.

Akasa Air in June beat SpiceJet for the first time in terms of domestic passengers carried per month. The airline carried 618,000 passengers in June, compared to SpiceJet, which carried 555,000 passengers, according to the data released by the Directorate General of Civil Aviation (DGCA).

“By virtue of the merger, Air India emerges as the number two carrier, but if you start breaking down Tata group by airline, you will see that predominantly is where the market shares are for each of these entities within the Air India group. So I would say it is really too early to talk about duopoly in this market. I think each carrier is running with a clear strategy in mind,” he said.

On the issue of airfares, he said that April, May and June are traditionally the peak months for the Indian aviation industry. 

“Unfortunately, some capacity that went out of the market (Go First’s exit) triggered the pricing to move up quite a bit. It is a culmination of several factors. May and June is peak summer traffic for the country and certain capacity went out of the industry. These two things put together did have an impact,” Iyer said.

July, August and September are traditionally weaker months for air traffic due to the monsoon season. “Last year, the capacity from June through July saw a 10 per cent reduction. This year, the capacity was the same in June and July. The industry had 2,800 daily domestic flights in June this year and it was the same in July 2023. Considering these year-over-year statistics, I am pretty happy the way fares are. I think it has maintained a perfect equilibrium,” he noted.

“It is affordable for customers. The industry is running at a 90 per cent load factor. Clearly, this is laying a strong foundation for a very strong and robust growth that the industry will see as we start getting into the festive seasons. I am pretty happy with how things are progressing. I am pretty happy with how the situation is as of today,” he said.

But he said the number of daily flights had not touched the pre-pandemic level even as the demand has risen rapidly. “If you turn your clock back to February 2020, there were 3,200 daily domestic departures a day in India. As of today, there are 2,800 daily domestic departures. This basically means that between February 2020 and August-September 2023, which is a period of almost three years, the capacity has been flat, while this industry is used to a CAGR (compound annual growth rate) of 12-15 per cent. If I apply this CAGR on 3,200 departures for a period of three and half years, the industry should have been operating 4,000 plus domestic daily departures but it is not at this level right now,” he said.