The last week of July has been rather exciting for the Indian aviation sector with a new player knocking on its door. Virgin Group founder Richard Branson once famously said, "If you want to be a millionaire, start with a billion dollars and launch a new airline." Interestingly, this risky proposition has been rather attractive to several billionaires since the birth of civil aviation. Currently, it is a billionaire investor and stocks trader Rakesh Jhunjhunwala who is betting big money on Indian aviation and plans to launch an airline.
Mumbai-born Jhunjhunwala belongs to Jhunjhunu district of Rajasthan, is a chartered accountant, manages his own portfolio as a partner in his asset management firm Rare Enterprises, and is often referred to as India's own Warren Buffett. The Big Bull of Dalal street is known to be an investor with a Midas touch and thereby, his sudden interest in Indian aviation has surprised many and also made many curious about his plan.
As per an interview with Bloomberg television on July 28, Jhunjhunwala has said he has planned to invest $35 million for a 40 percent share in his airline venture, which he expects to have a fleet size of 70 aircraft over a period of four years. The move is aggressive as well as bold as Jhunjhunwala aims to get the no-objection certificate from the civil aviation ministry within 15 days.
The feedback from industry experts is mixed. While some feel confident about an ace investor and sharp mind entering a sector that desperately needs strong players, others are of the view that this is a dangerous move especially in an environment where the demand scenario is uncertain due to COVID-19. Even the largest player is not immune to the wrath of COVID-induced weak consumer sentiment.
A day prior to Jhunjhunwala's announcement about his foray into aviation, IndiGo posted its highest-ever quarterly loss. The airline has posted a loss of Rs 3,174 crore for April-June. This was also its sixth consecutive quarterly loss.
"Our financial results for the first quarter were severely impacted by the second covid wave. The number of passengers traveling declined sharply in the months of May and June. With the second covid wave receding, we are seeing a measured recovery in bookings for July and August. Notwithstanding the Industry’s present challenges, we remain firmly optimistic about
IndiGo’s future. Our entire focus during this pandemic has been to manage our cash balances, run a high-quality airline and continue to build our capabilities, and be prepared for the post covid environment," IndiGo CEO Rono Dutta said after the earnings announcement.
As the existing players continue to post earnings in red, new players such as Jhunjhunwala and old ones like Jet Airways are prepping themselves for entering the race of fares and airport slots. While several industry experts have often hinted at expected consolidation in the industry, it remains to be seen whether we will see consolidation or more competition.
(Edited by : Anshul)