Rakesh Jhunjhunwala’s death may put Akasa’ ambitions on hold

Just a week ago, Rakesh Jhunjhunwala, often referred to as India's Warren Buffett, was celebrating the launch of the country's newest airline Akasa Air in the Mumbai-Ahmedabad sector.

Although wheelchair bound, Jhunjhunwala in his inimitable style had quipped that even before launching the airline had forced competitors to take notice of the product. He told the Akasa management and staff that as the low-cost carrier expanded operations, they need to be frugal without compromising on passenger comfort or the quality of the product.

Following his sudden death on Sunday morning, Jhunjhunwala's words would be resonating in the minds of Akasa CEO Vinay Dube and others on his team. It is not every day that a marquee investor likes to risk their money on a low yield high investment business like aviation.

"We cannot thank Mr. Jhunjhunwala enough for being an early believer in us and putting his trust and faith in us to build a world-class airline Akasa Air will honour Mr. Jhunjhunwala's legacy, values and belief in us by striving to run a great airline," said Dube in a statement.

Jhunjhunawala had invested $35 million in the LCC for an over 40 per cent stake. One of his last major investments was something very close to his heart, but it was also one of his last major investments. Passengers on the carrier's first flight remember how a usually restrained Jhunjhunwala freely mixed with them for conversations and selfies.

The head of retail research at HDFC Securities, Deepak Jasani said that while his charisma, advice and fund pulling abilities will be missed, he has ensured that the company is professionally run and will survive and prosper in his absence. The Delhi Demography and rising aspirations of the middle class indicate that this venture indicates his confidence and faith in the growth potential of the industry. Other market observers chose to be cautious and said that Jhunjhunwala's passing away may put a temporary pause on Akasa's ambitions.

He was critical in providing financial capital to the company. A senior research analyst told Business Today that the management could look into the option of finding another investor, but it remains to be seen who would be willing to invest such large amounts of money in the airline with the path to profitability yet to be established.

He noted that Akasa can also evaluate potential tie-ups with global airlines wanting to invest in India's aviation sector.

A senior executive with an Indian carrier, who declined to be named, told Business Today that Jhunjhunwala was critical for Akasa as he was not only an investor in the company but also could arrange cheap financing for both Indian banks and foreign institutional investors. His enormous clout in the market made him intimidating to a behemoth like IndiGo. With him gone, Akasa will be under great stress and may turn out to be a different animal than what was originally envisaged. The senior airline executive said that IndiGo may be ruthless in dealing with it on sectors where it launches operations.

In his lifetime, Jhunjhunwala was rarely known to make losing bets. Any speculation on the fate of the LCC may be unfounded in the long term.