How Akasa Air has risen to become India’s third-largest airline in just three years

The biennial wings india aviation show in Hyderabad serves as a showcase for Indian commercial airlines. It provides a good platform for visibility and networking among all stakeholders. In 2024, it went a step further and delivered a surprise.

In the 2024 edition of the event, Akasa Air, a two-year-old start-up, stunned the industry by placing an order for 150 Boeing 737 MAX aircraft worth $20 billion—the largest order ever placed by a fledgling airline in the country. The move propelled the airline—barely out of infancy—into the front ranks of global buyers, marking the level India’s newest carrier had set for itself.

Akasa is perhaps the first airline to be funded by private investment, unlike its predecessors, which relied on bank lending. In its latest round, the airline secured Rs 1,200 crore ($125 million) from three new investors—Premji Invest, Claypond Capital, and 360 ONE Asset —alongside existing backers, including the late Rakesh Jhunjhunwala’s family. Their decision to double down shows a growing conviction that Indian aviation, long seen as a graveyard for airlines, may finally be entering a more sustainable phase.

Passenger traffic rose above pre-pandemic levels in 2023 and has been rising steadily since. Akasa’s launch in 2022 seems to have been timed just right. Its lack of baggage, as was the case with GoAir, which closed operations in 2023, and SpiceJet, hobbled by headwinds, ensured that it had a relatively smooth passage to becoming the third-largest player in a market dominated by the big two—IndiGo and Air India—that command around 90% market share.

The airline’s leadership echoes this optimism. “Aviation here is entering a golden era. While the industry has been perceived as risky in the past, we are now at the forefront of maturity,” aviation veteran Vinay Dube, the Chief Executive Officer of Akasa Air, tells Business Today.

Manoj Jaiswal, Partner–Industrials & Buyouts, Premji Invest, the family office of Azim Premji that has an evergreen pool of capital and manages $14-15 billion, says the Indian aviation industry has strong growth potential, domestically and beyond. “Team Akasa is brilliantly positioned to execute on this opportunity.”

Industry watchers agree. “Akasa has been able to raise money from credible investors. The fact that the airline has attracted fresh investment is perhaps the best sign yet of how the perception of this sector is shifting,” says Kanika Tekriwal, co-founder of JetSetGo, the country’s largest operator of private jets and helicopters.

What surprised the industry was that the two new investors, Premji Invest and Claypond Capital—the family office of Dr Ranjan Pai, who part-owns Manipal Hospitals and several educational institutions—are usually conservative in funding new ventures.

Dube says investors see the same opportunity that the airline does: A country of 1.4 billion people with only 600–700 commercial aircraft, compared to 7,500 in the US. Analysts say that following the funding, the airline’s valuation has grown to around $500 million, which is quite notable for a three-year-old carrier.

Praveen Iyer, Co-Founder and Chief Commercial Officer of Akasa Air, offers a different perspective on the record aircraft order. “We believe that while the aviation industry is witnessing record aircraft orders, growth must be disciplined, sustainable, and aligned with real demand.” He says Akasa’s growth strategy has always been guided by discipline, foresight, and a focus on creating long-term value.

Headwinds Aplenty

Even though the airline has managed to attract more investment, in an industry where the two other carriers have nearly 90% market share, it is never going to be an easy ride for the rest.

The airline’s record order has, ironically, led to internal strife among employees, according to several reports. Critics note that Akasa has approximately 750 pilots, of whom over 300 are not actively flying due to delays in aircraft delivery. This has resulted in a situation where the grounded pilots are not receiving the same salary as those who are flying.

M. G. Mohan Kumar, former Chief Financial Officer and Finance Director of Air Deccan, feels the airline should never have placed orders for Boeing aircraft. “The aircraft it operates, particularly the Boeing models, are plagued with issues, leaving the airline severely impacted,” he says. He adds Akasa has hired far too many pilots when many of its aircraft haven’t been inducted, which is adding to the burden.

But Dube counters the criticism: “Hiring was planned with an 18–24-month horizon, factoring in notice periods and Boeing 737 training needs. As deliveries resume, these pilots will progressively move into active duty. We don’t hire for today, we hire for tomorrow.”

That isn’t the only issue regarding its pilots. Insiders report that there have been instances of pilots leaving before their contractual notice period. This has forced the airline to request compensation for the lost notice period.

The management is clear that the steps taken were appropriate. When a certain number of pilots quit without fulfilling their notice period, the result was flight cancellations and disruptions. About 600 flights were cancelled in August 2023 when 43 pilots quit suddenly, according to various reports.

Dube says the airline’s decision to seek legal remedy was a measured response to protect customers and uphold regulations. “Training bonds and notice periods strike a balance between our training investment and operational continuity.”

Since 2023, Akasa claims that no pilot has left without serving a notice period.

Multifaceted Issues

While Akasa has been working to address pilot concerns and attempting to get aircraft deliveries back on schedule, it faces larger, multifaceted issues. Although its 5.5% market share makes it the third-largest player in Indian skies, after IndiGo and Air India, it needs more firepower to grow further.

A significant cause for concern is the airline’s financial performance, which remains underwhelming. For financial year 2024–25 (FY25), its standalone net losses widened to Rs 1,983 crore, a rise of almost 19% over the previous year. This was primarily driven by higher employee expenses, sharp increases in foreign exchange outlays, and escalating maintenance costs and airport charges.

Analysts say these are structural issues rather than one-off shocks, which means they will continue to pressure profitability. This suggests that fresh capital alone will not be sufficient to resolve the problem without more profound cost restructuring and efficiency gains.

Yet, alongside these losses, the airline is projecting a very different picture through its operating metrics. Available Seat Kilometres (ASK) expanded by 300%, primarily on a low base, given Akasa’s relatively small fleet size, while showing an aggressive fleet and network rollout. At the same time, unit revenues have been climbing, unit costs are falling, and EBITDAR margins improving by 50–70% annually—all of which suggest that scale is being built efficiently. The airline currently has 30 Boeing 737 MAX in its fleet.

High-Margin Buffers

The numbers reinforce this narrative. Revenue grew by 49%, in line with a 48% increase in ASK, demonstrating that demand has absorbed the additional capacity without significant yield dilution. Revenue per ASK (RASK) rose 13%, reflecting better pricing power and revenue management through higher fares, a more potent route mix, and improved load factors.

Cost per ASK excluding fuel (CASK ex-fuel) fell by 7%, signalling efficiency gains from economies of scale, aircraft utilisation, and tighter operating controls. Cargo and ancillary revenues—such as seat selection, baggage, onboard sales, loyalty programmes, and freight—have also become substantial contributors, offering high-margin buffers that reduce vulnerability to fare wars.

On paper, then, unit economics are moving in the right direction: more revenue per seat, lower costs per seat, and stronger operating margins. However, the paradox is that absolute losses have widened. This is the classic challenge of growth-stage airlines. Rapid expansion improves operating metrics, but fixed costs—such as aircraft leases, salaries, training, and airport charges—along with external shocks like fuel volatility and foreign exchange fluctuations, continue to outweigh short-term gains.

Jitendra Bhargava, former Executive Director of Air India, says the airline has several things going for it: a stable aviation policy, a team of skilled professionals, a backlog of aircraft orders. “What it needs to do is increase the network and have more flights in key cities. Only then will passengers increasingly start frequenting the airline.”

Mohan Kumar points out that capital productivity is an area the airline should look at closely. He cites the example of Air Deccan’s paid-up capital, which was Rs 98 crore, but with revenues of Rs 3,000 crore, the topline-to-capital ratio was 30 times. “The biggest airline in the country, IndiGo, has a very healthy topline-to-capital ratio. That demonstrates high capital productivity. Using smaller capital to generate larger business is the hallmark of a smart airline—and this is where Akasa should focus.”

Double-Digit growth

While the airline’s management is happy with market share growth, Dube says it is not their primary focus. “We are building an airline for the ages, not for monthly share figures. Safety, cost structure, and service excellence matter more.”

According to Mohan Kumar, however, keeping an eye on market share is essential because airlines with a broader market share can command a premium. “Once an airline builds a large network, passengers are often willing to pay slightly more because of convenience and reliability. Akasa hasn’t reached that point. Unless it rapidly expands its network, any marketing expenditure or promotional efforts will have a limited impact. Cost amortisation remains low, and without scale, it will struggle,” says Mohan Kumar.

That said, by the end of the decade, Akasa expects its market share to be in the double digits. More importantly, it hopes to rank among the world’s top 30 airlines in terms of profits.

Bhargava makes a relevant point. Whenever an airline closed down, starting with Kingfisher Airlines, Jet Airways, and GoAir, one company—IndiGo—captured their market share. “Therefore, the only option is to have a marketing strategy that starts eating into the market share of existing players,” he says.

The airline has also built a robust IT backbone, which helped it overcome the recent global Microsoft outage. “We made a conscious decision from day one to ensure that every process, from airports to our Operating Control Centre to commercial operations, is powered by the best technology available. The Microsoft Azure outage in July 2024 highlighted why this matters: despite a global systems disruption, our operations continued with zero flight cancellations,” says Anand Srinivasan, co-founder and chief information officer of Akasa Air.

Global Footprint

Meanwhile, the airline is planning to expand its global footprint. It recently launched the Mumbai–Phuket route, which Praveen Iyer says is part of a long-term vision.

The airline is not overly worried about the resource-intensive nature of global operations and stiff competition. “While domestic aviation has experienced strong growth over the past six to seven years, international connectivity from India has lagged for nearly two decades. Demand has consistently outpaced supply, leaving ample headroom for growth,” says Iyer.

He says the airline’s international strategy is guided by long-term vision and resource-conscious expansion. Hence, Akasa is looking to expand operations to Central Asia (Kazakhstan, Uzbekistan), Southeast Asia (Malaysia, Singapore, Thailand, and Indonesia), South Asia (Sri Lanka, Bangladesh, and Nepal), and Africa (Tanzania, Egypt, and Kenya). It currently operates flights to several international destinations, including Kuwait, Abu Dhabi, and Riyadh.

“For international expansion, one key enabler will be the renegotiation of bilateral agreements between India and countries where entitlements are exhausted—such as in the Middle East and in the ASEAN region,” says Iyer.

Dube says one of Akasa’s biggest strengths is the huge order book as aviation airline is a business of scale. But aviation is inherently complex. “To succeed, airlines must be well-capitalised, have industry-leading cost structures, and professional management teams with large-scale experience. For Akasa, these are in place,” says Dube.

He believes there are three pitfalls airlines must avoid: not being well-capitalised—every airline needs rainy-day funds; weak cost structures—if you can’t outrun competitors, you won’t survive; and, ignoring customers—service excellence and customer trust are the only sustainable drivers of long-term revenue growth. Dube says the airline is well-capitalised and hasn’t outlined a plan for another round, expecting its initial public offering to take place within two to five years.

Akasa’s rise highlights broader shifts in India’s aviation sector. Analysts say there is room for challengers in a country with 1.4 billion people but fewer than 700 commercial aircraft. Still, the hurdles are formidable. Supply chain disruptions continue to slow aircraft deliveries. Structural costs—airport fees, fuel, etc—show little sign of easing. And profits remain elusive even as unit economics improve.

However, Akasa is in a better position than some of those who lost out. This is primarily due to the founding team, which consists of airline professionals with decades of experience, and improved infrastructure in the country, which includes more airports emerging in metros and a stable aviation policy.

As JetSetGo’s Tekriwal points out, the narrative is changing. “The old joke—that if you want to become a millionaire, start with a billion and launch an airline—may finally be losing relevance,” she says.