I

SWOT/PESTLE

Corporate Strategy NEERAJ DANI

POLITICAL
 so
Akasa Airlines backed by Rakesh Jhunjhunwala having 40% in the venture has
picked the right time to launch ULC Airlines when the government is bringing
reforms in the Aviation sector and disinvesting the national carrier Air India which is
singing in debt.

So, whosoever buys Air India will have to manage a lot of debt which is not possible
with low air fares.

The government is looking for more and more disinvestment of its PSUs with Bharat
Petroleum next in line, the govt is looking for expansion of different industries via
the private sector. This would also help in job creation and also foster the
government led projects like Make in India, Skill India and so on.
 ST
Rakesh Jhunjunwala in himself a very well known brand, he is known as the Warren
Buffet of India. Being the main promoter of the Airlines he has an ample amount of
money power.

Any govt. machinery bows down to money power. The current govt. has an image of
supporting industrialists and businessmen with money power. But at the same time
the govt. also has the image and history of being bold and taking decision without
consulting the respective stakeholders.

So, the govt. might take decisions relating to fuel prices and GST which might
impact the aviation sector but since Akasa Airlines has a massive financial backing
this could be managed since they have deep pockets.
 WO
Biggest weakness for the airlines would be entering in times of uncertainty when we
don't know that till when the restrictions are raised and when we might again enter
into lockdown.

Also, money from their pocket has already begun to flow out but they won't earn
until they start flying. Another problem would be managing the ultra low cost fares
in times of dynamic pricing.

But they are entering the industry at a time when the govt. is regulating the ticket
prices and most of the tickets are 20-30% more then the usual rates. So as an Ultra
Low Cost Airlines customers will be attracted to cheap fares. So, the govt. price
relation will certainly help the low cost airlines.
 WT
Even though the airlines does not have any specific baking from a specific political
party, but Spice Jet which is promoted by Ajay Singh (PA of Pramod Mahajan) who is
associated with the BJP might pose some threats to the new airlines.

Another big aspect is the history of low cost airlines in India, which could never
succeed. Even today India is supposed to be a low cost airlines but their fares are as
high as that of others.

Politically the style of this govt. is very unpredictable they have turned tables
overnight. The airlines will have to maintain good relations consciously with the govt
nor they might land in trouble as the govt has a history of creating problems to
those who don't follow their style of work and line of action.
ECONOMIC
 SO
Finance is the most challenging part for the aviation industry and this is where the
deep pockets of Rakesh Jhunjhunwala will be big boost.

Rakesh Jhunjhunwala the main promoter of the airlines as a golden eye, he has a
record of making maximum money from the stock market. He puts his money only
when it has the chances of growing multiple times.

Raising money from the market will be very easy for the airlines since it has a very
solid name behind it. A major strength for the airlines is that it is ultra low cost
airlines so this will open a options for people with low income to travel through
flight and this will eventually expand the industry and bring in more money in
market as well as circulation.
 ST
The Indian economy is just regaining its ground after the Covid-19 pandemic and is
suffering massive unemployment and pay cuts. Along with this credit has become
expensive not because of increased interest rate but due to lack of disposable
income with people.

In such times the industry will get a massive boost with the airlines infusing money
in the economy and the respective stakeholders will also have the needed
confidence in their investment due to the backing of Rakesh Jhunjhunwala.

Also, even though people have less money and their spending priorities might
change due to pandemic this will certainly impact the aviation industry but this is
the biggest strength of Akasa Airlines that is ultra low cost so air travel will not hurt
their pockets as such.
 WO
A major weakness for the airlines in the economic front would be only money
outflow in the initial times and no earning untill they start operating their flights.

Also, with Air India and Jet Airways in que to be taken over and starting operations
there will a lot of pricing war with Airport Authority of India for parking hangers,
slots, storage and all other ground equipment and staff management. Since Air
India and Jet being existing carriers who have been industry leaders at some time it
will be difficult for Akasa to manage that war with AAI.

But since they have deep pockets and Jet and AIr India being debt hit Akasa will be
able to manage this pricing war and manage extra slots and infrastructure than
others.
 WT
A major threat would be TATA taking over Air India since TATA has a fabulous track
record in the aviation industry with Air Asia and then Vistara both being TATA
backed ventures. TATA groups has prior expertise and experience in managing
economics of aviation and they also have regular cash flow through Air Asia and
Vistara for them to fund Air India. So, if they manage to acquire Air India then this is
a real threat and a dent of the weakness of the Akasa since TATA will certainly enter
into direct pricing war with Akasa.

Another factor bring that the airlines plans to make Bangalore as their base, with
Bangalore being the busiest airport in the country after Mumbai and Bangalore
being one of the two most expensive city in the country this will increase the
operational cost and delay in meeting the economies of scale.
SOCIALOGICAL
 SO
The main promoter Rakesh Jhunjhunwala being the money man and the banker to
the airlines is less likely to have financial crises. This is important as Covid-19 has cut
down the pockets of people and their spending capacity.

This will affect the travel industry. At the same time people are more likely to prefer
Air Travel over train/bus journey due to hygiene and safety reasons.

This is very where the airlines will directly dent the competitors since being an Ultra
Low Cost Airlines they are very likely to takeover a good amount of market share
from others in the Industry.

With Covid hitting the planet everyone is looking for safer options even in travel so
more people are likely to shift to Air Travel in coming years.
 ST
As the airlines plans to make Bangalore as their base, it will attract a lot of crowd
since Bangalore is already a technological hub it is emerging as a educational hub
as well with a lot of higher educational institutions coming up.

History is evident that every time a new low cost carrier comes up its base city is
very determinant in its future growth. Bangalore being a cosmopolitan will aid in the
growth of the airlines.

Our country has a huge youth population and a large number students and both
the categories undertake travel for variety of purposes so this will open doors to
those people as well.
 WO
Air travel is often looked upon as a burden on the pocket and with Covid people
have become double cautious of what they spend, how they spend and where they
spend. People are likely to reduce their travel because of safety and financial
reasons.

But with Akasa around people's both the concerns will be getting addressed since
people being be paying really low prices and getting the safety and comfort of
aircrafts. This will turn the tables around and encourage people to undertake travel
as they will be paying less on the same routes.
 WT
It is very deep psychological factor in the minds of people that Air Travel is
expensive. Even if the airlines launches as low cost carrier but people have this in
the mind that there are a lot of taxes and hidden charges which will make the ticket
expensive.

People will be reluctant to spend on air travel since Covid has hit peoples pocket
hard.

Being a new airlines people might be a little reluctant to go for Akasa and also
people usually have their preferred airlines and they like sticking to that only. (I
usually travel only by Indigo or Vistara)
TECHNOLOGICAL
 SO
Aviation industry requires massive investments and this cost goes up if the
company wants to introduce quality aircrafts. The company aims to launch a 70
fleet airlines.

Buying 70 new Airbus/Boeing in one straight go is not possible neither for Akasa
nor for the aircraft makers.

Akasa can certainly buy a couple of aircrafts in good condition from Jet & Air India.
They would quality machinery at a relatively lower price to begin with and as their
operations expand they can introduce more and more of new aircrafts.

Also, the govt. is looking for a buyer for Air India so Akasa can certainly try their
hands on getting a few air crafts and start their operations and generate cash flow.
 ST
Air India and Jet Airways are in que to be taken over, and it is less likely that they
would operate with the same aircrafts. Specially Air India which has old Air Crafts
and those which are new require a lot of patchwork.

In this case whosoever take over Air India will certainly look to change its fleet in
order to have a image make over. If that happens then Akasa's aircraft will take time
to get delivered since Air India already fully operating airlines will be in a better
position to acquire new aircrafts quickly.

But the point which matters here is massive debt on the hands of Air India & Jet
where as Akasa being new and backed by the power house of Stock Market and the
money man is less likely to get bother because of his massive wealth creation
ability.
 WO
A very neglected part in aviation industry is the ground equipment and ground set
up (non human resources) which is very expensive when the airlines is operating in
multiple cities.

This means the cost of ground setup and ground equipment goes up every time the
airlines extends its operations in a new city.

This becomes and unnecessary cost in the initial phase. To deal with this Akasa can
tie up with carriers like Air India - Star Alliance and rent their bridges, buses, cabs
and other on technical infrastructure.

This will help them save cost in the initial days, and also help them expand in no
time since Air India has its set up on every airport since it is the oldest airlines at
present.
 WT
Being a new airlines and not having the necessary expertise they may face
difficulties in coping up with latest advancement in aircrafts.

Also, it will be really challenging for them to forecast how their operations would
succeed and plan their aircraft buying accordingly.

As of now the best aircrafts in the market are Air Bus A320 Neo and A321 but the
aircraft manufacturer is also in process of launching a few more. So, it will be a
tussle at Akasa to buy the existing ones or to wait and buy according to their
operational expansion.
LEGAL

 SO
The current govt. is in favor of disinvestment and it is making necessary
amendments and changes in the legal frame work to foster increased participation
of private players in different industries and the biggest example being Air India.

This is plus point for Akasa since legal frame will make it simple for them to expand
their operations in the years to come.
ENVIRONMENTAL
 SO
A big advantage for Akasa is that they are entering the industry and they can
emerge as trend setters by adopting environment friendly practices in the air as
well as on the ground.

No plastic policy is something which they can certainly work upon and this will be a
great opportunity for them even to make PR as this no plastic policy will make them
gain public reputation, trust and recognition.

Since they are new they will be doing everything from the scratch so it will be easy
for them to adopt environment friendly practices . Also they can adopt practices
which aim at reducing carbon footprints since they are new in the market.