Demand strong despite macro challenges, says Akasa Air CEO Vinay Dube

Akasa Air sees resilient travel demand despite rising fuel and forex costs, while betting on new airports and long-term expansion

India’s domestic air travel demand remains resilient despite macroeconomic headwinds, with passenger numbers continuing to rise even as the sector navigates volatility in jet fuel prices and foreign exchange rates, said Vinay Dube, Akasa Air’s founder and CEO, on Thursday.

 

“At this moment in time, it is not a demand issue so much. It is much more of a fuel price and forex (rupee depreciation) issue, which we believe is going to be short term. But even if it extends for a while, it's not a problem. We’ve got the financial wherewithal to get through this without a problem,” he told Business Standard in a video interview.

 

 

Fuel costs and foreign exchange have a significant bearing on airline profitability. Aviation turbine fuel (ATF) accounts for around 35-40 per cent of an Indian airline’s operating expenses, making it the single-largest cost item. At the same time, several other major expenses — including aircraft lease rentals, maintenance payments, insurance and a substantial portion of spare parts — are denominated in US dollars. As a result, a weaker rupee raises costs even if underlying dollar prices remain unchanged, while higher ATF prices further squeeze margins.

 

Airlines often struggle to fully pass on these cost increases through higher fares, particularly in a competitive market, putting pressure on profitability.

 

On infrastructure, Dube said the development of Navi Mumbai and Noida International Airports will help ease long-standing capacity constraints at key aviation hubs. Major metro airports like Mumbai have faced severe slot constraints — regulatory limits on the number of flights that can take off and land at an airport — for over a decade.

 

“Slots in Mumbai and Delhi have always been constrained,” Dube noted. “And so to get these, you know, airports in these big cities that have had, you know, capacity constraints for over 10 years, I think is fantastic.”

 

To support its expansion, Akasa Air has committed to building a dedicated Maintenance, Repair and Overhaul hangar — a specialised facility where aircraft undergo maintenance, repairs and engineering checks — at Noida International Airport.

 

On airport charges set by the Airports Economic Regulatory Authority during the last few months, Dube said the airline adapts to regulatory decisions as part of its normal operations. However, he acknowledged that carriers are currently unable to fully pass on higher input costs to passengers as the spike in fuel prices has been massive.

 

Despite the cost pressures, operational metrics at the two new major airports remain strong, with load factors — the percentage of seats filled on a flight — in line with the airline’s network average.

 

Akasa Air's capacity is split between 75 per cent domestic and 25 per cent international operations, with West Asia destinations such as Riyadh and Abu Dhabi accounting for more than 80 per cent of its overseas capacity.

 

The airline recorded strong operational performance in the April-June quarter, posting nearly 30 per cent growth in Available Seat Kilometres — a measure of airline capacity calculated by multiplying the number of seats available by the distance flown — according to Dube. Revenue and passenger traffic grew faster than capacity during the quarter.

 

Akasa Air has around a 6 per cent share of the domestic market. It operates a fleet of 40 aircraft and has 186 more on order as it expands its network over the long term. Dube said the order book would support steady growth in both domestic and international markets.

 

Dube said India’s young demographic and rising preference for discretionary spending on travel will support the airline's long-term international growth. Rejecting conventional industry classifications, he added, “I would request you and others to classify us as an ELC, an experience-led carrier.”