Akasa Air crisis: Will the airline take off or shut down?

Akasa Air has encountered difficulties due to a series of pilot resignations recently, despite its efforts towards expansion since it started operations. The airline rapidly expanded its operations and fleet, becoming the fastest to acquire 20 aircraft, a prerequisite for launching international flights. However, Akasa Air, backed by the late billionaire investor Rakesh Jhunjhunwala, is currently struggling to retain enough pilots to efficiently operate its aircraft.

Pilot exodus 

The airline recently took legal action against 43 pilots who resigned abruptly without fulfilling their mandated notice periods of six months to a year. Akasa Air alleged that these sudden departures led to numerous flight cancellations, resulting in operational losses and harm to its reputation.

It led to the cancellation of about 18 per cent of its usual 3,500 monthly flights in August. While a notice period of 6–12 months is mandatory for pilots, some pilot organisations have challenged this requirement in court.

According to media reports, most of the resigned pilots are believed to have accepted offers from Air India Express, another carrier operating Boeing 737 family aircraft. Akasa Air not only seeks to enforce notice period clauses in pilots' contracts but also demands substantial compensation from each pilot for lost operational profits and damage to the airline's reputation.

Akasa Air's lawyers reportedly told the Delhi High Court that the airline faces a crisis due to the pilot's resignation, warning of a potential shutdown as numerous flights are being affected by abrupt departures. In August, the airline's market share dropped to 4.2 per cent, down from July's 5.2 per cent, placing it below SpiceJet in the rankings of domestic carriers. Akasa Air had previously surpassed SpiceJet in terms of market share in June and July.

Despite these challenges, Akasa Air's CEO, Vinay Dube, assured employees that the airline is financially strong and equipped for long-term growth. Dube stated that the airline currently has an adequate number of pilots in various stages of training to operate more than 30 aircraft.

Legal battles over pilot resignations

Akasa Air has initiated two legal cases in response to the pilot resignations. The first case, filed in the Bombay High Court, seeks to enforce notice periods mandated by the Directorate General of Civil Aviation (DGCA), requiring six months for first officers and one year for captains. The airline also seeks compensation from pilots for operational losses and damage to its reputation due to flight disruptions caused by their abrupt departures, claiming up to approximately Rs 22 crore per pilot in damages.

The second case is before the Delhi High Court, where the carrier seeks enforcement of rules established by the DGCA in 2017 that mandate notice periods. The validity of these rules is currently in question, as several pilot unions have challenged them in court.

Despite the airline's legal actions, some members of the aviation community question the validity of pilots' contracts, alleging that Akasa Air unilaterally modified pilots' salary structures in June, potentially breaching their contracts.

"Financial and operational hardship"

Akasa Air claimed that the DGCA is responsible for causing "significant financial and operational hardship" by not intervening to prevent pilots from abruptly resigning and disrupting operations. The airline has filed a legal dispute against some of the pilots for alleged contract breaches and has warned that it may have to cease operations if the resignations continue.

The airline argues that its contractual obligations with pilots remain valid and is suing the aviation regulator for not intervening in the public interest. In a 265-page legal filing made on September 14, the airline accused the Directorate General of Civil Aviation (DGCA) of being "unwilling to take any action," resulting in "significant financial and operational hardship" and "reputational loss."

Respite amid the challenges

Akasa Air has received approval from the DGCA to start international operations, with the airline planning to take its fleet in the foreign skies by December.

“The Ministry of Civil Aviation has recognised the strength of Akasa Air’s operations, and we have been designated as an International Scheduled Operator. This new designation will allow us to fly internationally, enabling us to take one step closer to our dream of launching international operations before the end of this year. We are now working with all relevant authorities on our request for traffic rights and will soon be able to announce the international destination we will fly to," said Vinay Dube, Founder and CEO at Akasa Air.

The airline said that it is "on track to announce a three-digit aircraft order by the end of this year to serve the growing travel demand".

(With Reuters Inputs)