Monday, March 30, 2020

Vistara or AirAsia India? Tata Group must pick one as losses mount

It's going to be bloodbath in the aviation sector as a result of Covid-19 outbreak. With passenger operations of all commercial airlines coming to a grinding halt till April 14, probably even beyond, the industry enters a phase of large-scale disruption. According to aviation consultancy firm CAPA, Covid-19 would cost the sector $3.6 billion (Rs 27,200 crore) in just three months. As a result, Tata Sons might be forced to operate just one airline from amongst the two (Vistara and AirAsia India) that it is operating now.

"This may be the right time for Tata Group to rationalise its airline portfolio. This event is going to cripple the entire industry, and Tata Group will be in a position to back just one airline instead of two," says Kapil Kaul, CEO (South Asia), CAPA.

As per data submitted with the ministry of civil aviation, both AirAsia India and Vistara have continuously posted operating losses between FY15 and FY19. Vistara, for instance, posted (provisional) operating losses of Rs 846.1 crore in FY19 in comparison to AirAsia India's Rs 703.04 crore operating losses in the same financial year. In FY19, operating losses of nearly all large carriers, including Vistara and AirAsia India, swelled considerably as compared to the previous financial year.

"Post Covid-19 world is going to be entirely different. The biggest worry is that if this situation gets prolonged, some airlines would shut down. The stronger airlines, especially IndiGo, would likely withstand the impact and restart services with depleted operations. But there seems to be bleak future for loss-making carriers," says an aviation analyst.
Though it's not clear that which Tata Group entity will likely bear the brunt; the rough journey of AirAsia India since inception makes it more vulnerable to the current challenging environment.

Business Today's queries to AirAsia India and Vistara remained unanswered until the publication of this piece.

Both Vistara and AirAsia India commenced operations around the same time though Vistara has grown to be slightly bigger with 41 aircraft (Airbus A320s, Boeing 737-800NG and 787-9) in its fleet covering 36 destinations in India and abroad. AirAsia India, in comparison, has 29 aircraft (A320s) covering 21 destinations. AirAsia India, a joint venture with Tony Fernandes-run AirAsia Bhd, was first to start services in June 2014 from its Bengaluru hub soon after the government allowed 49 per cent FDI (foreign direct investment) into an Indian airline.
30/03/20 Manu Kaushik/Business Today
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