Monday, January 31, 2022

Vistara continues to be upbeat on expansion amid Air India privatisation

The coronavirus pandemic and the official handover of Air India notwithstanding, full-service carrier Vistara’s expansion plans are well on course.

For one, the Tata Group-Singapore International Airlines (SIA) joint venture’s order book is still intact, albeit with some Covid-19 induced delay. In the financial year 2018-19, the airline had placed orders for 56 aircraft including A320 and A321 of the Neo family from Airbus Industrie and wide-bodied B787 from the Boeing Co.

“When COVID hit us in early 2020, we had a fleet of 40 aircraft. Right now, we are at about 51. So, growth has been there. Yes, we would have probably been closer to 60 if Covid was not there and would have hit 70 aircraft sometime in early 2023. Now that gets pushed maybe by a year,” the airline’s CEO Vinod Kannan told Business Today in an exclusive interaction.

Consequently, Vistara hasn’t put orders for new aircraft on the backburner. This gradual enhancement in the fleet is expected to allow the Gurugram-headquartered airline to achieve economies of scale going forward.

“Assuming that we don’t have any fresh surprises, we are very much on track to become more viable because of the mix of international and domestic flights,” asserted Kannan.

Launched in January 2015, the airline is yet to be in the black. In FY2020-21, it registered a loss of Rs 1,611.57 crore. Although this was lower compared to the loss of Rs 1,813.39 recorded in the previous year.

“Ironically, if you look at it over the last two years, the airlines which have been affected a bit more are those that are big, because they couldn’t deploy a larger number of aircraft as compared to smaller airlines. So, in hindsight, it’s probably a bit of a blessing as well as a curse. But looking ahead, I think there is no doubt that we will probably be on a better slope, as compared to where we were before,” he added.

Globally, the airline business is generally regarded to be capital and asset-intensive. In India, the challenges of domestic players like Vistara are further compounded by the high cost of aviation turbine fuel (ATF) and no input credit on GST for spares. Such factors often end up further stressing their financial performance.

Vistara is thus looking at further ramping up international operations to enhance revenues. It currently flies to 12 international destinations of Bangkok, Colombo, Dhaka, Doha, Dubai, Frankfurt, Kathmandu, London, Male, Paris, Sharjah and Singapore.

“The international operations actually do have a very big differentiator as compared to domestic because of taxation. In our context, people are willing to pay a little even more for a long international flight as compared to a shorter domestic flight,” informed Kannan.

The other product that the airline is banking on to drive growth in revenues is its business and premium economy classes.

31/01/22 Manish Pant/

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