1. 5/20 rule stopping us from going international: Vistara CEO Phee Teik Yeoh

5/20 rule stopping us from going international: Vistara CEO Phee Teik Yeoh

While Vistara will be expanding its fleet size to 20 by 2018, it will order more aircraft if it is allowed to fly to international destinations in the coming years.

By: | Updated: August 27, 2015 11:40 AM
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Vistara CEO Phee Teik Yeoh says the reception to premium economy and business class has been growing every month and many corporates are now travelling this class. (Reuters)

While Vistara will be expanding its fleet size to 20 by 2018, it will order more aircraft if it is allowed to fly to international destinations in the coming years. The airline’s chief executive officer Phee Teik Yeoh tells Rhik Kundu the company’s operational performance so far, the challenges ahead and how its premium economy and business class are gaining traction. Excerpts:

Q. Despite high on-time performance figures, your passenger load factor has been relatively low. Why?
A. Our OTP over the last seven months has been in excess of 90%. Our aircraft configuration is that of 16 business class seats, 36 premium economy and 96 economy seats, which is 20% less than competitors who fly the same aircraft type (Airbus 320). Though we are enjoying a high load factor in our economy class — sometime more than full service competitor — it’s in the business class and premium economy segment where our load factor is not that high.

However, the reception to premium economy and business class has been growing every month and many corporates are now travelling this class.

Q. What steps are you taking to increase the load factor?
A.Our presence is very limited and we will gradually increase our footprint and hit more destinations which will improve our load factor. Many companies want to give us more business but unfortunately we don’t fly too many destinations now. In the next three months, we are going to grow our footprint by 50%.

Q. What are your fleet expansion plan?
A. At present, we have six aircraft (A320) and all have been leased from the Bank of China Aviation (BoCA) with whom we have a deal to lease 20 aircraft (13 A 320 Ceo and 7 A320 Neo). We will induct three more aircraft, taking our fleet size to nine by November. We will add 3-4 aircraft every year in our fleet next year onwards. The fuel efficient A320 Neo, which consumes 14% less fuel than A320 aircraft, will be inducted in our fleet by 2017-18. We will lease four A320 Neo is 2017 and three in 2018.

Q. Any plans of purchasing aircraft instead of leasing them?
A. Our 20 aircraft (lease) order is just the tip of an ice-berg. We will not stop at 20. We are looking at our next aircraft order. We will keep our options open whether we want to lease or buy planes going ahead.

Q. What’s your view on the upcoming aviation policy?
A. It was long overdue for the Indian travellers. I would like to remain optimistic that this will happen soon and ultimately logic will prevail.

Q. What about the domestic flying credit proposal put forward?
A. Our view is 5/20 has to go, but let’s not replace it with another complicated policy. While it is complex and complicated, it is a step in the right direction. The decision, however, should be taken as quickly as possible.

Q. What about your plans to fly international destinations?
A. We have ambitions to fly globally from the first day we started flying in India. However, the 5/20 rule is stopping us from doing so. Once we are allowed to fly international, we will look at both east and west for short and long-haul destinations. For anything longer than 5-6 hours, we will need to induct wide bodied aircraft. We are waiting for the policy which will give us clarity when, how fast and how soon can we fly international.

Q. Your views on the discounts and flash sales that are often initiated by LCCs which in turn hurt carrier’s bottomline?
A. Discounting and price wars are not something new and existed before Vistara started its operations. We too have fare promotions but these are value for money offering and are rolled out once in a while. However, we do this because, we want to thank those who fly with us. Our fares will be competitive and value for money. But we will have promotions only once in a while unlike others.

Q. When do you expect to break even?
A. When we break even is subject to many conditions. We have a plan but can’t share it with you. I would rather focus on exceeding customer satisfaction. As we gain traction in market, as our credibility grows from strength to strength, as we manage costs better, better offerings and we get more loyal customers, we will eventually break even.

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