Even as low-cost carrier SpiceJet struggles for survival with no investor in sight yet, Vistara, the new full-service airline from the house of Tatas and Singapore Airlines, said on Monday it would take off in January promising to “redefine the flying experience”.
With R8,000 crore of losses last year and R80,000 crore of debt, India’s aviation sector isn’t exactly in the pink of health. The state-run airline, Air India, is on perpetual life support and only one of the seven players — the market leader, Indigo — is making steady profits. Amid such turbulence, Vistara will take off from New Delhi’s Indira Gandhi International Airport on January 9, heading to Mumbai. Vistara will be the third full-service airline in the country after Air India and Jet Airways.
Vistara CEO Phee Tek Yeoh said on Monday he believed in the immense potential of the Indian aviation market. “We have done customer surveys and sense there is demand for such a product. No doubt there are challenges, but the government has the strongest mandate in three decades and we are hopeful the impediments to industry will go away,” he said.
The timing could not have been better because jet fuel prices are at four-year lows and the economy may be at the cusp of a turnaround.
Vistara aims to be different in many ways and pay “attention to detail”. Not only does it have a three-class configuration — economy, premium economy and business — but personalised check-in services through tablets, a meal menu that changes every week and a frequent flier programme where you collect points on your ticket spends rather than miles travelled.
Asked how the airline hopes to protect margins when it is promising such a lavish experience, Yeoh said, “We will leverage on IT and innovation to drive cost leadership… That is paramount. Costs will be managed very tightly, but we will go all out to delight customers.”
The airline, which will start operations with two 148-seater Airbus A320 aircraft operating on three sectors — Delhi-Mumbai, Delhi-Ahmedabad and Ahmedabad-Mumbai — aims to have five aircraft by March 2015 and 20 in four years. The airline, which has hired 400 people already, also hopes to add wide-body aircraft for long-haul international routes once government regulations permit. “The writing is on the wall, and we hope the 5/20 (five years or 20 aircraft) rule goes away. We will look to expedite our international footprint. Some destinations are beyond the reach of an A320 so we will have to procure wide-body aircraft,” Yeoh said.
“The Indian aviation industry is suffering from high operational costs due to excessive taxation, dependence on global MROs, high airport charges; and regulations that force airlines to excessive employment in terms of pilots, cabin crew, security staff, etc. The positives are the growing economy, young, upwardly mobile population and significant tourism opportunities. The positives are here to stay and the negatives are something that the government can resolve. It is in this hope that new airlines like Vistara are entering India,” said Amber Dubey, partner and India head of aerospace and defence at KPMG.
Vistara, which has already entered into an inter-line agreement with SIA to give each other’s customers access to their respective networks on a single ticket, is also in talks with other airlines for a partnership. “We are also open to options like joining Star Alliance, but it is early days now,” Giam Ming Toh, Vistara’s CCO, said.