Vistara, the full-service airline promoted by Singapore Airlines and Tata Sons, will explore synergies with the other aviation ventures of its promoters in a bid to save on costs and enhance efficiency in an extremely cost-sensitive Indian aviation market. In an interview with Rhik Kundu, Vistara’s chief executive Phee Teik Yeoh says that the premium carrier will expand its fleet to nine aircraft by the end of 2015 and expand to 20 planes in the next four years. Edited excerpts:
How are the steps taken by you to keep costs low-bearing fruit?
Driving cost leadership is one of our top three strategic imperatives. We strive to keep costs low through disciplined control of non-customer facing expenses and innovative use of technology. Additionally, we leverage the expertise and resources of our parent brands to reduce overhead costs. We have a healthy mix of insourcing and outsourcing models to keep our operations lean and effective. Being a new organisation, we had the choice to decide on what costs to incur and what to avoid. Going forward, we will continue to look at options that will help us reduce costs.
When do you expect to breakeven? How have the declining jet fuel prices helped Vistara’s financials?
The fall in global prices of jet fuel has definitely relieved the cost burden for the entire industry, but this is something that we cannot count on forever. Jet fuel prices have recently been increased by 8.2%. What we can definitely count on is reduced cost base and ease of doing business consistently. Currently, we are focused on our expansion plans that will extend our unmatched service excellence to more customers. If we keep doing that right, breakeven will follow naturally.
Vistara recorded a load factor of 56% in January, the lowest among existing full-service carriers.
Vistara started taking bookings towards the end of the holiday season when business travel is light and majority of the leisure travelers had already booked flights. From the outset, as in other areas, our pricing strategy has been disciplined, and we chose not to engage in unsustainable rock-bottom sales. We opened our flights for sales on December 19 and at that time our schedule was only published till February 15. Given the limited inventory of seats and short lead time for sales, our load factors were impacted.
Now that we have added more destinations and increased frequencies, we have opened sales till end of the summer schedule in October 2015, enabling customers to book in advance. This, coupled with our increasing brand awareness among customers, is leading to encouraging improvement in our passenger load factor.
How does Vistara plan to grow its fleet?
By end of calendar year 2015, we will have nine aircraft and we will gradually increase our fleet size to 20 planes by the end of our fourth year of operations, enabling us to grow organically while steadily offering new destinations to flyers. The 20 aircraft are being leased from BOC Aviation, Asia’s leading aircraft operating lessor.
What are the operational synergies that Vistara can explore with Singapore Airlines and AirAsia India, considering your promoters are associated with these two airlines as well?
Vistara incorporates the customer-centricity, operational efficiency and service excellence that are integral to Singapore Airlines operations. We have also been leveraging the aviation expertise and knowledge of Singapore Airlines. Over a period of time you will see increased partnership and synergies between Singapore Airlines and Vistara. To share an example, cross-participation in our respective frequent flyer programs is a unique offering for the customers of both airlines. We don’t rule out driving the synergies between Vistara and AirAsia India, especially when cost savings are concerned.
