Tata Sons and Singapore Airlines JV airline Vistara will start its international operations by the end of 2018 and the management is expected to finalise the plan by the end of 2017. Sanjiv Kapoor, chief strategy and commercial officer, Vistara, in an interview with FE’s Malyaban Ghosh said that the increasing order book of the airline and the capacity constraints at the airports is hurting the overall business of the industry. He also mentioned that with the increase in scale of the business Vistara’s costs have also come down year-on-year. Excerpts:
Are you satisfied with Vistara’s performance last year?
We are very pleased to share that our revenues have grown and costs have come down on a year-on-year basis. Our performance was significantly better than the year prior to it, which was expected because we have grown in scale and have revamped the network. The customer acceptance has also come a long way. We are very pleased with the performance relative to the market conditions and have managed to wither the overall decline in the market year on year. In terms of occupancy our economy class load factor is the best in the industry and our overall PLF last month was 87% with three class seat configuration. Other airlines are in the 90% level with only economy class seats and our economy class occupancy is in the upper half of the 90s. Load factor in the business and premium economy class has also increased y-o-y and more importantly the average fares have also increased. Hence revenue from the premium cabins has shown steady growth. In the premium cabins one has to look at the combination of the load and yield. So PLF cannot be the only parameter to judge the sustainability of the business and premium economy class.
How has the yields been for Vistara since the listed competitors have shown decrease in yields due to increase in fuel cost?
We have reported an increase in yields and average fare year-on-year and it is moving in the right direction. Relative to the overall market our performance has been pretty strong. On the cost front also we have been able to cut cost year-on-year. Even if you take our fuel cost we have started to get some cost advantage since we are expanding which gives us the advantage of scale. We have renegotiated certain contracts. We started on a smaller scale and now that we have expanded we have more ability to renegotiate. There is some overcapacity in the short term with too many aircrafts coming in. Vistara has not placed a big order because we want to grow in a manageable manner and take into account the market’s ability to absorb additional capacity. We want to make sure that our planes are occupied and can depart profitably.
How many aircraft will be added to the fleet this year?
By June next year we will have 20 aircraft and as soon as we get our 21st aircraft we can fly international. Our 15th and 16th aircraft will be delivered in July and August respectively. Another two aircraft will arrive in February and March next year. We also have an option to accelerate the delivery of the planes but as of now we don’t have any plan to do anything like that.
How do you plan to kick start your international operations?
We are in the process of finalizing the long term plan on the international operations and are expected to start operations by next calendar year. Can’t give a specific timeline but will start with our A320 aircraft and fly within the region. Long haul operations will happen thereafter and we are certainly working on it. We are still finalizing the network plans and once that is done the outcome of that will be the required fleet to serve the network along with the size of the aircraft needed. All of this are expected to be finalized by the end of this year.
Is the capacity constraint at airports in Delhi and Mumbai a cause of concern?
The fact that two new airports will be developed in Mumbai and NCR is great news for the industry but by the time the first phase of the airports will be complete it will be too small. To build a global hub in India and to compete with the likes of Beijing, Shanghai and the Gulf states we need much bigger airports. It impacts everybody since the order book is huge. So if we are getting delivery of the aircraft we are wondering where to fly it. Either we are flying it into small cities where there are no slot issues or you are juggling the existing slots around. So now in the sector we see aircrafts being deployed on routes which may not merit a plane with 150 seats but there is no choice. That impacts the overall yield for the industry. There is over capacity in the short term which is now being deployed on the less profitable routes which cannot command a fare premium and one has to drop the price to attract passengers.