Taking wings! Vistara gets Rs 600-crore boost from promoters

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Published: December 5, 2019 3:08:45 AM

Vistara plans to add 12 aircraft by March-end to lift its fleet size to 42, including wide-body Boeing 787-9, and Airbus A320 and A321 aircraft.

Vistara launched international operations from August with flights to Singapore, Bangkok and Dubai.

Vistara has received infusion of Rs 600 crore from its promoters — Tata Sons and Singapore Airlines — at a time when the carrier is planning rapid international expansion and domestic yields are under pressure due to a fare war.

The airline’s board approved the allotment of 600 million shares of `10 each to the two promoters on November 28, according to a filing with the ministry of corporate affairs.

A Vistara spokesperson did not reply on the fund-raising till the time of going to the press. While Tata Sons owns 51% in Vistara, Singapore Airlines has the balance 49% in the full-service carrier. According to the aviation regulator, Vistara held 5.4% domestic market share in October 2019.

Tata group has been on an investment mode in its aviation business since its launch in 2014. So far the promoters of Vistara have infused over Rs 1,500 crore in FY20.

The loss-making carrier had raised Rs 2,200 crore in FY19. Vistara’s net losses almost doubled to Rs 831 crore in FY19 due to a tough operating environment. Its operating revenues increased 41% year-on-year to Rs 2,994 crore in the year ended March 31, 2019.
AirAsia India, Tata’s other joint venture carrier with Malaysia-based AirAsia Berhad, also witnessed an investment of Rs 500 crore from the promoters in April 2019.

Domestic yields for airlines have suffered as Jet Airways’ capacity has been replaced by low-cost carriers. The airlines are offering competitive fares to fill in new capacities.

Jet, a full-service carrier, shut operations on April 17, 2019 due to a cash crunch. On October 24, IndiGo chief executive officer Ronojoy Dutta said the airlines experienced softness in travel demand during the festival season prompting flash sales from competitors to improve cash flows. Low-cost carrier GoAir and Vistara launched ticket sales during that month.

Domestic passenger traffic grew at 4% y-o-y in October 2019. Vistara has been expanding rapidly since the grounding of rival Jet Airways. It operates about 1,400 flights a week now, up 70% from the 800 it operated at the end of March. The airline, which had 22 aircraft in March 2019, added planes from Jet’s fleet.

Vistara plans to add 12 aircraft by March-end to lift its fleet size to 42, including wide-body Boeing 787-9, and Airbus A320 and A321 aircraft. It will be starting medium-and-long-haul international services to places like London and Tokyo from next summer. During July 2018, Vistara had ordered 19 aircraft worth $3.1 billion from Airbus SE and Boeing Co.

Aviation experts believe that Vistara would require huge investments in acquiring slots at new airports and flight product enhancements.
“There is softness in air travel demand due to economic slowdown. Apart from that Vistara will be acquiring new slots at international destinations. It also has to make sure it has the best in-class product for new routes. That requires a lot of money,” Mark Martin, chief executive officer, Martin Consulting, explained.

Vistara launched international operations from August with flights to Singapore, Bangkok and Dubai.

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