Tata Sons-owned Vistara Airlines, which is facing stiff competition from low cost carriers, is clear that it will be a premium brand. Roping in a top film star for the advertising campaign is part of the airline’s strategy to enhance its image. Vistara’s chief strategy & commercial officer Sanjiv Kapoor spoke with FE’s Bilal Abdi and Malyaban Ghosh on the airline’s strategy to hold on to its premium tag.
How has Vistaras’ performance been so far and how are you planning to improve operational efficiency?
First, we have done a good job by increasing our aircraft utilization to 12-13 hours from 8-9 hours when we started. Second, even though fares are falling we have consistently been able to charge 10-20% premium compared to other airlines. I think customers are ready to pay a reasonable premium to fly with us. But we cannot charge customers in a vacuum as the Indian market is very price sensitive.
Could you elaborate on how deep discounts are affecting the market? Can we expect Vistara to join the bandwagon?
In a highly transparent and competitive sector like aviation, especially in a price sensitive market like India, you are held hostage by the cheapest fare provider because they set the floor price and the market gravitates towards that player. The other players are forced to bring their prices down. Crazy last minute discounting needs to stop. Discounting has a role especially for low cost carriers as well as full service carriers. The earlier you book the better deal you get, is the rule. But in the last few months the rule has completely fallen apart because now you get the best fares in the last minute. That completely spoils the customer behavior and doesn’t allow you to revenue manage properly. Revenue management assumes that prices go up the closer you get to the day of travel if that rule is broken then managing capacity and demand becomes a problem.
Has the seat configurations helped the airline to perform better?
One of the reasons why we really don’t want to go down the discounting and cheap fare route is because we don’t want our traditional customer base, which is the corporate class, to no longer enjoy the refined atmosphere and ambiance. We want to maintain that sanctity of the experience. We are not ready to fill up seats at any cost during the lean seasons.
Will the focus for Visatara be on the yields and margins?
The lean season is a challenge but there is a point beyond which further discounting will not generate more demand. We are creating an excess consumer surplus which means that these passengers would have flown even if your prices were R1,000 higher. You are not picking up any incremental traffic, you are just losing out on the margins. India has the lowest fares in the world and now it has gone to ridiculous levels, when oil prices go up and the discipline in pricing comes it will be a rude shock for the customers.