Vistara, a Tata-Singapore Airlines joint venture, has been aggressively expanding its fleet and network, becoming a leading player in domestic market. It now plans to spread its wings on foreign routes. The airline’s chief executive officer Leslie Thng is piloting its operations at a time when high fuel price and weakening rupee threaten to stunt the robust growth in passenger traffic. He spoke to Nirbhay Kumar on airline’s fleet plan, overseas operations and issues facing the aviation sector. Edited excerpts:
When exactly do you plan to launch your overseas operations? To begin with, how many countries would you be covering and reasons behind choosing them? How soon would Vistara operate direct flights to Europe and the US. These are markets where West Asian carriers have enjoyed competitive advantage over rivals for years. How do you see competition on these routes?
We aim to start our international operations (subject to necessary approvals) before the end of this year, with destinations within the range of our Airbus A320neo aircraft. As we induct more aircrafts in our fleet from the Airbus A320/A321 neo family starting next year, we will further densify our domestic network and expand on other international regional routes. Our wide-body aircraft, the Boeing 787-9 Dreamliner for which we recently placed order, are scheduled for delivery between 2020 and 2021. With induction of these aircrafts into our fleet we will further expand our international operations on medium and long-haul routes.
We see a great demand in India for a better flying experience on international routes, and we believe that our globally applauded service standards will make a significant difference for people travelling from India to other parts of the world and vice versa to experience Indian hospitality in the true sense with a contemporary, global touch.
As a result of high domestic fuel price, cost of most airlines has gone up building stress on their yields. Some of the airlines still prefer to sell cheap tickets. How do you see the trend?
Indeed, the spike in fuel price has increased operating costs for all airlines, but it is not the single element that affects pricing. Airline pricing is dynamic and a function of supply and demand in the market beside many other factors. At Vistara, we price competitively and offer value-for-money products and a fine experience at every touch point.
The yield pressure is more on metro or non-metro routes? Which are some of the key routes where capacity exceed demand resulting in losses for the carriers? Do you think this could make airlines bleed as in 2008-09 eventually leading to closure of Kingfisher in 2012?
I will not be able to comment on the commercial aspect of particular routes. Given the diversity of preferences among consumers across geographies and demographics, it would be incorrect to categorise demand under just two buckets of metro and non-metro routes. In fact, the rise of some non-metro cities in India has taken many by surprise with a sharp increase of residents’ spending capacity. This is true especially for products and services that fall under the lifestyle segment, of which travel is an essential part.
What is your projection of domestic aviation market? What are the key challenges in the way of running a profitable airline business?
The growth of the Indian aviation in the past decade or so has been phenomenal. India is now the world’s third largest domestic aviation market and flies over 100 million passengers in a year. The beauty of the situation is that this isn’t yet at its peak. In a country of a billion-plus people, only about three per cent of its population has travelled by air. The opportunity for the aviation industry in India is undoubtedly enormous, especially against the backdrop of a growing economy.
Fierce competition in the industry is helping everyone put their best foot forward, and newer ways of delighting customers are emerging and being embraced by airlines around the world. Technology will continue to shape many aspects of aviation – whether it is passengers’ experience on the ground or amidst the clouds. Air travel is all about the experience and people are increasingly making travel an important part of their lifestyles and individual growth. For a full-service carrier like ourselves, we believe that the key to staying in the business is to keep your fingers on the pulse of consumer trends and to continue to stay relevant. The dynamics are changing world over, and India is no exception to it. It’s the day and age of being flexible in business and in what you offer to consumers. A significant reflection of our effort in this direction is the launch of ‘Vistara Freedom Fares’, which is an intuitive, menu-based pricing model designed to empower customers with the freedom to choose the kind of fare and services that suit them best. It lets them decide if they want to pay for certain additional benefits and features that come in thoughtfully packaged bundles or to choose them à-la-carte, so that they can plan journeys their way. And when a world-class flying experience with internationally applauded service standards remain constant, we continue to stay relevant. Eventually, there are a thousand ways of doing business, one just needs to do it right.
Of course, there are challenges as well. The aviation industry continues to grapple with issues such as inadequate infrastructure, slot constraints, high state taxes on ATF, high parking cost, among other things that make running an aviation business in India quite challenging. However, we’re happy that the government is cognizant of these limitations, and existing policies are being revisited or new ones are in the making to address some of the issues. It is also heartening that the government is taking a consultative approach to this, involving stakeholders from across groups for improvement in many spheres.
Infrastructure continues to be a major concern. Some of the non-metro airports are also facing capacity constraint. How serious this impediment is for expansion of your fleet and network?
Infrastructure-related issues, including but not limited to runway shortage, slot and airport capacity constraints, definitely require immediate and targeted solutions. Almost all metro cities need two airports to handle the growing demand for air travel, and smaller cities need significant improvement of existing airports. This is, perhaps, the biggest issue that hinders the growth of the Indian aviation ecosystem today, for it limits possibilities for airlines and eventually all related businesses and at the end, inconveniences consumers as well. We hear from so many of our loyal customers that they would like more flight options from their cities, but as much as we would like to multiple frequencies on some routes, we’re sadly constrained by non-availability of slots at several airports. We were very careful in evaluating all our options for fleet expansion and we factored in infrastructural constraints quite significantly at every step of the way, before ascertaining our fleet requirement for the next five years. However, there is a sharpened focus on infrastructure development by the government. The government’s vision of enabling a billion passenger trips a year is truly heartening and makes us quite hopeful.
There have been debates in the past over price distortion by Air India, which gets heavy subsidy from the government. Now that the airline is likely to continue as state-owned entity with another tranche of bail-out on its way, does it worry you?
I wouldn’t like to comment on any other airline. At Vistara, we’re not chasing the competition, but creating a unique space for ourselves in a market that has ample opportunities for all airlines. We’re passionate about delivering an unrivalled flying experience, and our remarkable success in a short span of time speaks for this. Having said that, we’re not new to competition. Our thoughts, ideas and ways of doing business and of serving our customers are original and unique. As a result we have carved a niche for ourselves in the market gaining millions of loyal customers.
How much fresh investment you would be making to strengthen your market position.
It may suffice to say that we’re adequately funded at present, and both our parent organisations are quite upbeat about what we can make of Vistara. They are confident of and remain deeply committed to our growth plan.
So far you have stayed away from participating in the regional connectivity scheme (RCS) while most of your peers have bagged the rights and launched operations. This suggests huge business opportunity exists there. Do you plan to bid for these routes in future?
We support the government’s UDAN scheme and view it as a landmark step in Indian aviation, which will significantly contribute, to the country’s economic growth. Due to our relatively small scale and size at present and absence of suitable aircraft to operate on routes under the scheme, we could not participate in it. However, we do not rule out the possibility of doing so in the future.