Vistara may fast-track expansion to fly abroad

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Vistara is likely to speed up expansion as part of its plan to fly overseas, a top company executive said, even as the airline looks likely to face hurdles in getting planes and crew fast enough.

The civil aviation ministry on Wednesday removed the stipulation that airlines must operate in India for at least five years before venturing abroad, while retaining the rule that mandates a minimum of 20 planes before starting overseas flights.

Vistara, which started in January 2015 and was lobbying to scrap this rule, still has only 11 planes.

“We are always open to competitive offers from lessors in terms of aircraft in the near future, but the price has to be right,” said chief executive officer Phee Teik Yeoh said.

Yet, Vistara’s fleet expansion won’t be quick or easy.

The airline, jointly owned by the Tata group and Singapore International Airlines (SIA), will get two planes around September, and then there are no deliveries scheduled until next June.

Under its current plan, it expects to acquire a total of 20 aircraft by 2018. This when India’s largest airline, IndiGo, plans to add 29 planes this fiscal year itself.

The cost and size of fleet expansion has to be right, Yeoh said, so that “we don’t suffer from indigestion”.

The $100-billion Tata group holds a 51% stake in the airline, while Singapore Airlines owns the rest. It flies to 17 destinations with 457 weekly frequencies.

Yeoh explained why more planes could be a better idea now.

“Now that our brand presence has gone so huge, even in Bengaluru, we are more confident of ramping up our utilization. Initially, we had kept our utilization low. We have now confidence to ramp it up,” he said.

It, however, will take time to lease planes.

According to Steve Forte, a former chief executive officer of Jet Airways, one of India’s full-service airline, Vistara could lean upon Singapore Airlines and associated airlines such as Scoot for planes.

Scoot, which recently started flying to India with its Boeing 787 planes, has said it will connect Jaipur, Amritsar and Chennai to Singapore this year.

Yeoh did not rule out this option.

“Still, you need to define your brand. You are not going to have the same seats as Scoot. You paint the livery different. You are going to also define what is your international product delivery,” he said.

Forte said in the long term, Vistara may take over Scoot routes.

“Vistara has no choice but to create a comprehensive domestic route structure and could become a primary feeder for Scoot. In other words, Scoot could serve as the builder of Vistara’s future international route structure. Once Vistara gets the approval to fly abroad, Scoot could then relinquish its routes one by one, and develop its business elsewhere. And voila’, Vistara would then end up with an ‘instant’ international network,” Forte said.

But rapid expansion has its own set of challenges.

Former head of operations at IndiGo, Shakti Lumba, said the airline will need trained engineers and pilots. For every 10 planes, it will need at least 70 trained captains and an equal number of co-pilots. Many experienced pilots are already taken up, which means hiring expensive expats or hiring pilots from other airlines at steep salaries.

“They are scraping the bottom of the barrel,” he said, referring to Vistara’s late entry.

Vistara has also faced strategic issues like changing seat configuration.

“It has been tough going for Vistara till date,” Ansuman Deb, an analyst with ICICI Securities, said in a 153-page report on Thursday. “Operations with business-class seats did not take off as hoped. It is not easy for any new airline with the policy of route dispersal guidelines, which binds it to fly some non-profitable routes.”