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Vistara CEO Vinod Kannan: No clarity on how Vistara and Air India will move forward; ball in Tatas' court

Vinod Kannan is not one to dodge a question. In this wide-ranging interview, the Vistara CEO gamely responds to every query thrown at him, from the impact of the Tata takeover of Air India and competition to ATF costs, managing a multi-aircraft fleet and a host of other challenges. Read on

May 26, 2022 / 03:59 PM IST
Vistara CEO Vinod Kannan.

Vistara CEO Vinod Kannan.

Vistara, a joint venture between Tata Sons and Singapore Airlines, which faced a lot of negative customer sentiments recently, is making attempts at rectifying those issues. Vinod Kannan, CEO, Vistara, says, “Of course, many of those comments and much of the feedback probably is valid because there were things that we could have done better and there were things that we were forced to do because of other reasons.”

While admitting that some employees have left to join other airlines, Kannan adds “but I am happy to say that there is no mass exodus.”

With a delay in delivery of its widebody Boeing 787, Kannan says Vistara is in talks for leasing capacity and adds that in the next month the airline “should be able to get a landing on where we are,” including how many widebody aircraft will be inducted in the fleet. Edited excerpts:

Tata Sons now owns Air India and Vistara. Is there any clarity on how it's going to be moving forward? Will both the brands be retained?

There is no clarity, at least as far as I am concerned, and from what I have been communicating externally and internally; the shareholders are in discussions. I am sure you have read reports that the shareholders are talking to each other, but at this time Vistara remains an independent entity. We remain focused on our growth and the things that we have to do ……I have another 20 aircraft that are coming in over the next two years, so that will be the focus in terms of what the branding will be. Whether there is going to be a merger, whether it is separate entities I will be guided by what the shareholders say, which I'm not a part of for good reasons.

But given the fact that Vistara has reported losses since inception, are the parents willing to keep funding an airline that is reporting losses? 

I think the last two years have been anomalies. It has been tough for everyone. But yes, we are still in the red. Still, the feedback from the shareholders has been positive. The fact that we were able to not just withstand the pandemic but grow through it—I have added almost 10 to 11 aircraft since the time that Covid started—this is a measure of the confidence that the shareholders have in us.

These are questions that the shareholders, especially the Tata side, have to answer. But there are other things that we have built up as Vistara—the fleet or the brand equity that we have. These are things that have to be considered and I'm sure that they will.

Right now, both Air India and Vistara are competing on domestic and international routes. Is there any clarity on how it's going to be? Will you keep competing or have you now decided among yourselves that Air India will operate at a particular time and Vistara will operate at a different time so that both of you can remain profitable?

We have not, and unless there is a decision on what the final position is or the entity is going to look like, or the entities will look like, it is not right to do that from a competition perspective. We are very clear that we are still two separate entities. The fact also is that there is enough demand for us to operate, especially on overlapping routes, whether domestic or international, with India as a growing market.

I would say it is a matter of us justifying the price that we charge and justifying the value that we bring. And I'm sure with the Tatas taking over Air India, they are in that process as well.

There are two more airlines coming up in the next few months. What is your strategy to meet the growing competition in the Indian market?

When we launched our operations one of these two airlines (Jet Airways) was still flying strong and even then, despite all that, we managed to make a name for ourselves and we are here today as much as the pandemic has battered all of us. I think what we have done internally is build a workforce and a team that is very nimble and able to navigate through crises. And competition is the name of the game. If it is not Jet or Akasa it would have been IndiGo or SpiceJet adding more aircraft. That is par for the course and we believe that we have a good value proposition.

There has been a lot of negative customer sentiment against Vistara. What is the airline doing to ensure that such issues don't come up again?

I suppose you are alluding to social media and negative comments that we received in the recent past. A lot of these were actually during January to March when things were still not as settled as they are now.  (In January, amid the third wave, Vistara cancelled and rescheduled several flights. Many customers were irate as its customer care number was constantly busy; in-flight services, including food, were also truncated because of the third wave.)

That is when we had the Covid third wave and operations were hit. We had to scale up quite fast up to December because after the second wave, things were going great. And then we had to scale back very fast in January because of the third wave.

There were certain changes we had to make in terms of in-flight service and customer service because even customer care representatives were affected by the third wave. All these things are behind us.

Of course, many of those comments and much of the feedback probably is valid because there were things that we could have done better and there were things that we were forced to do because of other reasons. But we took the bull by the horns. In February I sent out a note to all our customers to say that we believe we can do better.

Internally, as well, we spoke, I communicated the same to our employees and all our partners. We have started working on in-flight services.

We have also made some other efforts. I would say there is still some way to go but some efforts in terms of self-service and digital, things that we were perhaps not doing before, have been made. For example, if there is a disruption now you can go on to the website and either through the chatbot or an option similar to a Plan B, like what IndiGo has, you can look at what your flight status is and what options you have in terms of changing the flight or asking for a refund.

Have complaints come down?

The number of complaints may not be the right thing to look at because the number of flights has increased. We now have almost 15 to 20 percent more flights than pre-Covid times. So, in absolute numbers maybe not. But when we track complaints per thousand or feedback per thousand cases, those numbers have gone back to the levels that Vistara was proud to be associated with.

What is your staff retention strategy and what is your overall view on securing talent?

Talent everywhere is a concern regardless of whether you are in the services industry or IT or any other sector. When I talk to other leaders or other CEOs, one of the biggest things is, how do we recruit and retain talent? I don't think it is specific just to aviation.

What Is our strategy to retain talent? There are two things that are important. One is to be able to offer a brand that people will look up to. I think to a large extent, thanks to the Tatas, Singapore Airlines and Vistara itself, we have a brand people want to join or people want to be a part of.

Second is, internally how do we create a culture and environment that makes people stay? In the end, money is important but more importantly, tangibles like the culture that we have, which I believe is quite open, is also important.

These are things that people value to some extent and these are things that we have built over time. There will be people moving around, especially with opportunities that are coming up and that is the name of the game. But ultimately I think the brand that we have built and what we offer internally as an organisation is something that will tide us through.

Do you think that is enough to keep people back in Vistara?

Yes, although if there are opportunities elsewhere, there will always be operational staff who will leave as other airlines start recruiting. But the talent that we have built over time, especially after what we went through over the last two years, is something the team will appreciate.

With Akasa and Jet coming up, has there been any attrition from your airline?

A few people have joined these other airlines. The Middle East airlines have also started recruiting, especially cabin crew or tech crew as these are areas where traditionally people move. I have not seen too much of a move to Akasa or Jet at this point.

Never say never, but I am happy to say that there is no mass exodus.

ATF is at an all-time high. How much of that have you been able to absorb and how much has been passed on to the customer?

The fares have increased, that is no secret. But to put it in perspective, if I look at the ATF prices I paid in, say, April or May, they were almost 80 to 100 percent more than what I paid last year but airline ticket prices have not increased by that much. I would not say that I have been able to pass it entirely to the customer, but yes, we have been able to recover some of this cost increase in ATF through ticket prices.

Is the increase in fares in double digits? 

I would say it's double digits because fares have gone up. If you compare fares now versus say a year ago, there is at least a 20 to 30 percent increase, some of it, of course, is demand-driven. It is not purely because of cost, it is also because it's the high season. People are travelling for the summer. There is also revenge travel. So, it is not all attributable to the cost aspect. It is a bit tough to segregate it, but overall, prices have increased by about 20 to 30 percent on specific routes year on year.

But also remember that last year at this time there was the second wave, so it was depressed pricing.

The industry is touching about 400,000 passengers a day. When do you see it bouncing back and getting back into profitability?

This has been an industry where passenger numbers, unfortunately, have no relevance to the final bottom line because a lot of costs like fuel costs or more importantly, the exchange rate, play a big role. My own take is that this summer is going to be very strong. We would have all turned into the black if fuel prices were at the levels they used to be. But unfortunately, they have increased to an all-time high and nobody knows where the hike is going to stop. That is going to be a concern.

Are you adding capacity, getting in more planes? How are you capitalising on the opportunity that you have right now?

Yes. We added more planes even through the pandemic. We started the pandemic at about 40 aircraft. We are at 51 and in the next couple of months, we will hit 54 to 55. We are adding new planes and adding more routes as well. For example, recently, we started flights to Coimbatore from Delhi and we will be adding flights from Mumbai and Bangalore. We have restarted Mumbai to Ahmedabad.

Internationally, we have gone up to daily flights on the London service. We have added the Mumbai-Male flight; these are doing pretty well. At the same time, we are also mindful that there are constraints; for example, slots and infrastructure constraints. We are trying to navigate through these. But the endeavour definitely is to try and capitalise on this demand wave. The results in the initial term at least are promising. Our market share, which used to be 6 to 7 percent is now comfortably 8 to 9 percent every month as per the DGCA report. In February I think we were at 9.7 percent.

You mentioned that you will be adding four to five new aircraft in the next couple of months. Are they going to be narrow-body or wide-body planes? And can you give a time frame?

They will be narrow bodies. I take delivery of three more aircraft in the next couple of weeks. The wide-body Boeing 787s have been delayed because of the FAA (US regulator) and issues with the Boeing production facility. So, I am stuck at two (such) aircraft, but we are trying to see whether we can look at a temporary lease. We are in discussions with various lessors and with Boeing. This should hopefully be sorted out in the next few weeks.

How many leased aircraft are you looking at and by when do you expect to get them?

There are aircraft available in the market. I can't comment on how many because we are still negotiating with the lessors. But we believe that in the next month, we should be able to get a landing on where we are.

Within a month or so, we will know the details of whether that is going to happen. So, it's still a work in progress.

Why did Vistara decide to drop its business class and go in for an all-economy configuration on some of its aircraft? Didn’t that go against the airline's thinking and philosophy when it started?

We currently have six all-economy aircraft. The intention was never to become a low-cost carrier. Even on these all-economy flights, you get a meal and free baggage as part of your ticket. You also get a streaming service. It is not an LCC product, it is a service economy class product.

We found there were certain routes on which business or premium economy may not be as viable. These are points maybe to secondary cities. These are points where during different times of the day business class travel is very limited. Plus we can also deploy these aircraft on certain other routes, where we need additional seats where we believe the economy class can fill better. Due to these two reasons we had invested in a separate sub-fleet of aircraft. Among the destinations, the all-economy class aircraft service are Raipur, Indore, Ranchi and Bagdogra.

We will have ten all-economy aircraft deployed on certain routes where they are better used as compared to a business and economy aircraft.

When do you plan to phase out the Boeing 737s that are on lease?

They should leave by the end of this calendar year. I currently have five of them, three of them should leave by 2022 and two more will leave in the first half of next year.

Can you elaborate on your expansion plans—the B787 seems to be in limbo, so you will have to look at the Airbus 321 and the Airbus 320.

We are still waiting for good news for the Boeing 787s. We keep pushing Boeing but we will have to see what happens. We still operate almost 12 flights a week one way using the 2 Boeing 787s that we have. We have also used the Airbus 321. We are using it to Singapore and Dubai for example. There will be one more Airbus 321 coming in (part of the five aircraft) in the next few weeks.

We are also trying to see where else we can deploy the Airbus 321. There are certain routes that we had originally earmarked for the Airbus 321. We have done some charters as well on these routes during Covid. For example, we flew them to Hong Kong and Moscow. But all these routes, unfortunately, given the times, are not the most viable. We are trying to see where we can deploy them. Alternatively, some of them will have to be deployed on domestic routes for now till we have these other routes open. There will be announcements about a few more new international destinations opening in the coming weeks.

How are you managing the complexities of a multiple-aircraft fleet? Why did you go for it given that this was not part of your original plan?

The Boeing 787 and the Airbus 320 were always the plan. We had ordered both these knowing fully well that the 320 will be for the domestic or narrow-body or regional fleet and the 787 will be international. What was different was that the Boeing 737 planes (from Jet Airways) became available and we went into that to capitalise on the opportunity. It was a call we made, that given that Jet is suspending operations, firstly there are aircraft available. Secondly, there is demand because all the ex-Jet passengers would definitely fancy Vistara as an option. Those were valid commercial reasons. I think they paid off. To a certain extent, cabin crew can be multi-used. They can be used across multiple fleets but not so with the tech crew. For example, the pilots have to be trained on a fleet-specific basis.

We also have engineers who have to be trained again. They can be multi-trained. It’s not an issue of having only one fleet, but operationally it becomes a bit challenging when you have one aircraft down. For example, an A320 is down and you have to replace it with a 737 and your 737 does not have a premium economy for example.

If you did a cost-benefit analysis, do you think that the Boeing 737 paid off?

I have no idea. I haven't looked at it in detail, but I have to also look at the strategic element, the fact that we've reached the market share that we have. We command the stature that we have partly because we were able to induct these additional aircraft. We took nine of them, four of them have left, five will be leaving soon, but they did provide that immediate lift that we needed to capture some of the slots.

Will the five Boeing 737s leaving be compensated by the other aircraft coming in, or will there be a dip in the number of seats being offered?

The new aircraft coming in will be replacing these plus there will be aircraft for growth as well. So, it's not that we are taking a hit by returning the Boeing 737s because we had already planned for some growth to replace them.

Vistara has not looked at cargo. That is something yielding a lot of revenue for domestic airlines right now…

Yes, we have not looked at an all-cargo aircraft, we have not looked at freighters. As for using the belly-hold on the domestic and more importantly international routes, the Boeing 787 cargo capability or cargo capacity is almost 20 tons a flight, which is as good as any domestic freighter.

We have been using them to good effect. Cargo has been contributing a lot more than it used to, mainly because of demand and because of fares, which have gone up on the air-freight side. So, although we haven't moved into a separate vertical, the belly hold on domestic and international routes has seen good increases and we are continuing to focus on these as an ancillary stream of revenue.

Are there any numbers as to where cargo ancillary is right now and where you are looking to make it go?

Those numbers are sensitive and I will keep them to myself. What I can say is that cargo has contributed much more than it used to pre-Covid.

Ashwini Phadnis is a senior journalist based in New Delhi.
first published: May 26, 2022 02:03 pm