File image of a parked Vistara aircraft.
Vistara, the Tata Sons-Singapore Airlines joint venture that is slated to be merged with Air India by March 2024, declared its best-ever performance in the third quarter of FY23. The airline also crossed the $1 billion revenue mark in FY23, with 67 days left in this financial year.
While the results, by its own admission, don’t include unrealised foreign currency losses and non-operating income, it is a performance of which the airline should be proud.
Vistara, which started services in 2015, has gone through multiple phases – starting with a premium-heavy configuration based on its market research. The airline has since reconfigured its planes twice and also inducted all-economy aircraft, a far cry from being the first and only airline to offer three classes of service on domestic routes in India.
Although Vistara has specifically noted the non-inclusion of unrealised foreign currency losses and non-operating income, there is a reason to believe that the airline has at best clocked an operating profit and not a net profit. The airline is unlisted and is not required to release its financials publicly.
Hidden behind the numbers is a story of resilience and focus on growth during the pandemic and is the only carrier, apart from IndiGo, to keep scaling up with a razor-sharp focus on fleet renewal.
International expansion to the rescue
Vistara’s first B787 Dreamliner landed on the last day of February 2020. With dreams and ambitions as big as the plane, the airline was forced to ground it as the world headed into lockdown. When things opened up partially, the airline deployed the aircraft as part of the air bubble travel arrangement to places including Tokyo, Frankfurt, Paris, and London.
The pandemic and subsequent reduction of flights the world over gave Vistara coveted slots at Heathrow that the airline could make permanent later for more reasons than one.
While the widebody aircraft were utilised, another challenge cropped up. The US Federal Aviation Administration asked Boeing to stop delivery of the Dreamliners, citing quality issues. Vistara’s aircraft had rolled out of the production line but could not be delivered. While the airline waited for its next aircraft, it inducted one from the open market to augment services to Paris and Frankfurt.
On the narrowbody aircraft front, the A321s with flatbeds in business class were utilised for ASEAN and Gulf destinations. As international operations resumed in March last year, Vistara steadily increased services, first by augmenting its presence in Bangkok, Kathmandu, and Singapore, and then by adding flights to the Middle East from Mumbai.
The advantage of operating international flights is that taxation on fuel is lower, and selling tickets in foreign currency helps counter the sliding rupee and its impact. While Vistara competes with Etihad and Emirates on Gulf routes, the pricing is not as cutthroat as it is on domestic routes, helping to make more revenue per unit and pushing overall revenue and yields upwards.
While airlines shrank, Vistara remained committed to the market and at times even tried filling up the void left by others. In 2021, the airline was almost at the same level of departures as in 2019, the pre-pandemic year, something that even IndiGo found hard to match.
The airline closed the third quarter of FY23 with over 3.3 million passengers, its highest ever. The airline had carried 2.22 million passengers in the third quarter of FY20, the last full quarter of operations before the pandemic.
Growth and tilt towards international
Vistara operated 7,056 domestic departures in November 2022, the latest month for which the regulator has released data. This is 28 percent higher than the corresponding month of 2019. In terms of available seat kilometres (ASK), growth was higher at 34 percent.
On the international side, growth was almost threefold in three years, with departures going up to 742 in November 2022 from 250 in November 2019. In terms of ASKs, the growth had quadrupled.
International capacity by ASKs now constitutes 29 percent of Vistara’s total capacity, compared to 12 percent in November 2019. This is only a fourth of IndiGo’s capacity on international routes. IndiGo has 23 percent of its total capacity on international routes.
Vistara may have a long way to go in terms of profitability, but it has exactly five quarters before it merges with Air India. It has an opportunity like no other to leave a legacy while heading into a legacy airline.
As the focus shifts towards the merger, how it inducts its next aircraft and eases out the three B737s from its fleet to become an airline with all modern fuel-efficient aircraft and its international expansion will define the way forward. All it needs is one-quarter of net profit without any asterisks before it merges with the big red airline.
Checkout Budget Highlights 2023
