Vistara's transfer of Boeing 737s to Air India Express is a win-win for both

For Vistara, it would mean one step closer to being an airline with all new-age aircraft. It would have just two A320ceo in its fleet now, both of which are not in active operation and could see redelivery very soon. Both these aircraft moved to MRO (for possible redelivery), as per the flight tracking website FlightRadar24.

The 737s of Vistara

As Jet Airways went down in April 2019, Vistara had a first-mover advantage when it added flights on the Mumbai-Bengaluru sector. The capacity came by withdrawing flights from some other sectors. The government stepped in and linked the redistribution of slots to the addition of capacity.

SpiceJet made the most of it as it took 31 B737s which were with Jet Airways while Vistara took 9. This was a win-win for lessors whose aircraft were stuck with Jet Airways without the rentals being paid.

Vistara was an all-Airbus airline then, with widebody induction a few months away and the fleet comprising A320s only. While a few A320s were available in the open market, pilots weren’t and there came the 737s. With an airline shut down, there also was a ready stream of 737 pilots and thus the airline added nine of them.

What does this mean for Vistara?

The airline has returned four of these nine aircraft to the lessor while five operational ones continue operating. The airline had deployed these aircraft on routes to Hyderabad, Kolkata and Chennai from Mumbai along with one odd Mumbai-Delhi and Delhi-Patna flight last season.

Vistara will have three benefits — simplification of the fleet, reduction in the average age of the fleet and moving to more fuel-efficient aircraft. All of this will, directly and indirectly, help in improving costs and also customer experience.

What does this mean for Air India Express?

Air India Express, which has had its expansion on hold as it went for privatisation, will get the much-needed strength for expansion. The airline, which is primarily South-based, has seen expansion from Delhi in the past and could use this to strengthen the network from other points as well. The airline has 24 aircraft in its fleet.

The airline has in the past made its ambitions clear on various fora about flying to central Asia and ASEAN. Though a subsidiary of Air India, the airline does not have a codeshare with Air India and that keeps both airlines away from selling each other's inventory. Looking at that area could help shore up revenues for the Air India group.

Air India Express could soon have two aircraft types in its fleet with the merger of AirAsia India with Air India Express. This will help the airline satisfy the criterion of deploying international capacity under the National Civil Aviation Policy. The policy mandates airlines to deploy 20 aircraft on domestic routes and incremental capacity on international flights. Air India Express was exempt due to it being a government airline.

Is this an indication of a merger?

Vistara and Air India Express are two separate entities. Air India Express is 100 percent owned by Air India, which, in turn, is owned by Talace, a subsidiary of Tata Sons. Vistara, on the other hand, is 51 percent owned by Tata Sons.

The five planes are leased and thus technically not transferred from Vistara to Air India Express but processed in such a way that there is either completion of the lease or early termination from Vistara with the new customer for these planes being Air India Express.

While the process says so, there is enough room to believe that the two airlines and the lessors have been on board with such a decision to transfer planes. The other factor, of course, is manpower, which cannot move without explicit approval and plan from the two entities at the highest level.

This hardly is an indication of a merger but only signals closer cooperation. Beyond that, the Tata and SIA teams will require more time to work out the way forward both in terms of investments, funds and structure before SIA can come on board with investments in Air India.