Posted: July 1, 2018 |  AUTHOR: KEN FOX | CONTACT ME

 

Introduction
A unique joint venture between Singapore Airlines and Indian conglomerate The Tata Group* launched a new full service Vistara Airlines. The two partners had previously tried to start an airline in the mid 1990’s but it was unsuccessful, due to the Indian government not allowing regulatory approval. However, the Indian government has opened up its airline industry to a 40% foreign direct investment. The two companies tried again in a more welcoming governmental environment. Tata Sons owns 51% and Singapore Airlines Ltd (SIA) owns the remaining 49%.

The new airline hopes to redefine air travel in India. It wants to provide a personalized flying experience which blends Tata’s and SIA’s service excellence and legendary hospitality. This alliance reflects the very high image of the Taj Hotel chain owed by the Tata Group, and outstanding service provided by Singapore Airlines.

Vistara formally started in January 2015. The name is taken from Sanskirt with the word vistara meaning limited expanse. Vistara Airlines has made positive headway in terms of on time arrivals and membership in the International Air Transport Association (IATA), which is an achievement for an Indian airline.

As of June 2018, Vistara serves 22 destinations in India with over 800 flights a week.
Vistara Airlines announced it received its 21st aircraft in June 2018, an Airbus A320neo. This number of operating aircraft allows the company to fly to international destinations.
Vistara’s CEO, Leslie Thg stated in February 2018 interview:
“our mission from day one is to go international, using the domestic market’s size and more importantly, feed, for our international operations.”
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*As a reminder, The Tata Group owns the luxury Taj Hotel Resorts & Palaces with 99 hotels located worldwide and 83 throughout India.
CEO Thg further stated only about 3% of India’s 1.3 billion people have actually traveled by air. The airline has not announced its first international destinations, but only says it would likely be a medium-haul route “of between 5-9 hours.” International flights will be launched from its main base at Delhi Indira Gandhi International Airport, but the carrier also plans to fly internationally from secondary hubs in Bengaluru and Mumbai.

The Vistara Brand
Vistara wants to transform the flying experience in India. Their CEO said they will do this by “delivering our signature personalized and seamless service with intuitive thoughtfulness.” Their frequent flyer program is based on earning points on what one pays. Vistara planes have a three class configuration: business class, premium economy and economy. The premium economy is a first in India and has proved very successful. It targeted the high-end economy fliers who are unwilling to upgrade to pricey business class but who would not mind some of the privileges, such as: wider and semi-reclining seats and more leg room. Currently, all business class passengers are given a Samsung Galaxy tablet preloaded with specially selected audio-visual content.

The company wants to bring Vistara as a brand to overseas markets. They clearly want to be seen as an international airline.

 

Services
It was recently confirmed that Vistara ordered $3.1 billion dollars worth of aircraft including 13 A320 new family jets from Airbus and 6 Boeing 787-9 aircraft, which will facilitate international expansion.

One way of leveraging their joint partnership between Tata and Singapore Air is the launching of a “Chef on board” program, beginning May 1, 2018. This program utilizes Tata’s Taj SATS Air Catering Limited group. The Chef on board program is unique for India, where a uniformed chef will obtain immediate feedback on the menus offered, and in the future maintain the quality of service delivered. “A new menu features all-time Indian, Asian and Continental favorites and is based on food choices one would look forward to when dining out to eat with friends and family.”

Chef on board, Vistara Airlines

Airlines in India
India has a fragmented commercial airline market. Many Indian start-up airlines have come and gone under. Air India, the largest and flag carrier of India was started in 1932 by J.R.D Tata and originally called Tata Airlines. It started flying a single engine de Haviland Puss Moth aircraft carrying mail from Karachi to Bombay (present Mumbai).

Air India currently uses Airbus and Boeing Aircraft serving 94 domestic and international routes. Air India is now owned by Air India, Ltd, a government owned enterprise. The company is currently $7.8 billion in debt and the government wants to sell 76% of the company.

The largest airline in India is low cost carrier IndiGo, which was founded in 2006 and based in Gurgaon, Haryana, India. It claims a 41% domestic market share (as of May 2018). The airline flies to 51 destinations, both domestic (43 destinations) and international (8 destinations). It’s first international flight in January 2011 was from Delhi to Dubai, UAE. IndiGo went public in 2005. It flies these types of aircraft:

IndiGo had serious engine problems over the past two years. Their Pratt & Whitney PW45000 engines have shut down a number of times with planes making emergency landings on one engine. They had to replace these engines on 32 Airbus 320 Neo Aircraft at least 69 times in the period May 2016-November 2017.

Performance
There is no published revenue or profit data from the joint venture. However, an indicator of success is load factor information. One published report (Source: DGCA) showed the load factor for Vistara Airlines in February 2018 to be 90%.

 

Commentary
Vistara Airlines is disrupting the Indian commercial airline business. The apparent decline and financial stress of Air India and the many previous airline start-up failures suggest an opportunity to fill gaps in the market. India is prospering under Prime Minister Modi’s leadership. The IMF expects the Indian economy to grow at an annual rate of 7.4% in 2018 and 7.8% in 2019. Restrictive government policies are being reduced or eliminated* and consumers are being given more choices, as evidenced by IKEA planning to open 25 new stores in India.

Vistara is establishing a high end positioning based on proven partners, Singapore Airlines and Tata’s upscale Taj Hotel chain. The combination provides a strong value proposition with opportunity to tap into proven management experience and quality services from each partner.

The airline achieved the hurdle of owning 20 aircraft to qualify for international flights. Vistara has the opportunity to leverage the excellent reputation of Singapore Airlines among their domestic market who may be tired of failing airline start-ups, engine failures or those that may never have flown an airline previously. I wish Vistara great success.
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*Such as loosening restrictions on Foreign Direct Investment (FDI), reduction of export-import taxes, and the removal of price controls.

Resources

  1. Vistara Receives 21st Aircraft; Becomes Eligible to Fly International, Mihra Mishra, The Economic Times, June 24, 2018.
  2. Interview: Vistara Gears Up for International Launch, AAron Chong, Flight Dashboard, February 26, 2018.
  3. New Owners of Air India to Get Planes and $5 billion of Debt, Anurag Kotoky, Bloomberg, March 29, 2018.
  4. IndiGo’s Engine Nightmare: 3 In-Air Failures, 69 Replacements in 18 months, Rajeev Dubey, Business Today, February 13, 2018.
  5. How Do You Solve a Problem like Air India?, Brian Pereira, Business World, June 2017.
  6. Vistara Takes Off but Can it Succeed Where other Carriers have Failed?, Business Moneycontrol.com, January 9. 2018.
  7. We HAve Changed the Way India Flies, Nithin Rao, Tata Group Website, February 2016.
  8. What Will Be the future of Air Vistra Airlines, Quora for Business, March 21, 2018.
  9. India’s Economy on Track to Beat China, Panos Mourdoukoutas, Forbes, April 21, 2018.
    Wikipedia
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©2017, The Global Galaxy blog is produced by The Soundings Group, LLC, Charleston, South Carolina, USA, www.thesoundingsgroup.com. The company is an international business consulting firm, specializing in new market assessments, market entry strategies and marketing guidance. The scope of Global Galaxy is to cover timely international trends, issues and business building ideas. Its purpose is to educate, inform and stimulate thinking for business opportunity analyses.

 

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