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The Tata Singapore Airlines joint venture airline Vistara will be re-configuring its Airbus A320 aircraft going forward in an effort to stem losses. The re-configuration could happen as early as this month when the airline’s seventh A320 is delivered.
Vedant Agarwal.
The airline’s six A320s currently have 16/36/96 seats in business, premium economy and economy class. Though Vistara has not provided any details, industry experts feel the airline will reduce the premium classes to increase economy class seating. The new configuration is expected to be 8/18/128. It is also unclear whether the re-configuration will be retro-fitted on to the existing fleet, though it is not immediately likely.
An industry analyst estimates Vistara suffered a loss of about Rs 1,200 per passenger it flew. The analyst aggregating the airline suffered total loss of around Rs 600 million and has flow a little over 0.5 million passengers. Clearly Vistara has wrongly judged the premium the price sensitive Indian passenger is willing to pay for domestic services.
The much touted premium economy class is a dual edged sword. Admittedly Vistara is the only airline offering this class on domestic routes, however, as industry inputs seem to suggest, Vistara in a way is cannibalising its business class as many business travellers choose premium economy class instead. With a growing uncertainty about Indian economic reforms and the slowing global economy filling the high priced business class is a significant challenge.
“Vistara planning seems to be oblivious though and without any substantial market or overall experience these results are perhaps inevitable.”
The lack of broad network of business destinations with services at convenient timings adds to the challenge, and this is reflected by the extremely low passenger load factors. The airline appears to be relying on value added services like Wi-Fi on aircraft. This will provide sustainable competitive advantage to Vistara, but it is not likely to generate adequate monetary returns.
Should Vistara acquire GoAir?
Readers will recall, six months ago, I had written a satirical article about Vistara acquiring GoAir.
That fantasy seems to be finding roots in reality. In the six months since the article, key developments I had presumed, have come true. De Roni has quit GoAir which is now floundering financially. Now that Vistara is realising its high price, high service model needs a tweak, do you feel this is a key moment for Vistara to re-consider what was once satirical thought, and acquire GoAir?
Share your thoughts via a comment.
Perhaps A320 is too big. Maybe 50-seat aircraft would be better.
Especially given that domestic airlines are required to fly to unprofitable airports.
Or something like the Embrear E-170. That would have seemed like a good idea.
I’ve always been skeptical since Vistara introduced it on domestic sector (although I love the PE product). Our market is different. The majority of the market is price sensitive and thus makes sense to have a larger EC (Economy Class). Customers in this category generally would not like to spend more to try out PE. They usually think its better to try BC (Business Class) or save money and travel in EC. I’m stating facts here having been talking to my friends/colleagues. You have a small minority who are ready to splurge on BC every time they travel & they would not consider PE to have that social distinction. Some say they do not want to set a precedent in their company by accepting to travel on PE. I do not feel airlines should plan for a large PE market here. I know it becomes tricky when Vistara will start flying internationally. And lastly, the smaller flying times between our metros (where you expect majority of PE traffic) is going to limit the PE uptake. I feel UK should stay clear of G8 although I always felt there is more truth than perceived in your satire article. If at all I think SG should be more interested in acquiring G8 if they have funds available.
Why stay away from G8?
SpiceJet can already fly international.
I think the perfect compromise may be to allow new airlines to fly long distance flights (over 8 hours) since incumbents do not fly to AUS, NZ, RSA, anyway.
And keep the 5/20 rule for short distance flights like Dubai, Singapore, Bangkok.
Although flying International is the main criteria but it is definitely not the only one. My view is based on the historical experiences. Jet -> Sahara, Kingfisher -> Deccan and some smaller airlines in the 90s. I’m not saying Vistara buying GoAir will end up bad for the former, but they have different operating models. Whereas SG will be happy to see a competitor go & also meet their massive expansion plans. They don’t mind operating both Airbus & Boeing. I read somewhere that getting A320 planes on lease has become very difficult & slots for new ones are filled till 2018.
One of the full service domestic carrier may be Vistara (Given that they have baggage allowance matching policy) should consider flying a few night flights connecting DEL to other cities. There are several night arrivals (Aeroflot, Ethiopian,China Southern,Swiss,Austrian,ANA) that do not actively connect to other cities. International passengers with domestic ongoing connection should wait till morning to resume their journey. DEL-BLR ,DEL-MAA, DEL-HYD might work for them at night. If every airline targets the same pie without much thought, some one would suffer losses.
I don’t think hey should acquire GoAir. They might end up like Kingfisher Deccan.
Vistara is in really good hands on one side its the Tata’s with real indian economy understanding and on the other side SIA with real world aviation understanding. I am sure whatever decision they take, they would ensure that it rightfully finds its place in the current indian market scenario as well as maintain a class apart from other carriers because of its SIA background. Its still relatively new. Let them explore more, run more and they can turn out to grab a huge chunk of the flying mass in this country.