Full-service airlines have room for growth in India – Vistara CFO

July 20, 2015

India’s aviation sector is dominated by low-cost carriers such as IndiGo and SpiceJet but Niyant Maru, chief financial officer of India’s newest airline Vistara, says there is room for growth in the full-service carrier segment as increasing prosperity leads to demand for quality in-flight services.

On July 20, Maru joined the Trading India Forum, a live webchat hosted by Thomson Reuters where members from the financial industry interact. Maru shared his views on Vistara’s performance and where India’s aviation industry is headed.

Here are edited excerpts from Maru’s responses in the chatroom. Any opinions expressed here are those of Maru and not of Thomson Reuters.

Q: Let’s begin with your assessment of the first five-six months of Vistara’s operation. Has it met your expectations?
A: First of all, it has been a great moment for both the shareholders to see a long dreamt partnership take to the skies. The experience that we have gained in the initial months has been immense.

It was a slow start but as days pass by, we have seen a good response from the customers. As we speak, we have completed six months in operation and we started with two routes but are now covering 10 stations with around 250 flights a week and served more than 400,000 customers.

Q: Can we expect Vistara’s IPO in the coming years?
A: I think it is too early to comment on IPO as it takes time to build scale and gain efficiency in this industry.

Q: What is the crucial factor that will make you a success in the highly competitive Indian airline industry?
A: We believe there are three important constituents of our strategy – (1) service excellence (2) operational excellence, and (3) cost leadership.

Q: All major airlines in India, except one, are running operating losses and are debt-ridden. What are the primary issues that need to be addressed by the industry?
A: In any industry, demand and pricing is market driven so maintaining cost, which is in management’s control, is key. We believe that low oil prices augur well and if VAT on fuel can be rationalised across India, it will go a long way in growing this industry over time.

Q: Why do you feel that there is room for a full-service carrier when the low-cost model dominates?
A: If one looks at the Industry there is a room for growth in the full-service carrier segment as the economy grows, purchasing power increases and people want to experience quality service.

Q: When do you expect to get your load factors to a level where you are profitable?
A: We have introduced many firsts in the industry such as premium economy, value-based loyalty system and an innovative IFE (in-flight entertainment), besides others. These will definitely differentiate us from other players and help us in achieving better load factors over time as customers get to experience Vistara services.

Q: When do you expect to become profitable?
A: As of now, we are focusing on delivering service excellence and ensure that more and more people experience Vistara. Profitability and break even will follow in due course.

Q: Can you give us a timeline on when you expect to break even?
A: Too early to comment. We are just six months into operations.

Q: What is the plan for the next 12 months in terms of fleet expansion? You had previously said the company would lease 20 Airbus A320s by 2019.
A: We have six aircraft in our fleet and by end of March 2016 we will have nine. We have a contract for 20 aircraft including 7 NEOs which we will receive by end of the fourth year of operations i.e. 2018.

Q: When do you expect the government to get rid of the 5/20 rule?
A: We are also waiting for revision in the 5/20 rule as it is the biggest impediment to the growth of the sector. We are hopeful that the pro-business and pro-growth government will take a decision soon.

Q: How does the Indian aviation environment compare to that in other Asian countries?
A: Indian aviation has immense potential. If the policy is conducive to support growth, Indian aviation can reach its fullest potential and be showcased on the world’s platform.

(Trading India chat hosted by Savio Shetty. Transcript edited by Sankalp Phartiyal and David Lalmalsawma. Follow Trading India on Twitter @TradingIndia, Savio @abeautifulmind7, Sankalp @sankalp_sp and David @davidlms25. This article is website-exclusive and cannot be reproduced without permission)

No comments so far

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/