Vistara will deploy 50% of its capacity on international routes in the next five years The Tata-Singapore Airlines joint venture Vistara’s losses ne
Vistara will deploy 50% of its capacity on international routes in the next five years
The Tata-Singapore Airlines joint venture Vistara’s losses nearly doubled to Rs 831 crore in 2018-19 (FY19) in a tough operating environment, which also saw its peers post weak results.
The airline, however, is expected to improve its financial performance in the current financial year, as it expands its network and gets a boost in premium-class occupancy following the closure of Jet Airways.
Vistara had reported a loss of Rs 431 crore in the previous financial year. The airline’s latest loss figure is mentioned in Tata Sons’ annual report for 2018-19. The report does not give the details of revenue and break-up of expenses.
While the airline’s capacity and revenue rose as it added two planes and carried five million passengers in FY19, losses widened due to an increase in crude oil prices and a weak rupee. On average, aviation turbine fuel was 23 per cent costlier in FY19 compared to FY18, while the rupee depreciated over 8 per cent against the US dollar, increasing the costs for domestic carriers.
Other domestic airlines, too, posted dismal results in the last financial year. InterGlobe Aviation, which runs the country’s largest airline by market share, IndiGo, saw its net profit decline 93 per cent to Rs 156 crore, while SpiceJet posted a loss of Rs 316 crore after a profitable FY18.
The situation has improved in the first quarter of FY20, where both IndiGo and SpiceJet have reported a huge jump in net profits. Vistara declined to comment on the issue. “As a matter of policy, we do not comment on the financial information of the company,” a spokesperson said.
“Vistara’s FY19 losses are in line with our estimates. The first half of FY19 was financially challenging for the entire industry and its losses are aligned to the overall industry performance. Jet’s closure is positive for Vistara and it has improved its financial numbers, but reaching profitability will be a long haul,” said Kapil Kaul, South Asia CEO of aviation consultancy CAPA.
Other analysts say the closure of Jet Airways and launch of new international services should help improve aircraft utilisation. Occupancy in business and premium economy cabins, too, is expected to get a boost, especially on the key Mumbai-Delhi route, where it flies 14 daily flights. “The capacity has increased significantly and there is a margin improvement in every quarter except the second quarter of last year. We are now close to break even,” said an airline source.
Vistara launched daily services from Mumbai and Delhi to Singapore last week and will add flights to Dubai and Bangkok later this month. Eleven new routes have been added, and fleet size has increased from 22 to 31 between March and August. Vistara ordered 56 Airbus and Boeing planes and promoters also pumped Rs 2,400 crore in the airline in FY19.
Vistara will deploy 50 per cent of its capacity on international routes in the next five years and aims to launch services to London and Tokyo next year, the airline’s chief executive officer, Leslie Thng, told mediapersons last week. In the second phase of growth, the airline will look to start non-stop services to the US and Australia, he had said.
First Published: Wed, August 14 2019. 22:10 IST