The last fiscal was a bad one for the domestic aviation industry due to high fuel prices and a weak rupee, with the intensely competitive environment and rapid capacity expansion by most airlines making matters worse. Not surprisingly, full service carrier Vistara, a joint venture between Tatas and Singapore Airlines, joined the likes of IndiGo and SpiceJet in reporting dismal numbers for FY19.
Vistara's losses spiked 93 per cent to Rs 831 crore in 2018-19, the Business Standard reported, citing Tata Sons' latest annual report. The report, however, did not share revenue details or the break-up of expenses. In comparison, SpiceJet reported a net loss of Rs 316.1 crore in standalone terms in FY19, down from a profit of Rs 566.66 crore in the previous fiscal while Indigo reported a sharp decline of 93 per cent (y-o-y) in its standalone net profit at Rs 156.10 crore.
Aviation turbine fuel on average spiked 23 per cent in FY19 while the rupee depreciated over 8 per cent against the US dollar increasing operating costs for domestic carriers. This is why Vistara's losses widened, despite the increase in its revenue and capacity. The country's sixth largest airline added two planes and carried five million passengers in the last fiscal.
"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," Kapil Kaul, South Asia CEO of aviation consultancy CAPA, told the daily. Rivals IndiGo and SpiceJet have already seen a turnaround in fortunes, with both airlines recently posting a huge jump in net profits for the first quarter of FY20.
Vistara similarly expected to improve its financial performance in the current fiscal, as it expands its network and gets a boost in premium-class occupancy following Jet Airways' demise. The launch of its international services is also expected to help improve aircraft utilisation. "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," a Vistara source told the daily.
Last week, the four-year old airline commenced international operations with the launch of its daily services from Mumbai and Delhi to Singapore. The airline intends to expand its global footprint further to Dubai and Bangkok later this month followed by London and Tokyo next year. So far, 11 new routes have reportedly been added, and Vistara added 9 planes between March and August alone taking the fleet size to 31.
In October, the airline disclosed in a regulatory filing that it had received Rs 2,000 crore from Tata Sons and Singapore Airlines. The fund infusion is clearly aimed at fuelling Vistara's aggressive capacity expansion moves. In 2018, Vistara placed its order for 50 purchased and leased aircraft from the Airbus A320neo family, including A321neos, with deliveries scheduled between 2019 and 2023. In addition, the carrier has bought six Boeing 787-9 Dreamliner aircraft to serve long-haul destinations that are scheduled to be delivered between 2020 and 2021.
Vistara will deploy 50 per cent of its capacity on international routes in the next five years, CEO Leslie Thng announced last week, adding that in the second phase of growth, the airline will look to start non-stop services to the US and Australia.
CAPA predicts that the domestic air traffic will rise 14-16 per cent in FY20, with international traffic set to be 10-12 per cent higher as the Indian fleet expands by more than 90 aircraft. Furthermore, Indian carriers are expected to narrow down losses to a collective $550-700 million in the current fiscal, including a return to profit by low-cost carriers.
With Reuters inputs