Vistara thriving on international routes, more coming up: CEO Kannan

'If you look at the Indian aviation market, we are in a better place compared to some of the other countries,' he says

Having posted its maiden profit, Vistara Airlines is now bracing for its merger with Air India. At the cusp of this momentous feat, CEO Vinod Kannan talks to DH’s Lavpreet Kaur on what the immediate future and post-merger holds for the eight-year-old airline and then some - on the Indian aviation scene. Here some excerpts from that exchange:

Air India CEO, Campbell Wilson, has talked of taking forward some of Vistara’s legacy into the merged entity - which would these be?

I think one of the things that is very clear, from both Campbell, as well as the shareholders, is that all the positives that we built here, we migrate to the new Air India, whether it comes to policies, processes, the way we do things, knowledge transfer, and people. In the end, any organisation is built by its people and therefore, as I’ve been assuring my team, I think there’s enough and more opportunities for us in the new organisation. And we hope that a lot of them do come along on the journey.

How will you resolve issues like the multiplicity of single positions, pay parity, and employee consolidation? You talked of hiring another 1000 employees this year, will they be retained post-merger?

So if you look at the scale of what is being set out to be achieved, we are looking at almost 2x to 2.5x, compared to what we have today, not just Vistara but across the Tata Group airlines. For most airlines, a lot of this manpower is the frontline and operational stuff and that’s directly related to the number of aircraft. So obviously, there’s going to be no impact on that as the number of aircraft grows, in fact, we will have to recruit more staff as well.

As far as the other support staff are concerned, again, the scale of what we’re planning to achieve, there are enough opportunities for us.

What’s the status of the merger process with AI? Do you expect it to be completed by March 2024?

That’s the plan, the process has begun. Of course, there are various approvals that are needed and there are various things that we can’t work together with AI, because we are still separate entities. But once we have those approvals, and once that process takes place, I think we will have a little bit more clarity. But I think we are working towards those kinds of timelines.

Last quarter, Vistara posted a profit for the first time, what has been the major driver?

If you look at the macroeconomic factors, there has been a strong rebound in travel, again, not just in India, but across the world. And therefore, that has definitely played up in terms of demand, average ticket price and so on. Unfortunately, the cost of operations was also high. During the second half of last year, fuel prices were quite high. Thankfully, that’s come off a little bit now, but the US dollar is still strong compared to the Indian rupee. So there are some clouds when it comes to the cost side but thankfully, we’ve been able to do a very good job on the revenue.

What are your expectations for the present quarter? Could you also plan for the upcoming year?

We hope to continue the good run. But of course, seasonality also matters, and January to March is not as strong as an October to December quarter. So while the load factors have remained steady or, in fact, increased slightly, the average ticket prices actually came down.. So, we are hoping to have a good result for this quarter as well but time will tell.

You also talked about expanding your fleet of 70 aircraft towards the end of 2024, can you share details on what aircraft you plan to add? Do you think Indian airports are ready for this major addition?

As of today, we are at 55 aircraft, we will get another 15 net. Four of them will be 787 Dreamliners, there will be three more A321, and the rest will all (8) be A320 Neos. So it’s a pretty homogenous fleet.

As far as the Indian aviation industry is concerned, with new airports coming up, I think the infrastructure constraints that we have will probably remain for the short term, but there is going to be some growth in airport capacity as well.

What are some of the challenges ahead of the Indian aviation industry in your opinion? Do you think the surge in demand post-pandemic will continue in the upcoming year?

If you look at the Indian aviation market, we are in a better place compared to some of the other countries. If you look at the proportion of Indians who are flying now, there is still a long headway on how many more people can actually take to the skies. So I think at a very broad level, we are a growing market.

Having said that, cost pressures for airlines, especially because we are so much driven by USD costs or foreign currency costs, is an issue. We are an industry that is so prone to so many of the shocks... But thankfully, we’re also an industry that bounces back quite fast. So I’d say my outlook is cautiously optimistic.

As of now, which are the routes that are the most profitable for Vistara? You’re also now expanding your international routes, what are your further plans on that front?

I can’t talk about specific routes and route profitability, I can say that the international routes are doing very well. In fact, longer flying time - anything over three to four hours - that’s where our value comes from… I think London, Frankfurt and Paris, which we are operating with our three 787 Dreamliners are doing very well and we expect that to continue.

And as for the new aircraft coming in, we will focus on international. That’s why you see a lot of new routes that are being added, such as Dammam, we reintroduced Colombo, Mauritius is going to start from Bombay soon. There’ll be more such announcements.

Cargo has emerged as an important area of focus over the years. How do you view this market? Any plans to move in that direction anytime soon?

Fundamentally we are a passenger airline, and therefore belly cargo is what we will be focusing on. Having said that, with the 787s, you have a belly capacity of 20 to 25 tonnes, which is quite significant. So I think we have good growth coming in just from the belly hold in the coming year. And also, the fact is that the cargo market is also quite seasonal. In fact, now that capacity is back in the market, cargo yields and demand have kind of flattened out a little bit, compared to the highs seen during the pandemic.

Do you have any plans on MRO (maintenance, repair and operations)? The need for it has been talked about a lot in India.

Not at this time. We are focusing on improving our internal capabilities, which will be required in the long run, but setting up a separate MRO, I think that’s not something Vistara has planned for now.