Vistara’s Conundrum

In April, I happened to take three Vistara flights while crisscrossing from Goa to Jharkhand and back and was pleasantly surprised to find that flying by Vistara was far more comfortable than most of its competitors.

One, all its Delhi flights operate out of T3, which is by far the better terminal. Two, there are many small perks the airline offers its regular fliers, as I witnessed while sitting next to one on my flight from Delhi to Ranchi. A professor from Jharkhand who is a platinum member, or some such, on Vistara's frequent flier program gave me a detailed account of all the things he was entitled to, all of which sounded a bit prehistoric to me since the era of full-service, loyalty points and frills seem so far back in the past.

Then, to my delight, loads on the return sector to Goa were so low that I had two seats empty beside me, making the flight far more comfortable than knocking elbows on IndiGo or SpiceJet which often makes one feel like a sardine in a tightly packed tin. For the first time in over a decade, I gathered the courage to try the free meal and lo behold found it was actually edible. I have long abandoned meals on domestic flights, packing a subway or making do with almonds or cashews after a few bad experiences.

But as I flew back, I thought about how and why an airline which started with all odds to its advantage has never really gotten anywhere in almost a decade, and even today remains a relatively unknown and unexplored creature in the Indian flier's mind space.

Product Mix Leaving High-Value Flier Confused?

Almost since its first flight in 2015, the Tata Singapore Airlines joint venture has at best seemed like a confused and lost child. It began ambitiously with an aircraft configuration of 16 business class seats, 36 premium economy and 96 economy class seats. Very soon it became evident that filling the business and premium economy and charging accordingly would be a challenge and the airline accordingly reduced the business seats to 8 and premium economy to 24 in mid-2016. Then in 2019, it inducted nine old Jet aircraft (B737-800NG) with 12 business class and 156 economy seats. In addition, it also inducted some fully economy aircraft in the same year.

These changes have cost the airline in terms of the consistency of the product. Fliers who have flown and liked the premium economy offering are miffed when they fly on another route and find the segment missing. Selling premium economy for shorter domestic hauls hasn’t been a piece of cake either.

Similarly, business class passengers don’t understand why this class is not available on some select routes. On a recent flight to Ranchi, union minister Arjun Munda found himself surrounded by all and sundry as the aircraft was an all-economy one. While he, with his tribal roots, took this cheerfully in his stride, there’s no denying that there would have been more than one union minister across governments who would not be at ease rubbing shoulders with the hoi polloi. The same holds true for many celebrities, film stars and corporate and business chiefs. For the airline, almost 80% of its revenues continue to come from economy passengers where IndiGo fares set the benchmark and the average load factors for business class at a network level have been below break-even, normalised for a 12-month period, as per analysis done by aviation consultancy firm AT-TV.

Challenges On Costs And Flight Frequency

If product consistency is a problem, so are the cost differentials. The airline has a higher cost base similar to erstwhile Jet Airways since it offers more than the low-fare airlines do in terms of services, both on and off-board. In terms of cost per available seat kilometre, Vistara’s costs are almost 30% higher than rivals, according to industry sources, although the fares charged do not reflect this. The higher cost base translates to lower margins. According to newspaper reports, the privately-held airline has over time totted up losses of over $1 billion, leaving Tata and Singapore Airlines forced to invest more with no clear signs of returns. As one industry insider put it: “Vistara’s premium product is good but so was Jet and Kingfisher and we have all seen where it took them”.

I mentioned my recent Vistara experience to a frequent flier mostly on IndiGo. He argued that finding the right Vistara connection at the desired time remains a rarity. As he put it: “I would if I could but I can’t so I don’t.” He doesn’t mind paying a few hundred rupees more to fly Vistara but timings are key and they simply don’t offer enough frequencies. This has led to a situation where it doesn’t offer a compelling proposition on domestic or international routes.

Besides being perceived as less nimble than its rivals, internally too the company has had its share of challenges with its dual structure of local hires and expats from Singapore, with different terms and conditions of employment of the two and different cultures and styles of functioning.

Flying In More Crowded Skies

Vistara has now over time managed to doggedly create a distinction between its product and that of its rivals. Whether that will allow the airline to price accordingly remains unclear. Vistara’s market share is now hovering a bit below 10%, higher than AirAsia India which launched before it and almost as much as SpiceJet and Go First who have been around much longer. With the entry of Akasa and perhaps Jet Airways 2.0, competitive pressures among India’s airlines appear set to intensify. This is the conundrum the airline faces: gaining market share and inching up to rivals has come at a heavy price.

In the final analysis, are Vistara’s business troubles behind it and is it set for a robust climb to the top? I wouldn’t bet my money on it even as I would choose to board it over others.

Anjuli Bhargava is a journalist, with reportage and commentary on India’s aviation space for over 25 years.

The views expressed here are those of the author and do not necessarily represent the views of BQ Prime or its editorial team.