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Vistara orders 50 Airbus Neos, 6 Dreamliners in pursuit of profitability

Arindam Majumder/New Delhi 11 Jul 18 | 08:37 PM

In a major expansion bid, Tata Sons and Singapore Airlines’ joint venture, Vistara, has placed an order for 50 Airbus A320neos and A321neos, and six Boeing 787-9 Dreamliners. This is the first major order by the airline since starting operations in 2015.

While the airline has signed an agreement with French manufacturer Airbus for 13 A320neos, it will lease 37 aircraft. Additionally, the airline has kept the option to order four more Dreamliners from Boeing open.

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Chief Executive Officer Leslie Thng said he was convinced that the order would provide a fillip for profitable operations as it would enable the airline to make its network denser and operate on more profitable international routes. “We will use the A320 and A321 to boost our domestic network as well as to launch international destinations from our hub in Delhi. Simultaneously, the Dreamliners would be used to start destinations on the medium- and long-haul international routes," Thng said in an interview. 

The first batch of the single-aisle A320neo would be delivered in the first half of 2019, while the Dreamliner would join the fleet in the first half of 2020. It currently has a fleet of 21 A320 planes.

Operating in one of the world’s most price-sensitive markets, Vistara is yet to become profitable and has been able to corner only 4 per cent of the domestic market. Last year, the airline earned 3.36 per seat for 1 km, while spending 4.69 for the same. In comparison, low-cost airline IndiGo, which commands 40 per cent share of the market, spent 3.04 to earn 3.40.

Vistara’s rivals have also firmed up aircraft induction plans. Market leader IndiGo, with around 400 single-aisle A320 and A321 jets on order, is adding six planes every month on an average. Both Jet Airways and SpiceJet have more than 200 Boeing 737 MAX planes each on order, with fleet induction for SpiceJet starting from August.

Thng, however, said he was unperturbed by the challenge and thinks the growth in aspiration of the Indian middle class offers scope for all kinds of products. “The robust growth of the Indian market offers an opportunity to all to do business. When we operate international routes too, our much bigger rivals will not stay silent. But the rationale behind the order is that we see an opportunity for ourselves and are ready to tap into that," Thng said.

Experts said the order will help the airline improve its cost economics. Vistara has gone ahead with modest and realistic orders. The 50 A320s will help the airline replace its first 13 A320s and have an all-A320neo fleet soon. The cost-effective aircraft will help it compete better and fly a standard product. The number is also an indication that the airline is not intending to open up new markets, but will continue its premium mix to enter markets which are mature and offer a fine mix of corporate and premium traffic," said Ameya Joshi, founder of aviation blog Network Thoughts.

Simultaneously, the larger Boeing 787-9 will provide a right mix of business, premium economy, and economy cabins. “It will accommodate as many passengers as the A330s of Jet Airways, but at a cheaper cost and a longer range which will help the airline keep the options open for non-stop flights to the US, and get an advantage of per seat cost over Air India," Joshi said.

Industry sources said that the airline will also tinker with its product, launching a no-frills basic economy fare and adding extra row of seats to the single-aisle A320s. The airline in 2016 had changed its cabin by increasing economy space and cutting business class seats. Currently, it offers eight business, 24 premium economy, and 126 economy seats.

He refused to share details, saying product development is still in the planning stage. “We will share when we finalise something," he added.

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