New battle in Indian aviation begins with Vistara’s launch

Vistara CEO Phee Teik Yeoh (seated left) and Chief commercial officer Giam Ming Toh (seated right), flanked by senior managers and crew.

Though not many of you may remember, 2005 was a good year for Indian aviation industry. Three new domestic airlines were launched and with them, the dreams and aspirations of the tycoons behind them took off. Of those, one has packed up, the second is just about holding it together and the third, by its founder’s own admission has survived because it has stayed marginal. Kingfisher Airlines, SpiceJet and Go Air -- all three started operations in 2005. It is fair to say that the entrepreneurial efforts have seen them come to naught or thereabouts.

A decade later, a new airline is starting commercial flights today. This time with backers / promoters who have waited for a really long time to start an airline. As the first Vistara flight UK-890 takes off, the one pertinent question on everyone’s mind is – What are the chances of this venture being profitable? In FY14, the last full-year for which data is available, Indian carriers together posted operating losses of close to Rs 6,000 crore. Despite reduced capacity, the picture for this year may not be any rosy either.

Against this backdrop, what will it take for a new airline venture to succeed? There is one big difference between Vistara and others, which gives the airline a fighting chance in the cut-throat environment of the Indian skies.

Vistara is a 51-49 joint venture between the Tata group and Singapore Airlines. Together, what the promoters bring to the table is unmatched by any other airline startup in India so far. Though the Tata’s have a bigger stake in the company, the senior management leading the airline have been hired from Singapore Airlines. They bring decades of experience of the airline industry that can make the critical difference between success and failure. Some may argue that airline seats are a commodity and can be sold the same way as any other product. But, as it has been repeatedly proven, the industry is complex and the market is hard to crack. It is highly regulated in most of the world and very expensive. Also, it has very stringent safety standards.

It is the nuts-and-bolts experience of aircraft / engine leasing, maintenance contracts, network management and optimising revenues that can make or break an airline. IndiGo is the best example of this in India. The airline has benefitted hugely from co-founder Rakesh Gangwal’s experience in the industry. Contrast this with entrepreneurs like Jeh Wadia and Vijay Mallya or in an earlier era Parvez Damania and SK Modi, who had no experience pertaining to the airline business. They took many big bets which were later proven wrong.