After years of caution, the Tata group is now expanding its two airlines in India.
The salt-to-software conglomerate, which pioneered commercial flights in India in the 1930s, re-entered the sector in 2014 with Air Asia India, a joint venture with Malaysia’s AirAsia Berhad. It now holds a 51% stake in this venture. Tata Sons, the group’s holding company, also owns Vistara, a 51-49 joint venture with Singapore Airlines launched in 2015.
However, it is only now that the storied business group is thinking of a more significant role in Indian aviation, adding more aircraft and making overseas plans.
The two Tata airlines together account for a less-than-impressive piece of India’s fast-expanding aviation pie.
In the January-March 2019 quarter, the domestic market share of AirAsia stood at 5.5% and Vistara at 4%, trailing IndiGo (44%), SpiceJet (13.6%), and even GoAir (9.2%), show data from sector regulator, the directorate general of civil aviation.
In AirAsia’s case, some of the blame can be traced to an unstable top deck. Its first CEO, Mittu Chandilya, left the airline abruptly in 2016. Two years later, his successor Amar Abrol quit, returning to the Air Asia Group’s headquarters in Malaysia.
Vistara, too, had turbulent initial years.
Analysts say the airline was not able to create a unique identity for itself. “Vistara does not have its USP,” Mark Martin, founder and CEO of the aviation firm Martin Consulting, told Quartz. “Unlike IndiGo, which boasts of on-time schedules, or GoAir, which claims to provide extra legroom, Vistara isn’t sure about what experience it needs to give to the flyers.”
There’s also the fact that the Tatas haven’t been aggressive on expansion. AirAsia has a modest fleet of only 21 aircraft, while Vistara has 22 planes. “They aren’t creating a lot of inventory, compared to rivals, as it may boomerang later,” said Ashish Nainan, an aviation analyst at CARE Ratings.
The systematic growth has, however, resulted in a firm topline. “Since 2016, Vistara’s revenues have doubled every year. It’s been able to cut down losses, which indicates their fares are strategically placed,” Nainan said. “They do not have to sell tickets at massive discounts.”
AirAsia India, too, reported a near doubling of revenues in the financial year 2018.
Now, given the void created in Indian aviation by the grounding of Jet Airways, the Tatas may have found an opportune moment to expand market share as well.
Making things right
In May, Vistara leased six additional aircraft from BOC Aviation to gain a more prominent national footprint, it said. The four Boeing 737-800 aircraft and two Airbus A320neo planes are scheduled for delivery later this year. The airline is also increasing its headcount by recruiting around 500 employees of Jet.
Promoters Tata Sons and Singapore Airlines have already infused over Rs 4,000 crore into the airline in the 12 months to April, to fund the growth.
Vistara also plans to operate international flights soon; it received the government’s nod for this in March. Its loyal base of business class travellers may also prove helpful as it launches global operations.