Vistara, a joint venture between Tata Sons and Singapore Airlines, has just completed two years of its operations. In an interview with BusinessLine , the airline’s CEO, Phee Teik Yeoh shares the company’s turnaround plans as well as issues regarding its costs and operations.
According to analysts, Vistara has been handicapped by rising costs and hence has not been able to expand as rapidly as it should have.
Vistara’s costs were high for a few reasons. But we took action to bring the costs down through a series of measures. Initially, our focus was on expeditious launch of the airline and hence we outsourced almost all the functions to others. We knew that we didn’t have the luxury of failing on the first day in terms of customer expectations. But what happened was that outsourcing added up to our costs. So, we started taking on board most of the functions which has resulted in a downward trend in costs. We have also renegotiated with our vendors to bring down costs. As we had already said earlier, we plan to have a total of 20 aircraft by the year-end.
The utilisation of our aircraft was also low at about 7 hours, which has now gone up to about 13 hours. Another reason for the costs being high was because we didn’t have the scale to drive a hard bargain. We have also reduced ground time by five minutes. Our turnaround time for aircraft has been reduced to 45 minutes for metros and 40 minutes for on-metros. We are climbing up on the OTP (on-time performance) front as well. Our OTP is back to 90 per cent now. So, the cost of operations is steadily declining.
Another issue which seems to be bogging down the airline is the route configuration. The airline does not have a return Bengaluru-Mumbai service and this route is the third highest in terms of traffic in the country.
We do agree we do not have a return flight on this route. The main triangle of growth is the Delhi-Mumbai-Bengaluru route but unless you have at least four daily service, it is very hard to gain a mind share among the corporates. For this to happen, we need the right slots and as you know, Mumbai airport is choked. To get an extra slot is extremely difficult and therefore, and hence we have to make use of the existing slots very judiciously. Our utilisation has in fact gone up by 20 per cent year on year.
You started off with 36 buckets of seats across the aircraft and you were also the first one to introduce premium economy on three-hour flights on the domestic routes but we understand that one of the board members wants it to scrapped because it is not viable any more.
One needs to understand that Vistara is a learning organisation and we pursue our business with humility. We started off with 16-36-96 seating configuration. But over time, we realised that the number of seats in the front were too big and therefore, we decided to reduce them. We did this in October last year though the retrofit of the configuration started in April itself. Now, we have a 08-24-126 seat configuration. Our unit costs have gone down while the load factor has increased even on premium economy. But one must understand that configuration, yield and demand are different from each other. If we have to tweak the configuration further we will. Nothing is sacrosanct and that is the beauty of our airline. Unlike the others, we are nimble.