MUMBAI: Air Vistara’s long-term growth strategies will not be swayed by short-term developments, the airline’s chairman Bhaskar Bhat said while declining to comment on the Tata Group’s official stand on Jet Airways which is up for sale.
Tatas did not participate in the recent expression of interest invited for Jet Airways by its lenders, which intrigued industry watchers because the group was expected to bid given that Vistara needs to expand its network and get more landing slots to have a national reach and be viable.
“Tata SIA (which operates Vistara) while taking into account the situation will stay on course of developing its network both in India and abroad,” Bhat told ET. “Vistara continues to work with airport operators and the Department of Civil Aviation to secure more slots, specially in challenged locations like Mumbai and Delhi, even as it steadily acquires aircraft to expand network.”
Lenders to Jet led by State Bank of India had invite expression of interest from potential buyers in a bid to mobilise an estimated Rs 8,500 crore for the airline’s revival at the earliest.
Last week, Tata Sons and Singapore Airlines Ltd infused a combined Rs 900 crore in their joint venture Tata SIA to improve the airline’s financial health and take delivery of new planes from Airbus SE and Boeing Co. “We are mindful of the requirements of our business,” Bhat said. “It has been equal infusion of funds from both the partners.”
Bhat, managing director at Titan Co and director at the group’s holding firm Tata Sons, had taken additional charge as chairman of Vistara in 2016.
In November last, the Tatas held preliminary discussions to consider investment in Jet Airways. But further talks was scuttled over concerns that Jet’s promoters, the Goyals would insist on a board seat. Apprehensions about the deal’s reputational risks are also understood to have been by raised by chairman emeritus Ratan Tata in a letter tabled by a few directors before the Tata Sons board in November 2018 when the deal was first discussed by the board.
Tata Sons declined to comment on market speculations.
A mail to Ratan Tata on the concerns raised by him remained unanswered as of press time on Sunday.
A top official close to the development in the group said the Tatas would possibly take some interest only if Jet hit the insolvency and bankruptcy table. Defending Tata’s concerns, he said, “The message was cautionary in nature and from a person who is an expert in the sector. No one in the group is as informed about the airlines business like Ratan Tata, including the technicalities involved. Concerns about representational risks cannot be ignored. So it is wisdom that is being passed on and canon .
In its initial proposal to acquire Jet, Tata Sons had planned to eventually merge the two airlines to create a sizeable aviation entity.
Manish Raniga, a former vice president with Jet and now an independent management consultant and aviation expert, said the group “would have greatly benefited from Jet had the deal been accepted last year”.
“It is interesting to note that the Tata Group did not express interest in an investment in Jet,” he said. “It would have made sense given its long haul wide body aspirations and building a high yielding domestic network. If the consortium of lenders cannot find a buyer, slots in Jet will be up for grabs in an unbiased way. Vistara will be one of many airlines fighting for their fair share.”
Vistara recently obtained government approval to launch international flights. It currently operates 730 flights a week to 24 cities in the country using a fleet of 22 single-aisle Airbus A320. The airline has been slow to expand and currently accounts for just 4% of the domestic market. It aims to start international operations to Colombo in a month of two.
It plans to add about 60 planes, including 10 Boeing 787 Dreamliners in the next half decade through a mix of direct orders, leases and options. The rest are Airbus A320 neos and A321 neos.
Mark D Martin, founder of Martin Consulting and an aviation expert, said Vistara needs to get its identity right and its skin into the game. “I do think a current no (to Jet) by Tatas may not be a permanent decision,” he said. “I see a fundamental difference between a board-run airline and a promoter-led one. Vistara is still trying to find itself after four years in business, essentially because there are two drivers at the steering wheel, the Tatas and SIA.”
Vistara, which started operations in 2015, is 51% owned by Tata Sons and 49% owned by Singapore Airlines.
Bhat said Vistara wants to be a full service airline that is desirable, not a premier airline but one known for its standards and safety.
He refused to blame the government alone for the issues faced by the aviation industry, saying it’s more about “what the airlines companies need to do”.
“The industry has to come up with a value business model around pricing,” Bhat said. “Predatory pricing has been the root cause of the issues now being faced by the sector… Jet is the seventh airline going under. The industry needs to apply themselves into what needs to be done to make it grow. The airline industry has not encouraged ideas and have been promiscuous in its approach in spite of being one of the fastest growing markets in the world.”
Vistara recently received about 10 flight slots from the congested airport of Mumbai that have been left by Jet which has had to ground almost all of its planes. Other airlines such as Air Asia India (Tata’s other airline venture with Air Asia Bhd), IndiGo and SpiceJet too received 10 slots on average.
News Courtesy: The Economic Times