Is Vistara the New Jet of Indian Skies?
With the iconic Indian airline operator Jet Airways staring at bankruptcy, and hopes of a revival growing dim by the day, it seems Air Vistara is manoeuvring itself to occupy the slot vacated by Jet in the civil aviation space.
Facing financial problems and non-payment of salaries since 2018, Jet Airways was forced to halt its operations on April 17, 2019 after it ran out of cash even for making the most essential of payments. Its operational aircrafts, numbering around 100, were reported to have been seized back by unpaid lessors. On June 20, 2019, the National Company Law Tribunal (NCLT) admitted the plea of insolvency submitted by State Bank of India on behalf of the consortium of 26 lenders. The Resolution Professional appointed by NCLT will now take control of its assets and is expected to carry out all the related procedures within 180 days. The total dues of the airline to various lenders, suppliers and others amount to a staggering Rs 38,000 crores.
Jet Airways was founded in 1992, and commenced operations in May 1993 as a full service airline. Indian customers, hitherto used to sarkari airlines, really appreciated its top notch in-flight service, professional ground handling, on-time performance and courteous customer care response. Hence, it became the preferred airline and the top choice of fliers in no time. After grabbing the second highest share in Indian domestic passenger traffic just behind the government owned Indian Airlines, Jet launched international services in 2004 once the Indian government amended its policy to allow private carriers in India to operate international flights. Fueled by exponential growth in the Indian aviation sector, by 2017 Jet had become the second largest airline in India after IndiGo. On this upward journey, it also acquired another airline Air Sahara in April 2007, and integrated it as low cost subsidiary JetLite into its operations. However, Jet Airways’ decline slowly began in 2018 when it started falling behind in the payment of salaries and airport handling charges, finally imploding on April 17, 2019 when it stopped operations altogether. In the first quarter of this calendar year, it had a share of 10.3% of the domestic passenger traffic. It is pertinent to mention here that Jet Privilege, its famous award and loyalty programme, is now independently managed by Etihad Aviation group. Members can use its “Select Flights” option to redeem and earn points on partner airlines such as British Airways, Etihad, and Singapore Airlines.
Ironically, Jet is not the only one struggling to stay afloat in our country despite the passenger traffic steadily rising. Another high profile full-service airline, Kingfisher, was floated by Vijay Mallya of United Breweries fame, and had grabbed the second largest share in the domestic passenger segment by December 2011. During its expansion spree, it had also acquired low-cost carrier Air Deccan, floated by Captain Gopinath, that was doing quite well at that time. However, with mounting losses and debts, Kingfisher ceased operations in 2012. Owner Mallya fled to London in 2016, leaving a big line of unpaid creditors here in India. The Indian government is now forced to pursue his extradition through the UK courts.
Hence, it seems Indian customers who were earlier loyal to Jet and Kingfisher due to their superior service standards are now turning to Air Vistara to enjoy the same hospitality and service experience. Air Vistara is backed by Tata Sons and Singapore Airlines, and started operations not too long ago in 2015. Comfortable seats, professional crew and a variety of delicious options to choose from in the menu are some of its USPs. In addition, it offers Business Class and Premium Economy seats, which are in demand from senior professionals who are travelling for work, and need quiet and business like environment to read, work or simply relax during the flights.
In fact, Tatas have a long association with the aviation sector. JRD Tata, the late chairman of Tata Group, was the first licensed pilot in India and started the first ever airline in India in 1932 (which was later renamed Air India). However, the airline was nationalised in 1953. It is no wonder then that Tata group has an emotional connect with the aviation sector, and is keen on expanding its influence in the Indian skies in the current scenario. Through news gleaned from family and friends, we have learnt that Vistara has offered employment to many of the commanders earlier flying with Jet. It is not only paying them a handsome salary but also investing in their training and certification for flying aircraft included in its fleet. In the first quarter of this year, it had a 4% share in domestic traffic, which had increased to 4.7% by May 2019. It has recently added 62 new flights, and will now operate 170 flights a day to 24 destinations.
On the other hand, with Jet Airways dropping out of the competition, low-cost carrier IndiGo is striving to increase its presence in the Economy sector, both in the domestic as well as international markets. IndiGo is backed by NRI Rakesh Gangwal and travel entrepreneur Rahul Bhatia. It has announced a new flight to its 19th international destination (Delhi-Chengdu) from September 15, 2019. It is already the largest airline in India, a position it has held since 2012, with 44.3% of the market share of domestic passenger traffic in the first quarter of this year. With Jet folding up, it has gained more market share, which increased to 49% by May 2019. This airline currently operates flights to 51 domestic destinations, and 16 international destinations. Two more international flights will be operational from July, on Mumbai-Dammam, and Chennai-Kuala Lumpur routes. The airline’s USP is efficient services and on-time performance.
However, to make matters more interesting, SpiceJet Limited, another low-cost airline, is reported to be eying both the Economy and the Business class slots. With a fleet size of 101 aircraft, it is reported to be currently operating 312 flights to 55 destinations, including 7 international destinations. It is the second largest low-cost carrier in India after IndiGo, with a market share of 13.6% in the first quarter of 2019. The airline began operations as ModiLuft in 1993. SpiceJet is backed by Indian entrepreneur Ajay Singh, and has exchanged hands back and forth many times. After the suspension of Jet operations, it is reported to have placed orders for 11 additional aircraft in dry lease mode, to be able to fulfill the shortfall in meeting passenger demand. It is also shedding its low-cost carrier image, with the introduction of SpiceBiz, its Business Class with priority check-in and luggage delivery, 2×2 cabin, comfortable seats and gourmet meals, to ‘enhance your travel experience’. Its market share had increased to 14.6% in May 2019. It is also reported to have offered employment to certain specialised technical personnel who were earlier serving in Jet, maybe with an eye on future expansion.
Other budget airlines operating in India are Go Airlines and Air Asia. Go Airlines (formerly GoAir) was floated by the Wadia business conglomerate to offer affordable flight options to domestic fliers. It currently offers 230 daily flights to 28 destinations, including 4 international destinations. Its market share of 9.2% in the first quarter of 2019 had increased to 11.1% in May 2019.
Air Asia is a joint venture between Tata Sons and low cost carrier Air Asia Berhad of Malaysia. Currently, it has a fleet size of 21 aircraft, but in May 2019, it also announced plans to double its fleet size in the next 12-15 months. It started operations in 2014, and its market share was 5.5% in the first quarter of this calendar year, which increased to 6.3% by May 2019. It also has plans to launch international flights, probably to South Asian destinations.
Air India, Air India Express, and Alliance Air are the government owned airlines that have monopoly over sarkari sector, where staff of many government departments and institutions are required to avail their services irrespective of price. Air India had a domestic market share of 12.7%, that increased to 13.5% by May 2019. Financially, however, the situation is not too rosy, with the government looking to sell its stake in Air India.
TruJet (Andhra Pradesh) and Star Air (Karnataka) are regional airlines primarily serving the needs of customers in southern parts of India. Right now, they remain fringe players in the domestic aviation sector.
It is quite clear that the situation in the Indian aviation sector is currently very volatile. Though passenger traffic and revenue is undoubtedly increasing, high fuel prices, intense competition and discount wars have taken a toll on profitability. Till a clear direction emerges, the sky wars amongst different airlines are expected to go on!!
Note: Marketshare data is based on DGCA reports.