Flight Plan

We are not new to price competition

Ashwini Phadnis | Updated on January 16, 2018

In the driving seat: CEO Phee Teik Yeoh believes it’s wrong to benchmark Vistara with just any low-cost carrier

A month after the government notified new rules that allow domestic airlines to fly abroad, Ashwini Phadnis met with Phee Teik Yeoh, Chief Executive Officer, Vistara Airlines, to discuss its plans for going international as also rivalry from low-cost operators. Excerpts

As Vistara enters the third year of operations in January 2017 how has the journey been? A lot of people are comparing you with Kingfisher.

Hopefully in a positive light (laughs). I would like to believe that a lot of comparison is in terms of we filling the void that was left by Kingfisher where the product and service is top class.

In India all airlines talk about ticket prices being too low. Can you profitably manage operations?

Price war is not a new phenomenon; it is not unique to India. I think where it differs is in its intensity, regularity and extent. Suffice to say that in the last four to five months the price war has increased.

We are not new to price competition. The day we launched operations we were met with stiff competition. What we went through in the last four-to- five months is not something that we were not prepared for.

How do you prepare? At the end of the day you are a start-up?

We know we cannot price in a vacuum; we cannot do it alone. There is always choice in the market. It is about how to strike a fine balance. In the off peak period yes we will have to be as competitive as the market but there has to be a fine balance because there is no point filling up the aircraft just for the sake of it because what matters is how much revenue you get for the entire cabin.

We are a full-service carrier. So I do not benchmark with any low-cost carrier other than the one with the biggest market share. We cannot be a price leader. We have a very small market share today -- about 2.6 per cent.

It has been about three weeks since the 5/20 rule was officially stuck off the books. How has that changed your plans?

We do not rule out advancing the induction of the 20th aircraft. But at this point no decision has been made because it is not just simply advancing the 20th aircraft for the sake of advancing international operations. I think advancing the aircraft on its own has to make sense as well.

It is a fairly complex exercise that we have to undertake. If the aircraft is available, that is a big if, and at what price. And what happens to your previous commitment?

By how much are you looking at advancing?

First of all it must make sense for domestic operations. (It takes a) Minimum 12 months if not more because gearing up international operations is far more complex than domestic. You have to deal with external authorities, you have to talk about over flying rights and the product and service has to be commensurate to the longer journey time.

We are going to get our 20th aircraft in June 2018 which is less than 2 years from now. If everything goes unchanged we will be able to launch our international operations from June 2018.

If you look at it, the traffic is all to the West.

70 per cent goes westwards and 30 per cent eastwards. But we must not forget where the growth region is. It is all centred around the Asia-Pacific. So that profile will change with time.

Historically yes 70 per cent due to ‘visiting friends and relatives’ traffic and India’s connections with the USA and UK but we are beginning to see a lot more business driven traffic. It does not take you too long to determine the top five or 10 destinations for Vistara because the usual suspects are always there.

So that leaves the US, Europe...

Yeah. You do not have to be an expert in aviation to chart out the network plan for Vistara. Having said that, the obvious choice may not be the place you want to go because everybody else is there.

During the conversation you mentioned a Boeing 737. Are you looking at a dual configuration fleet?

We do not want to rule (it) out… that since we started out with the Airbus A-320 it will always be the Airbus. Ultimately fleet acquisition is a function of what is the total cost of ownership. Yes there is some complexity when you have to manage two variants. But at the same time if you know the price is attractive and you put it all into one basket and total operating cost in terms of operational efficiency of the aircraft type, lease cost, cost of acquiring the aircraft and you talk about the complexity of managing the fleet if it all stacks in favour of the other OEM (Original Equipment Manufacturer).

Will you look at acquiring turbo prop for the Regional Connectivity Scheme also?

We do not want to rule it out because these are all opportunities waiting to be tapped. The question is what does it take to tap this market profitably? As part of our long-term plan this is something that we are also looking at. But nothing concrete to say yes we will go in to the RCS in the next one, two, three years because it calls for a different smaller aircraft than what we have today.

Published on September 20, 2016

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