SIA-Tata joint venture Vistara hopes to soar in tough market

Fares show SIA-Tata airline venture won't compromise on premium tag

Singapore Airlines' launch of its joint-venture carrier with India's Tata Group from Jan 9 is bringing some New Year cheer to the aviation industry in India at a time when at least one airline is struggling to survive in an expanding but tough air travel market.

The full-service carrier, Vistara, based in New Delhi, opened bookings on Dec 18 for flights between the capital Delhi and financial capital Mumbai, as well as the western city of Ahmedabad.

It comes as India's second-largest budget carrier SpiceJet is struggling to stay afloat, even as more Indians are taking to travelling by air amid rising incomes.

Mr Ajay Awtaney, a finance services professional and a travel blogger, booked a seat on the inaugural Jan 9 flight from Delhi to Mumbai at noon "out of a sense of curiosity".

"I wanted to check out the product... Since I spend half my time on planes it is good to check out what the new kid on the block is doing," he said. "There are lots of people like me, curious to see what it is going to be like."

Operating with a fleet of new Airbus A320-200s, each with a capacity of 148 seats, the carrier is promising the full flying experience, complete with meals on bone china dishes and with fine linen in business class.

It is also introducing a premium-economy class and is offering fares that are between 20 and 40 per cent higher than the other carriers on the same routes, which analysts said showed that the airline would not compromise on its premium tag.

"The pricing is pretty high. If I were to go to Delhi tomorrow from Mumbai I would pay 6,500 rupees (S$135), and Vistara rates for January are around 10,000 rupees. So let's see if it works out for them," said Mr Awtaney.

Aviation expert Jitender Bhargava, a former executive director of state-owned Air India, said: "There is a need for caution. The Indian market, unlike other markets in the world, is in a paradoxical situation of high operation costs and a price-sensitive market.

"One will have to wait and see if Vistara can get enough passengers at reasonable fares to break even."

Still, many believe that with the economic outlook brightening and business sentiment improving, corporations will start to loosen purse strings in the coming months.

"It is a great time for them to start a full-service carrier. There is a big slot left by SpiceJet which has reduced its fleet size. With the Indian economy looking up, people are looking to turn to business class. Knowing the SIA and Tata strategy, they are negotiating and getting premium customers," said Ms Neelam Mathews, a Delhi-based aviation analyst.

India's aviation sector has been going through some turbulent times. While it is the ninth-largest air travel market in the world, with 121 million domestic and 41 million international passengers every year, it is also a notoriously difficult market.

Slowing economic growth, price-conscious consumers and increased competition as more airlines entered the market have meant that carriers in the past few years have struggled to maintain the bottom line in the face of high fuel costs and high airport taxes, among other things.

Kingfisher Airlines folded last year after incurring crushing losses while SpiceJet is on the brink of collapse, with passengers last week stranded in airports across the country after fuel firms refused to refuel SpiceJet's planes.

The entry of Vistara and budget carrier AirAsia in May this year is expected to add to the pressure, increasing competition among the half dozen or so airlines.

Still, Mr Bhargava said: "Vistara's entry needs to be welcomed.

"It will shake up the market."

Others like Mr Subhash Goyal, head of the Indian Association of Tour Operators, think it will be a boost to tourism. "The tourism industry is excited about Vistara."

SIA's entry into India has been a long time coming. The airline had made two failed bids to enter the country over the last two decades, before starting Vistara with Indian conglomerate Tata in September last year with a combined initial investment of US$100 million (S$130 million). Vistara is expected to start international operations once it has established its domestic routes.

Some are looking forward to flying with Vistara for its promise of good service.

"I am looking forward to travelling on Vistara at some point, I am sure the services will be good because of the groups involved," said Mr Gagan Sinha, a Delhi-based businessman.

gnirmala@sph.com.sg