India's newest airline Vistara - in which SIA has 49 per cent stake - eyes October launch

Staff members of TATA SIA Airlines Limited (TSAL) pose during the launch of the new brand name 'Vistara' - a Sanskrit word denoting limitless expanse - for the new airline in New Delhi on August 11, 2014. --PHOTO: AFP 
Staff members of TATA SIA Airlines Limited (TSAL) pose during the launch of the new brand name 'Vistara' - a Sanskrit word denoting limitless expanse - for the new airline in New Delhi on August 11, 2014. --PHOTO: AFP 
Chief executive officer of TATA SIA Airlines Limited (TSAL) Phee Teik Yeoh looks on during the launch of the new brand name "Vistara" - a Sanskrit word denoting limitless expanse - for the new airline in New Delhi on August 11, 2014. Tata Group and S
Chief executive officer of TATA SIA Airlines Limited (TSAL) Phee Teik Yeoh looks on during the launch of the new brand name "Vistara" - a Sanskrit word denoting limitless expanse - for the new airline in New Delhi on August 11, 2014. Tata Group and Singapore Airlines, which partnered to launch a full-service airline in the country, will launch services in October 2014. -- PHOTO: AFP

NEW DELHI (AFP) - India's newest airline announced on Monday flights could begin in October, saying it was "bullish" about the future even as a rival carrier reported a big loss.

The new airline, to be called Vistara - a Sanskrit word meaning "limitless expanse" - is 49-per-cent-owned by Singapore Airlines (SIA), while the Mumbai-based Tata conglomerate controls 51 per cent.

The airline will offer both business and economy class, new chief executive Phee Teik Yeoh told reporters in New Delhi, and hoped to start flying passengers "sometime in October", subject to approval by India's Directorate General of Civil Aviation (DGCA).

The previous Congress government began allowing foreign airlines to buy up to 49 per cent stakes in Indian carriers in 2012.

India's air passenger market has expanded at breakneck speed but many companies are laden with debts and beset by cutthroat fare wars, high fuel costs and shoddy infrastructure.

India's second-biggest carrier by passengers, Jet Airways, in which Abu Dhabi-based Etihad Airways owns a 24 per cent stake, reported Monday it lost 2.2-billion rupees (S$45 million) in the three months to June 30.

To help stem losses, Jet announced it was abandoning its low-cost JetLite brand to focus on its full-service business as it gears up for battle with Vistara in the higher-paying segment.

"We welcome the Tata-Singapore airline to India, it will help us stay slim and not drop our guard," Jet chairman Naresh Goyal told a late evening news conference.

Jet separately "vehemently denied" in a statement reports that it had received an ultimatum from pilots threatening labour action if salary arrears were not settled.

It said management will meet the pilots to discuss "all matters" on Aug 20.

Jet narrowed its losses from the 3.55 billion-rupee loss Jet reported in the same quarter a year ago after it cut financing costs, but the performance underscored entrenched problems facing the sector.

The Centre for Asia Pacific Aviation consultancy estimates the industry will lose US$1.3-1.4 billion (S$1.6-1.7 billion) in the financial year to March 2015 after losing US$1.7 billion in 2013-14.

IndiGo, India's largest passenger carrier, is the sole airline among the four biggest currently operating to consistently report profits. Kingfisher, another full-service airline owned by liquor tycoon Vijay Mallya, was grounded by huge losses in 2012.

But Vistara's new chief executive projected a strong future for the new carrier thanks to India's fast-growing middle class.

"The Indian aviation sector is on the cusp of change," he said, saying the company was "very bullish about the future" thanks to low air-travel penetration in the country of 1.25 billion.

Air trips per person each year in India stand at just 0.07, far behind developed countries such as the United States with 2.49 air trips annually.

Vistara will take delivery of its first plane, an Airbus A320-200, in September, and will have five aircraft by December. It plans to increase its fleet to 20 by the end of its fifth year in business.

The Tata Group, which launched India's first civilian airline - later nationalised - announced its partnership with Singapore Airlines 11 months ago.

Tata also holds a stake in an Indian low-cost carrier which started flying in June, operated by Asia's biggest budget airline AirAsia.

Tata said it believed there would be no conflict in holding stakes in two Indian airlines.

"AirAsia is a low-cost carrier, Vistara is a full-service carrier - they're in different spaces," said Tata Group spokesman Mukund Rajan.

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