SIA invests over $100m in Indian carrier Vistara

It is twice the amount initially planned; Indian airline eyeing international flights

Singapore Airlines (SIA) has reportedly invested more than $100 million in Indian carrier Vistara - twice the amount initially planned.

The airline is "encouraged" by Vistara's performance so far but an SIA spokesman declined to confirm funding details, citing commercial confidentiality.

Profits are not expected until 2020 at the earliest but the New Delhi-based carrier, which has been flying domestically for more than two years, is growing nicely, analysts said.

In June next year, Vistara - which is 49 per cent owned by SIA with the remaining stake held by Indian conglomerate Tata - will collect its 20th aircraft, a significant milestone which will pave the way for the airline to operate international flights.

Under Indian civil aviation rules, Vistara must have at least 20 planes before it can fly outside the country.

The launch of international flights is a key part of SIA's strategy to expand its own reach and reduce the dominance of Middle Eastern carriers which have a strong hold on the growing India-Europe and India-United States markets.

When SIA and Tata first announced in 2013 the intention to launch Vistara, the plan was for a joint US$100 million investment.

The financing has since more than doubled on the back of high operating costs in India, stiff competition from other Indian carriers that has prompted steep fare cuts, and costs associated with plans to go international, reports out of India have suggested.

Industry think-tank, Centre for Aviation, said in a recent report that Vistara is expected to order 100 planes - including 50 widebodies - before next month.

The airline currently has 13 aircraft serving 45 domestic routes, a Vistara spokesman said. No new plane order has been made, she said, adding that the airline is still evaluating its options.

Vistara has not ruled out leasing planes from SIA, she said.

While the aviation landscape in India is "very challenging and competitive", the opportunity is also "massive and there is a great potential for growth", said the spokesman.

According to the International Air Transport Association, India has replaced Japan as the third-largest domestic aviation market in the world.

SIA has said repeatedly that it is in the Indian market to stay, despite the tough operating environment.

To create more value for consumers, SIA and its regional arm SilkAir recently struck a codeshare partnership with Vistara.

This means that an SIA customer can book a single ticket to fly from Singapore to New Delhi, and, from there, transfer to a Vistara flight to any of 10 domestic destinations.

The Vistara spokesman said such agreements "play a very important role for us in spreading greater awareness about our brand in international markets, and, for us, these partnerships are assets that we're building to support our international aspirations".

A version of this article appeared in the print edition of The Straits Times on May 13, 2017, with the headline 'SIA invests over $100m in Indian carrier Vistara'. Print Edition | Subscribe