Vistara CEO on B787 aircraft leasing, airfare hike and fare caps at IATA AGM

Vistara is in no hurry to lease B787 Dreamliner aircraft to expand international flight operations as it does not want to get stuck with a plane that cannot be used viably, its CEO Vinod Kannan said.

For more than a year, Boeing has not delivered any B787 plane as the US Aviation regulator wants it to first make rectifications in the aircraft production line. Vistara had ordered six B787 planes in 2018 but it has got delivery of only two of those aircraft to date.

Vistara is waiting to receive four aircraft from Boeing’s 787 production line, but deliveries have been frozen globally since May 2021 due to quality-control shortcomings.

Vistara had ordered six B787 planes in 2018 but it has got delivery of only two of those aircraft to date.

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Kannan was talking to reporters on the sidelines of the 78th annual general meeting of the International Air Transport Association (IATA) in Doha. The last thing we want is to hurry and get stuck with an aircraft that we cannot utilise viably, he mentioned.

“The lack of more wide-bodied B787 aircraft has hampered the airline’s expansion of international flight operations. Asked by when Vistara would like to have another Boeing 787 aircraft in its fleet, I would like to have it yesterday. But the facts are that these things do take time.

When you come up with an RFP (Request For Proposal) for a new aircraft, there are certain sets of considerations. When you are looking into the market for aircraft that are used, you need to be looking at different parameters what is the age of the aircraft? What are the engines’ capacities?… It is a different set of considerations with which we have to go with our eyes open.”

Vinod Kannan, CEO, Vistara

As much as Vistara wants to get the capacity as soon as it can, it also wants to ensure that it gets a good deal, he said. He said the leases for B787 aircraft will hopefully be short-term with an option of increasing its duration as this is an interim lift as the airline waits for its aircraft.

Vistara’s aircraft fleet includes two 787-9s received before the delivery suspension and a mix of Airbus and Boeing narrow-body airliners. It plans to take 20 more aircraft by the end of 2023, mostly A320s to be used domestically and for nearby international destinations.

Airfare hikes are inevitable

An increase in airfares is “inevitable” and Vistara will also raise them if other airlines do so, its CEO Vinod Kannan also said.

“The ATF prices have been increasing and our fares have also been increasing. As part of the overall market, we do look at market fares. We don’t operate in a vacuum and if other airlines increase fares and if the function of supply and demand is there, fares will increase.”

Vinod Kannan, CEO, Vistara

He said that the increase in ATF means that fuel costs now account for up to 40-50% of total costs for Indian airlines.

Recently, SpiceJet’s Chairman and Managing Director Ajay Singh said that a minimum increase of 10-15% in airfares was “required” as ATF prices have increased by 120% since June last year.

While the airfares till June were backed by a strong travel demand, Mr. Kannan said that it remained to be seen whether an increase in ticket prices now will dent passenger sentiment during the traditionally lean travel season between July and September.

An increase in airfares is “inevitable” and Vistara will also raise them if other airlines do so – Vinod Kannan

Though the government has prescribed an airfare band with minimum and maximum airfares for travel within 15 days of booking, Mr. Kannan said more and more people were now booking more than 15 days before the date of journey as the uncertainty around travel due to restrictions and various protocols is gradually waning.

Increment of fare caps

The civil aviation ministry had imposed lower and upper limits on domestic airfares based on flight duration when services were resumed on May 25, 2020, after a two-month lockdown due to the COVID-19 pandemic.

For example, airlines currently cannot charge a passenger less than Rs 2,900 (excluding GST) and more than Rs 8,800 (excluding GST) on flights with a duration of fewer than 40 minutes.

Vistara’s airfares are hitting the upper caps occasionally.

The lower caps are there to protect the financially weaker airlines and the upper caps are to protect the passengers from high fares.

“Our position, as well as Vistara is concerned, we have always said the best solution or the best open market is where there is absolute freedom to price. That is the ideal situation. However, Vistara knows why the fare caps are there.

They (fare caps) are there for certain reasons. I believe that they are needed to protect the airlines but also the customers (passengers).

We are nowhere (in a situation) where we are hitting the (upper) cap 80-90 per cent of the time because as you know demand is also the function of the day of the operation. It is also fiction of other factors as well.

Yes, I will be happy if the fare cap is increased right through, not just the ceiling but also the floor. At the end of the day, our position remains that market pricing is the most optimal.”

Vinod Kannan, CEO, Vistara

He said Vistara’s airfares are hitting the upper caps occasionally.

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