Vistara may get major capital infusion soon: CEO Phee Teik Yeoh
Vistara is hoping to receive its largest equity infusion since inception to fund plans to fly on international routes, chief executive officer Phee Teik Yeoh said.
Tata Sons Ltd holds a 51% stake in Vistara, which was launched in 2015 and Singapore Airlines Ltd (SIA) owns the rest.
The airline started with a cash infusion of about Rs620 crore by its parent firms, who followed up recently by pumping in Rs150 crore more. The airline has authorized share capital of about Rs 1,500 crore, according the documents the airline has submitted to the ministry of corporate affairs.
To fly on international routes, which are capital-intensive and initially loss making operations, it needs a war chest to compete with the likes of Air India Ltd, Jet Airways (India) Ltd, Emirates and Deutsche Lufthansa AG, among others.
In a new civil aviation policy earlier this year, the Union cabinet partly scrapped the so-called 5/20 rule, which restricted overseas operations to only those airlines that had five years of domestic flying experience and a fleet of at least 20 aircraft. The five-year criterion has now been scrapped.
In an interview, Yeoh said a fresh injection of money would exceed the start-up infusion of Rs620 crore. The size of the infusion would depend upon the board of the airline, which is yet to approve the plan for Vistara to fly on international routes.
He said there was no need to take the services of a consultant, as is typically the case with major airlines, before starting overseas flights.
The airline, Yeoh said, already has Singapore Airlines’s vast experience and expertise behind it.
Meanwhile, Vistara continues to expand its domestic operations.
Vistara flies to 18 cities in India and controls 2.4% of the domestic market share. It is adding new cities to its network, which in future, can also help feed international flights. The domestic network is being stabilized.
“When we are going overseas we are exposing (ourselves) to even more complexities. I have to make sure my domestic operations is stable—brand presence, consistency, messaging. The board does not have to tell us,” Yeoh said in reply to a question whether there was a board mandate to first streamline domestic operations.
13 planes are already in its fleet, and seven more are set to join over the next one-and-a-half years. The airline had ordered 20 planes initially.
“(We are) sticking to original delivery, plan by and large,” Yeoh said. “Advancing (deliveries) is only half the picture. When is the 21st (coming) is the important question. I haven’t got the mandate to go for 21st aircraft and beyond.”
A person aware of the matter said the abrupt removal of Cyrus Mistry as chairman of Tata Sons Ltd on 24 October and the four-month deadline set for a search committee to find a replacement for him could delay the next cash infusion.
There could be a “minor delay” but “back room work is going on,” including ramping up operations for international operations, said this person, who declined to be named.
A Tata Sons spokesman said the group remains “stridently committed” to the airline, adding all Tata companies have been asked to pursue their businesses as before.
Airlines typically make losses in the first two years of their existence before economies of scale kick in.