Tata Sons Ltd, the holding company of Tata group, and Singapore Airlines Ltd—the two promoters of Vistara—have infused total capital of over ₹4,000 crore into the airline in the 12 months to April, according to documents filed with the corporate affairs ministry.
The large capital infusion is related to the airline’s expansion plans over the next few months.
The paid-up share capital of Vistara increased by ₹600 crore in fiscal year 2018 and stood at ₹1,620 crore as on 31 March 2018. With the capital infusion of ₹4,020 crore since April 2018, the paid-up capital of Vistara now stands at ₹5,640 crore. The ₹4,000-crore-plus capital infusion is the largest Vistara has received in a year since it started flying in 2015, according to two people familiar with the matter. The move comes at a time when debt-heavy private airline Jet Airways (India) Ltd has been grounded and state-run Air India is struggling to stay afloat, vacating a number of flying sectors both locally and globally, freeing up dozens of slots at airports and paving way for the rival carriers to expand operations faster.
“A large opportunity has emerged due to shrinking operations of some of the airlines (in India). The money will be used mostly to augment Vistara’s fleet, increase routes globally and attain earlier break-even," the first person said, requesting anonymity.
Vistara currently connects 24 domestic locations and operates 850 flights per week with a fleet of 22 Airbus A-320 aircraft.
Vistara plans to expand its operation significantly by 2023, which is the primary reason behind the carrier’s aggressive capital infusion moves. After receiving government approval in March to fly overseas, the airline is preparing for its international operations.
According to documents filed with corporate affairs ministry, Tata Sons and Singapore Airlines have infused a total of at least ₹1,820 crore into the airline between October 2018 and April 2019. This includes rights issues and issues of shares with differential rights to Tata Sons and Singapore Airlines. The total capital now stands at ₹4,020 crore, which includes the capital infusion of ₹1,820 crore by the two promoters during the October-April period.
Tata Sons has pumped in around ₹919.20 crore in Vistara, while Singapore Airlines has invested around ₹900.80 crore in the airline since October. And, in September, ₹2,000 crore was infused in the company by the two promoters through a rights issue; and around ₹200 crore was infused in August 2018.
Replying to an email from Mint, a Vistara spokesperson said, “As a matter of policy, we do not comment on the financial information of the company." Tata SIA Airlines, which runs the full-service airline Vistara, is a closely-held company and is not obliged to disclose its financials, except to regulators. Tata Sons and Singapore Airlines own 51% and 49%, respectively, in Tata SIA Airlines.
Vistara has been making efforts to improve its financial health and take delivery of new planes from Airbus SE and Boeing Co. During the next three fiscal years, Vistara has plans to expand its fleet by three times.
“Vistara has ordered a lot of aircraft. Payment needs to be done for this. A portion of the money infused by promoters during (FY19) will be utilized to pay for the aircraft," said the second person, adding that a part of the infusion will be utilized for working capital requirements.
Vistara’s current order includes both A320neo aircraft and Boeing 787s.
On Friday, Vistara announced it has leased an additional six aircraft from BOC Aviation for expanding its domestic operations. This includes four Boeing 737-800 NG aircraft to be delivered in May 2019 and two Airbus A320neo powered by CFM LEAP 1A engines, scheduled for delivery in the second half of 2019, according to a media release. CFM LEAP 1A engines are manufactured by CFM International, an equal joint venture between GE Aviation and Safran Aircraft Engines (formerly Snecma). Additionally, the company said in order to support the next phase of expansion of domestic operations, Vistara has recruited nearly 500 former employees of Jet Airways, including pilots, cabin crew, engineers and other staff.
“These leased aircraft will be deployed to meet the sudden drop in capacity in the market and to aid convenience of travellers," said Leslie Thng, CEO of Vistara.
Last July, Vistara had placed its aircraft order (a combination of purchased and leased aircraft) totalling 50 from the Airbus A320neo family (including the A321neo) for domestic, short and medium-haul international operations. The airline has also purchased six Boeing 787-9 Dreamliner aircraft that are scheduled to be delivered between 2020 and 2021 and will be used for long-haul international operations.
While the narrow-body Airbus aircraft will be delivered between 2019 and 2023, the airline will take delivery of six wide-body Boeing 787-900 (Dreamliner) aircraft between 2020 and 2021. Vistara narrowed its loss to ₹431.30 in fiscal 2018 from ₹518.45 crore loss in the previous year. Like other carriers in India, the airline has been hammered by high operating costs and intense competition.