Indian full-service carrier Vistara hopes to take advantage to changes in air service regulations to launch international flights within the next year, its chief strategy and commercial officer, Sanjiv Kapoor, confirmed during a panel discussion at the Routes Asia Strategy Summit in Okinawa, Japan earlier today. However, the issue of capacity constraints mean growth at the big airports could hit “a brick wall,” delivering what he described as a “full blown crisis on slots in India”.
The Indian market has seen rapid growth in recent years as airlines have added capacity and frequency while also filling up capacity on existing flights through load rises. In fact it is predicted that the Indian domestic market will be the fastest growing O&D sector in the world over the next 20 years, increasing in size by 5.7 times during the period. But, Kapoor highlighted that airport capacity is not keeping up with demand, particularly at the major airports.
“We are about to hit a brick wall unless something urgent happens,” he explained. “We can grow in secondary and tertiary markets and some opportunities are available there, but the major airports are running out of slots. We can develop in secondary cities, but people want to fly to the big cities or through them. That’s the elephant in the room that people need to talk about in India”.
There is clear potential for growth in India as Kapoor noted that India has an industry has around 450 aircraft, a similar scale as each of the major airlines in China, but warned that securing skilled pilots remains a major issue for the local industry. “We are a breeding ground for the Middle East airlines. There is huge competition for crews and no differentiation in cost among the airlines,” he said.
Despite his concerns, the relaxation of the term for new entrants to operate to prove their credentials will deliver “new opportunities” for the Singapore Airlines Group-backed venture to fly foreign routes out of its Indira Gandhi International Airport base in Delhi, according to Kapoor and could ease over capacity in some local markets. “We hope to launch international flights in 2018, initially on a regional basis but then long-haul from the following year,” he said. “We do expect to be flying to major Asian and European capitals”.
These regional routes will be flown by its growing fleet of Airbus A320 equipment and the arrival of seven A320neos by the middle of next year - the first will arrive as early as May 2017 - while the long-haul service will, according to reports, be served using larger A330 widebodies. These plans will be supported by a new codeshare arrangement that has been formulated with its shareholder Singapore Airlines. Vistara has also signed interline agreements with 14 airlines, including through check-in agreements with Air France, KLM and Japan Airlines, in addition to existing agreements with Singapore Airlines and SilkAir, and is exploring further bilateral relationships.
Kapoor believes the airline’s full-service operation will support its growth into international markets. It has always been our ambition to fly domestic and international, that is why we adopted this model and not the popular low-cost carrier offer,” he explained. “People will pay a premium for a quality service and ultimately we are all low-cost carriers down the back so we have powerful tool to differentiate ourselves and boost yields.
“The line between full-service and low-cost is increasingly blurred. In our case full-service includes a three-class service, one of which is a low-cost offering, while GDS usage is also an obvious differentiation,” he added.
But, Kapoor is not a big advocate of the much talked about low-cost long-haul model. “It’s tough,” he said as airlines don’t realise the cost and utilization advantages they see in short-haul markets. “There is a niche for leisure airlines into likes of Hawaii, but I don’t see a sustainable model for long-haul low-cost,” he added.