Vistara’s losses double to Rs 831 crore in FY2019 amid tough operating environment

Its financial performance in the current financial year is expected to improve as it expands its network and benefits from closure of Jet Airways.
Vistara’s losses double to Rs 831 crore in FY2019 amid tough operating environment
Vistara’s losses double to Rs 831 crore in FY2019 amid tough operating environment
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Airline industry took a severe beating last year primarily due to high fuel prices. In the Indian context there was a double blow since the Indian Rupee weakened against the US dollar and that resulted in a higher outgo for fuel. Among the private airlines to have been affected, Vistara had to incur losses in the financial year ending March 2019, which was double of what the company had reported in 2018. This is being attributed to the above two causes of higher fuel price and the Rupee-dollar exchange rate. Vistara is a joint venture between Tata Group and Singapore Airlines.

To quantify these, the price of aviation turbine fuel or ATF increased 23% during the last financial year when compared to the previous 12 months. Similarly, the rupee lost 8% in its value against the US dollar over the year putting an additional burden on the airline. Fuel cost is a key component in the operations of airlines and is fixed irrespective of whether the flights take off with seats full or empty.

The only saving grace for the airlines is that the current situation is far improved from those days and oil prices are holding steady if not dropping. The shutting down of Jet Airways has also benefitted some of the airlines, including Vistara. The first quarter of 2019-20 it is said to have done far better, though the company has not officially shared any details with the media. In fact, even the figures of Rs 831 crore as losses for the 2018-19 have come out through the annual report of Tata Sons for that financial year.

Obviously, there are no further details on the revenue earned and expenses incurred by Vistara. The airline did add to its fleet during the last year with a couple of aircrafts joining the line-up. In terms of the load carried the airline touched 5 million passenger mark. These would further cement the explanation that it was the high ATF price that led to the doubling of losses.

Vistara has confirmed that the closure of Jet Airways has helped it with some of the premium and business class passengers making a shift towards the airline. The busiest route in India, the Delhi-Mumbai sector is where Vistara operates 14 flights daily and it will definitely show much better performance this year.

Another important announcement from Vistara is that the airline has started its daily services to Singapore from Mumbai and Delhi and will add Dubai and Bangkok too in this ‘daily flights’ schedule shortly. Going forward the airline expects to have 50% of capacity dedicated to the international routes with services to Tokyo and London started next year. You can also look forward to Vistara flying directly to destinations like the US and Australia in the coming years.

The airline has placed orders for 56 new aircraft and the promoters (Tatas and Singapore Airlines) have pumped in Rs 2,400 crore in the airline this past year.  

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