Monday, November 30, 2015

Vistara: Fast fleet expansion, route development lags

by Soumen Mukherjee
VT-TTB, Vistara first A320-232 aircraft at Delhi Airport
Vistara, the countries latest full-service carrier is a joint-venture (51:49) between Tata Group and Singapore Airlines. The airline had commenced its operation on 9 January 2015. The airline has a robust fleet expansion program which stands at 9 even before it completes 1 year of operation. It has a network of 12 destinations and serves 25 routes as of today. Vistara has so far carried 7.72 Lakh passengers in the first 10 months and crossed the 1 Lakh monthly passengers mark for the first time in October. And the airline is expected to cross the milestone of flying the first million passengers by the end of the year, which is also well within its 1 year of operation. Here we will discuss how the airline so far performed in terms of its aircraft utilization and route development and whether it is able to maintain pace with its fast fleet expansion to have a maximum utilization of those capacity?
Vistara's current fleet expansion program has a target of 20 Airbus A320 aircraft by the end of 2018 which corresponds to 4 years of its operation. Out of 20 aircraft 13 will be of A320CEO variant and the rest 7 will be A320NEO. All 20 aircraft are being sourced brand-new from Bank of China (BOC) Aviation. Vistara has so far received 9 A320CEO aircraft and expected to complete its first year of operation at the current fleet level of 9. The remaining 4 A320CEO is expected to join by the first half of 2016 and the 7 A320NEO will join through the next 2 years, 4 in 2017 and the final 3 in 2018. Since it was originally expected to commence schedule flight service in Q4 2014, the airline had to take delivery of its initial aircraft in quick succession during Q1 2015. By March it had 6 aircraft in its fleet then it added its 7th aircraft in September, 8th aircraft in October and the latest addition, its 9th aircraft (MSN:6865) has just arrived in Delhi yesterday and will be registered as VT-TTJ. Vistara has received its 9th aircraft with its typical cabin configuration of 16 Business-class, 36 Premium Economy and 96 Economy class seats. Although the airline has signaled earlier to review the present seating configuration in early 2016 which may reflect in a changed cabin configuration on its 10th aircraft, VT-TTK, onward.



Currently it has a fleet of 8 active aircraft and operates 297 weekly flights or only 43 flights a day on weekdays which further dips to 39 on Sunday. To compare, another airline related to the Tata Group, operates 40 flights a day with a fleet of just 6 aircraft. With the arrival of its 9th aircraft Vistara to increase frequency on the busy Delhi-Mumbai sector from current 6 to 8 (on weekdays) from Dec.15 and to add an additional 4x weekly (1,5,6,7) flight on Delhi-Goa sector between Dec. 18 and Jan. 11; After that the added frequency on the Goa route to become weekend only (6,7), in the meantime Vistara will continue to operate its current daily flight on the Delhi-Goa sector. The airline is temporarily suspending its morning frequency on the Delhi-Lucknow sector between Dec. 20 and Jan. 15; The decision is expected to be influenced by the fact it is the peak fog season both at Delhi and Lucknow airport. But Vistara is also reducing its evening frequency on Delhi-Bhubaneswar sector from current daily to 5x weekly between Dec. 18 and Jan. 11. Although no valid explanation is available behind this decision. So even with an additional aircraft Vistara's operation is not expanding significantly as the no. of weekly flights stands at 311 as of 1 January 2016 from current 297;

Route
Flight No
Departure
Arrival
Service span

DEL-BOM
UK997
08:25
10:40
From Dec. 15
UK993
13:50
16:05
From Dec. 15

BOM-DEL
UK998
11:50
13:55
From Dec. 15
UK996
17:15
19:25
From Dec. 15

DEL-GOI
UK877
13:50
16:30
1,5,6,7 between Dec. 18 – Jan. 11
UK877
13:50
16:30
6,7 from Jan. 16

GOI-DEL
UK878
17:10
19:55
Between Dec. 18 – Jan. 11
UK878
17:10
19:55
6,7 from Jan. 16

DEL-BBI
UK781
16:25
18:35
2,3,4,6,7 between Dec. 18 – Jan.11
UK781
16:25
18:35
Daily till Dec. 17 & from Jan. 12

BBI-DEL
UK762
19:20
21:25
2,3,4,6,7 between Dec. 18 – Jan.11
UK762
19:20
21:25
Daily till Dec. 17 & from Jan. 12
DEL-LKO
UK927
07:25
08:40
Closed between Dec. 20 – Jan. 15
LKO-DEL
UK936
09:25
10:30
Closed between Dec. 20 – Jan. 15

The average aircraft utilization of Vistara's fleet is low compare to its industry peers. Some of its pattern just involves 4 flights a day, for example it operates an aircraft only for the double daily flights on the Delhi-Bhubaneswar sector a day. Another pattern shows an aircraft doing the morning Delhi-Mumbai-Delhi rotation then it seats idle between 12:40 and 17:10 pm before it flies the Delhi-Pune-Delhi rotation, a total of only 4 flights a day. While other airlines (both FSC & LCCs) in India operating an aircraft upto 8 flights a day, increasing the average aircraft utilization. The average aircraft utilization of Vistara's 8 aircraft stands at 10h 34min as of 30 Nov. 2015 while the DEL-HYD-DEL-GAU-IXB-DEL-BOM pattern showing the best block time of 12h 05min and DEL-BBI-DEL-BBI-DEL pattern showing block time of only 8h 30min. So there are lot of capacity going un-utilized in the airline and it is absolutely important for Vistara team to focus on a route development program which can maximize the utilization of the added capacity. 


Vistara's route network as of Nov. 2015
Vistara had added Varanasi as its latest destinations on Oct. 21 thereafter it had added no new destinations in November and currently there are no new proposed/announced destination to be included in the network in the coming weeks. It is expected that Vistara will soon expand its network too to maintain a balance with its aggressive fleet expansion program. In the past few weeks Vistara had multiple cabin-crew recruitment drive which signals likely expansion in its daily operations. Vistara is known to be looking for opening new short distance CAT-III route from Delhi in the coming months. As of November, Vistara flies 11.8% capacity on the CAT-II routes compare to what it deploys on the CAT-I routes. So with increase in CAT-I capacity (added DEL-BOM frequency from mid-Dec.) the percentage of CAT-II capacity is expected to go further down, and even breach the minimum 10% criteria mentioned in the route-dispersal guidelines (RDG). Therefore Vistara may well consider either increasing frequency on its existing CAT-II routes (DEL-GAU/IXB-DEL) or opening a new CAT-II route from its Delhi hub and Srinagar can be the ideal destination to launch during the start of the summer season 2016. Srinagar is the biggest airport with more than 2 million annual passenger traffic, in the north of Delhi and Vistara has so far all the routes going down southward from Delhi. Therefore it would also complement hub-spoke model of the airline. Although it is known that Vistara is eyeing Chennai and Kolkata by the next fiscal, both are CAT-I route from its hub Delhi, it can perhaps target Kerala market with all 3 routes from Delhi being CAT-III, it would suite Vistara's network best. With relatively longer flight within India Vistara can well differentiate itself from the competition and there is indeed not much competition on the non-stop Delhi-Kochi route as only 2 airline operate 4 flight a day and there is not a single non-stop flight available between Delhi and the Kerala capital Thiruvananthapuram.The average aircraft utilization of Vistara's fleet is low compare to its industry peers. Some of its pattern just involves 4 flights a day, for example it operates an aircraft only for the double daily flights on the Delhi-Bhubaneswar sector a day. Another pattern shows an aircraft doing the morning Delhi-Mumbai-Delhi rotation then it seats idle between 12:40 and 17:10 pm before it flies the Delhi-Pune-Delhi rotation, a total of only 4 flights a day. While other airlines (both FSC & LCCs) in India operating an aircraft upto 8 flights a day, increasing the average aircraft utilization. The average aircraft utilization of Vistara's 8 aircraft stands at 10h 34min as of 30 Nov. 2015 while the DEL-HYD-DEL-GAU-IXB-DEL-BOM pattern showing the best block time of 12h 05min and DEL-BBI-DEL-BBI-DEL pattern showing block time of only 8h 30min. So there are lot of capacity going un-utilized in the airline and it is absolutely important for Vistara team to focus on a route development program which can maximize the utilization of the added capacity. 
Vistara's network distribution in comparison to RDG as of Nov. 2015
Apart from adding new destinations in the network the airline also can consider connecting its Tier-II destinations with Mumbai. Although it serves flights to Delhi, Bangalore and Goa from Mumbai, Vistara doesn't recognize Mumbai Airport as its secondary (mini) hub not even as a focus city. In fact it doesn't have a particular aircraft stationed at Mumbai instead it parks on rotation an aircraft at night to operate the first morning Mumbai-Delhi flight. As the non-stop air-connectivity between Varanasi-Mumbai, Bhubaneswar-Mumbai & Lucknow-Mumbai are not so good at present so the airline can potentially connect those cities. There is a good demand on the Hyderabad-Mumbai sector as well. The airline should consider parking another aircraft at Mumbai in the near future to operate a morning BOM-BLR-DEL-XXX-DEL-BLR-BOM pattern. Or parking the aircraft at Bangalore so that it can operate an early morning Bangalore-Delhi flight with evening return which will complement its current morning Delhi-Bangalore and evening return flight. Vistara being a premium full-service carrier route development is proving to be a challenging task as there is little demand for its buisness-class/premium economy class product on most of the routes in India. And most of the metro to metro sectors it is operating now is already well served and competition is extremely high. It will be interesting to see how Vistara proceeds with its route development program amid the constrains of RDG and the 5/20 rule.


Note:
  • 1 Lakh = 1 hundred thousand = 1,00,000
  • The aircraft (VT-TTB) picture is from Wikipedia Commons.
  • The 'Vistara's route network' picture is a property of the airline, here used for representative purpose only.



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