Monday, November 9, 2015

Vistara to achieve the milestone of one million passengers by 2015 end?

by Soumen Mukherjee
VT-TTB, the first A320 aircraft of Vistara at Delhi Airport.

Vistara, the joint venture airline between Tata group and Singapore Airlines, is the newest full service carrier in India. Starting scheduled flight services on 9 January 2015 the airline had already crossed the milestone of flying 5 lakh* (0.5 million) passengers on 20 August 2015, just over seven months into operations. Now it will be interesting to see whether Vistara can achieve the first one million passengers mark by the end of 2015 or by the first year of its operations. Almost a year back the airline had started with a fleet of only two aircraft and launched operations to only three destinations initially. Then the airline has experienced a rapid growth as it gradually increased its fleet size to eight as of today and almost added a new destination a month into its network. Currently, Vistara serves twelve destinations across India distributed among Tier-I, Tier-II and Tier-III cities as per ministry of civil aviation's (MoCA) route dispersal guidelines. The twelve cities are Delhi, Mumbai, Ahmedabad, Goa, Hyderabad, Guwahati, Bagdogra, Pune, Lucknow, Bangalore, Bhubaneswar and Varanasi in the chronology of those being included into the network.

As per the latest data published by directorate general of civil aviation (DGCA), Vistara had already flown 6.49 lakh passengers by 30 September 2015. Now if it manages to fly 3.51 lakh more fliers and reach the magic figure of one-million within next 3 months (October-December), it will create a new record for itself of flying the first 1 million passengers by the first year of operations. If we analyze Vistara's performance in last few months the targets seems to be achievable. As mentioned above Vistara had 6.49 lakh passengers in close to 9 months on an average of 72 thousands per month. But in the last few months the airline is consistently clocking around 98 to 99 thousand (close to 1 lakh) fliers per month (see Figure-1). Which implies it will achieve 3 lakh in 3 months even at the current rate and needs only 50 thousands more in addition over 3 months period. What can go in Vistara's favor, typically October to December quarter is the peak travel season in India when demands for air travel are extremely high which should help improve its monthly tally. Meanwhile the airline has also added more capacity like it has launched new double daily Delhi-Bhubaneswar service from early October (1st frequency from Oct.1 & 2nd frequency from Oct. 5) and a new daily Delhi-Varanasi service from 21 October 2015. In addition to this on 25 October 2015 it has increased Delhi-Mumbai frequency from 5 a day to 6 a day (not all are daily service) although it also withdrew from the Mumbai-Ahmedabad route. Moreover, Vistara going to soon commission its ninth A320 aircraft which will help it to increase frequency on the Delhi-Mumbai route to 8 from current 6 a day from 15 December 2015 besides a second 4 weekly frequency on the Delhi-Goa route from 18 December 2015. Overall these new flights must reflect a significant upward shift in the monthly passenger figures.


Figure 1: Monthly passenger figures of Vistara

Apart from new aircraft and additional flights a second factor which can play equally important role in improving Vistara's passenger figures, is its passenger load factor (PLF). Simply, passenger load factor is the percentage of seats filled compared to total capacity. From the very beginning the airline has struggled with extremely poor load factor. Which is often attributed to its cabin-configuration, pricing strategy, small network etc. by the media. While the other rival airlines are reporting 75-85% load on an average Vistara is crawling near 60% from quite some time. If we compare it with SpiceJet which is in leading position in PLF consistently for last 6 months out of 9 months of 2015, had flown less than 10% of its seats empty, Vistara had flown almost 40% empty seats except the month of May during summer peak season when its PLF peaked at 71% (see Figure-2). So Vistara has a good opportunity to improve its passenger figure and therefore market share if it can manage a significant increase in PLF. For example, if it could have improved its PLF to 80% in September, it would have at least flown 1.25 lakh passengers even at the September level capacity. While it actually flew only 98 thousand people at 62.4% PLF in September 2015. In recent months Vistara has initiated new campaign drives to attract more passengers that can help improve its PLF figures and also introduces promotional offers to push the ticket sales up through agents and its websites. An increase in load factor will result in an increase in monthly passenger figures and eventually it will help increase its market share as well which stands at 1.5% as of September 2015.
Figure 2: Monthly PLF data of  SpiceJet vs Vistara
So, it is most likely that Vistara will achieve the milestone of flying the first 1 million passengers by the first year of its operation or by the end of 2015 (both almost overlaps) unless it stops flying. Back in July 2015, Vistara board member Dr. Mukund Rajan, in his interview with Mihir Mishra of Economic Times, has claimed that his airline will achieve the first million mark by the end of current fiscal year (FY2016). It seems his words going to become a reality sooner than his own expectation. But is Vistara going to be the first Indian carrier to reach the million mark within first year of its operation? So far I didn't find any authenticated information either in favor or against of this. And please feel free to express your opinions and reviews (if any) on the comments section below.


Note: 

  • For simplicity I have referred to DGCA published data although the authentication of DGCA released data are sometimes questioned. 
  • Vistara aircraft photo is from Wikipedia Commons. 
  • 1 lakh*= 1 hundred thousand = 1,00,000




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