Vistara, which is in the fourth year of operations, has not exactly broken even so far, given the establishment costs, and the fact that the airline has had to operate from the margins till the last financial year, given their hindered access to routes and rights in the past years. Not to forget, the cost of oil, which was up, and yields, which were down, due to intense competition for marketshare, which also saw the shut down of other carriers such as Jet Airways.
As per various publications which have retrieved the financial results of Vistara from the Tata Sons Annual Report for 2018-19, the airline has made a loss of INR 831 Crores (US$ 117 million), as compared to INR 431 Crores (US$ 60 million) a year ago.
The airline has added capacity over the past year with two new aircraft added and has had to go through an increase in the cost of fuel, and a weak rupee (airline costs are typically incurred in US$, including major ones such as aircraft lease). The Business Standard reports that the cost of aviation fuel was 23% more in FY19 (April 2018-March 2019) as compared to FY18(April 2017-March 2019) and the Indian Rupee declined 8% as compared to the USD, increasing costs for the airlines.
Of course, other airlines faced the same fate, with IndiGo’s parent InterGlobe Aviation and SpiceJet both posting poor results for FY19 as well. Profitability of airlines went back up in the Q1 of 2019, with both IndiGo and SpiceJet posting strong results. Not to forget, SpiceJet has added about INR 114 Crores (USD 16 million) to its profit in the expectation that Boeing will pay them compensation of this amount, a statement even their accountants are not willing to buy.
With the shutdown of Jet Airways, Vistara has more room to grow, being able to add 9 aircraft and launching international operations on the back of 9W evacuating various routes.
As a new startup airline, Vistara is currently in investment mode, with both their shareholders, Tata Sons and Singapore Airlines committed to giving the airline the resources needed to establish itself in the market. The airline has received INR 2,900 crores (USD 407 Million) as of March 2019, in a three rounds of fund infusion to expand capacity. The airline intends to purchase some aircraft as a part of its last aircraft order, while getting most on lease.
Vistara’s losses are no surprises, with the airline establishing itself in a capital intensive industry. But let’s hope they get the yield they deserve for their product to be able to break even in the coming years. As a private entity, it does not have the pressure to disclose its books every few months. Having said that, some other airlines which have been getting similar losses in spite of operating for many more number of years won’t get the same love from the markets.
What do you think about the financial situation of Vistara?