He has been amply exposed to both full-service and low-cost formats of the airline industry, has first-hand knowledge of all the business functions, and has served in important markets in Southeast Asia, Europe and the Middle-East. Meet Vinod Kannan, the young CEO of full-service carrier Vistara, a 51:49 joint venture between Tata Sons and Singapore Airlines. Elevated to the role in the New Year, Kannan, who is in his early forties and joined Singapore Airlines in 2001, throws light on his strategy for Vistara amid the recovery in passenger traffic in a post-Covid-19 world and the current geopolitical uncertainties. Edited excerpts.
BT: Where is the place for a full-service carrier in the Indian market? Not just in terms of positioning, but also in terms of the slots since it’s just you and Air India today.
VK: There used to be Jet Airways and Kingfisher Airlines in the past. But the fact remains [that] if you look at India as a market and the tremendous double-digit growth—putting aside the Covid-19 pandemic— that we’ve had over the last 10-15 years, [it] has led to an increase in disposable incomes. There are people who are getting a little bit richer, who have travelled the world and want to experience something along similar lines while flying within India. That proportion of people is willing to be value-conscious and pay a little bit more for a slightly more comfortable flight. That group of people is expanding and will continue to expand. Our association both with the Tatas and Singapore Airlines puts us in a good position because people know there is a certain standing and there’s a quality associated with that. But of course, the other side of the coin is that it also raises expectations. And maintaining them [expectations] and excelling every time is not easy.
BT: How do you see the Tata group’s acquisition of Air India impacting market dynamics and your own operations?
VK: Vistara continues to operate as an independent entity and both our parent companies, the Tata group and Singapore Airlines, remain invested in our growth and expansion plans. We are committed to our long-term vision of becoming one of the best airlines in the world.
BT: Since Vistara emerged from the Singapore Airlines school, doesn’t that make you old school?
VK: These days, there is no old and new school. It’s all one big school with aviation morphing into this situation. There are two different business models to a certain extent, which are low-cost and full-service. If you look at our product proposition and what we offer today, there is a group of people or a set of people who value add-ons more than what a normal low-cost carrier provides. That is the reason why we even introduced a premium economy, which is quite common in other countries. We thought that it is something that would also resonate here. Especially in Covid-19 times, there are people who want a little bit more privacy as compared to an economy class product. What we have seen is that the occupancy in the front end, whether it’s business or premium economy, did actually see a slight boost as compared to what you would expect otherwise. Usually, business class and premium economy seats are occupied by business travellers. But just after we restarted flights, we saw a lot of families also travelling in them because they felt those seats provided a cocoon and a safe experience.
BT: Did the success of premium economy surprise you?
VK: No, I wouldn’t say it was a surprise. We did know [that] there was a market for this particular product. Again, it also depends on the route. If you look at the other big carriers in India, for example IndiGo or SpiceJet, they do fly to a lot of secondary and tertiary cities where we don’t have as much of a big demand to deploy premium economy or business, which is the reason why we also have some all economy aircraft flying on some of those routes. But if you look at the popular metro routes like Delhi Mumbai, Delhi-Bengaluru or Mumbai-Bengaluru, there is enough potential for us to fill the premium economy and business [class] seats.
BT: With India lifting the embargo on scheduled international operations, what kind of growth are you looking at deriving from international flights in the new fiscal?
VK: International expansion is one of the most important aspects of our long-term growth strategy. Despite the challenges of the pandemic, we managed to introduce our services to seven new international destinations under air bubble agreements, including London Heathrow, Dhaka, Doha, Frankfurt, Sharjah, Malé and Paris, besides resuming operations to Dubai, Singapore, Kathmandu and Colombo. These operations not only helped us to introduce Vistara in markets that were already part of our expansion plans but also made inroads into new geographies, paving the way for a strong foothold for the brand in global aviation. We strongly feel that there is great potential for long-haul direct flights from India, with travellers increasingly displaying a strong preference for non-stop travel, and we are uniquely positioned to cater to this growing demand, especially as more wide-body aircraft are expected to join our fleet soon. The resumption of scheduled international operations is expected to stimulate demand. However, a lot would depend on the country-specific travel requirements. We are evaluating all options and working on additional flights.
BT: To what extent did the pandemic affect your expansion plans?
VK: In 2018-19, we had placed an order for about 56 aircraft, including Airbus 320 Neos, Boeing 787s and a few Airbus 321s. That order book is still intact. When Covid-19 hit us in early 2020, we had a fleet of 40 aircraft. Right now, we are at about 51 aircraft. We would probably [have been] closer to 60 if Covid-19 was not there and would have hit the 70-aircraft number sometime in early 2023. Now that gets pushed by maybe a year. What we would say is that the pandemic has delayed plans, rather than saying that we have cancelled plans.
BT: The introduction of Boeing 787s will probably throw up a situation where a non-stop flight to the US or Australia is a reality at some point...
VK: It’s something we are looking at. We had ordered six Boeing 787s, of which two are already with us. An ultra-long-haul flight requires certain things such as a thrust rating for the engine and a crew bunk, which the current aircraft don’t come equipped with. But yes, there are definitely potential opportunities. We are doing some studies and reviews to see whether that makes sense. The routes that we currently operate with the Boeing 787s in Europe have been doing phenomenally well. The cargo carried on the routes has been equally supportive.
BT: How do you see your expansion story in the domestic sector playing out?
VK: Currently, we cover about 30 cities within India, which is decent. The frequency or the proportion changes because there is a lot more capacity deployed on Category I or metro routes as compared to the others. Most of the major cities or catchments in the country have been covered. There will be an increase in frequencies on some existing points, plus a little bit more expansion into certain other white spaces, which we think are important. A lot of this is also to facilitate and feed into our international market. The fact that we have international flights requires feeders from different parts of the country.
BT: Amid all the bullish forecasts of growth returning to India’s civil aviation space in the months ahead, do you see geopolitical uncertainties and high fuel prices impacting ticket sales in the near- and medium-term?
VK: Today, we are operating in a very dynamic market, and it is difficult to predict the consequences of various external factors like the current geopolitical situation in Ukraine. As an airline, we can only stay agile and cope with their direct and indirect impact on the aviation ecosystem.
BT: What is the component of ATF in your overall operational costs?
VK: Fuel for any airline in India is between 35-40 per cent [of the operational costs]. We are very thank ful that the civil aviation minister has persuaded some of the states to bring down taxes on ATF. And that’s a very welcome move. But of course, more needs to be done with fuel prices running rampant at the moment.
BT: The post-pandemic period has witnessed several companies across sectors imbibing technology in a big way. Tell us something about your initiatives.
VK: In the good old days of pre-Covid-19, we used to have situations where people would just walk in one hour before the flight to check in. Those days are gone. The percentage of people checking in through the website or mobile before the pandemic was between 20-30 per cent. Now it’s about 95 per cent. So essentially, everyone has embraced technology. Technology has helped in facilitating some of these decisions and user behaviours. Secondly, unlike in the past, checking in bags has also become electronic. When you drop your bags, you get an SMS on your registered [mobile] number for reference. There has been a lot of investment in many of these automation technologies in streamlining human resources, procurement and finance. Ultimately, what we need is a situation where the customer does not need to call us. This can be achieved either through mobile or the website. For example, we have a chatbot now on our website.