Tata-SIA’s Vistara airline gets India operating licence

Mumbai: Tata SIA Airlines Ltd on Monday received the air operating permit from the regulator Directorate General of Civil Aviation (DGCA).

“Delighted to report that Vistara has its Air Operating Permit in hand,” Mukund Rajan, Tata Group’s brand custodian, said on microblogging site Twitter on Monday.

Tata SIA Airlines, known by its brand name Vistara, is a joint venture between Tata Sons Ltd and Singapore Airlines Ltd (SIA) with Tata Sons holding the majority stake of 51% in the company and SIA holding the remaining 49%. The permit was the last regulatory approval needed by Vistara to operate in India. Tata SIA Airlines confirmed the development.

“Headquartered in New Delhi, Vistara will begin operations with its fleet of brand new Airbus A 320-200s and will soon make an announcement on the start of sales, routes and schedules,” the company said in a statement. “Over the last few months, the Vistara team has been focused on complying with regulatory requirements for all procedural checks and finally the proving flights to qualify for the AOP (air operating permit).

Receiving the permit is a key milestone for Vistara, chairman Prasad Menon said. “It is a reflection of the dedication and determination of our entire team and we are all looking forward to the first flight with excitement,” he said.

In September 2012, the government allowed overseas airlines to invest up to 49% in local airlines. Previously, foreign investors, but not airlines, had been allowed to hold up to a 49% stake in local airlines.

Vistara is expected to start selling tickets in next few days and is likely to have its first flight in January, a person close to the development said on condition of anonymity. Vistara may have about five aircraft in operation by the end of fiscal year 2014-15, according to consulting firm Centre for Asia Pacific Aviation (Capa).

Starting a flight during fourth quarter of the current fiscal year will be challenging, according to Kapil Kaul, chief executive officer, South Asia, Capa, who expects Vistara to be aggressively greeted by its competitors.

“Tatas are regaining the opportunity they lost 50-60 years ago,” said Craig Jenks, president at New York-based consultancy firm Airline/Aircraft Projects Inc. Jenks said Vistara has to come up with imaginative branding, cross-marketing with other Tata Group products and Singapore Airlines for a potentially successful flight.

Vistara’s entry comes at a time when India’s airlines have posted an estimated loss of Rs.10,660 crore in 2013-14, which was 76% higher than in the previous fiscal year, and the worst result since 2007-08, according to Capa. The figure excludes Kingfisher Airlines Ltd, which remains a listed entity but has been non-operational since October 2012. State-run Air India Ltd accounts for more than half of the combined industry loss at Rs.5,390 crore.

Capa estimates that there will be only a slight improvement in the year to next March, with projected losses in the range of $1.3-1.4 billion.

Over the last seven years, Indian airlines have lost about $10.6 billion, according to Capa. These years also saw the closure of Kingfisher Airlines, Air Deccan (which had merged with Kingfisher), Deccan 360, MDLR Airlines, Paramount Airways and Indus Air.

But that is not stopping new airlines from taking to the air. The aviation ministry recently approved six new airlines, resulting as many as eight new airlines taking to the skies this fiscal year, including Tata Sons’ low-cost joint venture with Air Asia Bhd that has already started flights and Vistara. Three of the new approvals are for national airlines.

The new airlines are Air One Aviation Pvt. Ltd, Zexus Air and Premier Air, that are seeking to become national airlines; Turbo Megha Airways, Air Carnival and Zav Airways want to take to the skies as regional airlines that operate in limited locations and face restrictions on where they can fly to.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.