Vinod Kannan, CEO Vistara, tells Graham Newton that airports and airlines must work together as partners.
What are your plans for international expansion and how have they been affected by the pandemic?
The pandemic affected every airline. But Vistara was fortunate in the sense that India fared slightly better than most countries. Domestic demand has come back strongly and is at 80%–90% of pre-COVID levels on average. For Vistara, it is more than 100% meaning we are doing better now domestically than we were pre-pandemic. Credit must go to our staff and the entire aviation ecosystem for getting us to this point.
We are continuing to take delivery of new aircraft and in fact, have had more than 10 aircraft delivered during the pandemic. We would like to be using them more, but we are getting there.
Overall, I would say I have cautious optimism. The pandemic is still there and cases in India have risen recently. But the general outlook is much more positive than it was a year ago.
International growth is our focus. We added seven international destinations during the pandemic, including London, Frankfurt, and Paris. This decision has served us well from an operational resilience point of view and has increased our understanding of what we need to do going forward.
Do you expect it to be business as usual in the next few years or have we seen fundamental changes in the industry, markets, and passenger expectations?
There have certainly been changes and we can see that clearly in certain streams. There is more leisure and visiting friends and relatives (VFR) travel at the moment, because people haven’t been able to do that. At the same time, corporate travel is slow to pick up. But I think these trends are temporary and we will get back to a more recognizable balance.
The way people travel will be a permanent change though. For Vistara, most of our check-in is off-airport now and that is a big change. People want seamless travel and a suite of online, self-help options. They also want to travel direct. Transit journeys may not be so popular because of the health and paperwork issues that still exist.
What hasn’t changed and never will is people’s desire to travel. The most important point is that the demand exists.
Overall, what are the major challenges facing airlines as they try to recover?
The pandemic is still causing uncertainty. As mentioned, we are still seeing COVID-19 cases going up in certain countries. That is clearly affecting international travel as people don’t want to be stuck somewhere due to travel restrictions imposed at short notice.
And there are other reasons for uncertainty too including the Ukraine situation. It means that the corporate travel budget and discretionary travel is being affected.
In India, taxation is still a huge challenge. It has to be reduced, especially the tax on fuel. The cost of doing business here is high and we are always lobbying to change that.
There are a couple of elements that are both challenges and opportunities. Cargo has taken on a new importance as airlines have realized that it can be a good revenue stream. But we will have to wait and see to what extent cargo has moved up the agenda for airlines that are passenger carriers.
Travel Insurance, which traditionally was not so popular in the Indian context, has also become more important, but airlines will have to look at how to offer that in a better way.
What is your view of price increases at some Indian airports?
Airlines and airports can’t exist without each other. We are joined at the hip. Airports lost two years of revenue but so did airlines and so we can’t be responsible for paying airports back for those losses.
There are lots of ongoing discussions and meetings and it is not all bad. Bangalore, for example, gave us a rebate during the pandemic so credit where its due.
We keep making the point that we are partners and hope that better sense will prevail.
What other regulatory changes are needed to help Indian aviation recover?
The tax on fuel is the biggest change we need. Fuel in India is among the most expensive in the world.
There are lots of customs duties too. The way the Indian goods and services tax (GST) is set up on imports and exports basically means we build GST credit that we are unable to utilize.
And maintenance is another area where we need some harmonization.
But there is an openness and willingness to look at these problems, which we appreciate. And the government is also trying to make it attractive for lessors to locate in India, which would help Indian airlines.
What technology will have the biggest impact on the industry?
Technology is a function of the airline, so the impact of any particular technology varies.
Vistara never stopped investing in digitization and, if anything, the pandemic has accelerated the process. We are trying to make sure we have the right tools for customers to use. They want options.
As an example, we are making it easy for them to block the seat next to them or get assistance at the airport through meet and assist services. It’s what customers want and serves as additional revenue for the airline.
How important is sustainability to your strategy?
These days, every business must be sustainable, and especially airlines. It is fundamental to doing business.
One of the biggest factors is the efficiency of the fleet. Vistara has one of the youngest fleets in this part of world, with an average age of three years. Automatically, it makes us more sustainable.
Sustainable aviation fuels are a chicken and egg situation. Demand is low because the price is high. We need to reach a critical mass of supply and oil companies should take the initiative. Vistara is seriously studying SAF, the production volumes needed, and the source of the SAF.
But it’s important to look at the ground as well as the sky. There are sustainable options in ground support equipment and even our office building is working hard to reduce its carbon footprint.
Is diversity important to aviation’s future and what is Vistara doing to encourage it?
Almost half our staff are female. Perhaps most encouraging is that over 10% of our pilots are women, which is double the world average.
As a company, we have made it known that we are open to getting the best talent regardless of race, gender or anything else. It means we have developed a diverse workforce and an open environment. If you get the culture right, diversity will follow.
If you could change one thing about the industry, what would it be and why?
Broadly speaking, Vistara gets most of its income in Indian rupees and pays its costs in US dollars. I would change that equation if possible! The Indian rupee is depreciating so this is a major consideration for us. We hope that our international expansion will alleviate the problem to a degree.