Working on leaner cost structure, raising additional revenue to minimise COVID-19 impact, says Vistara

Vistara is working towards a leaner cost structure amid the COVID-19 disruption, even as the airline - like its peers - is exploring ways to bring in additional revenues.

"We have been pursuing several measures to reduce non-customer facing operating expenditures and are making every effort to conserve cash wherever possible. This includes renegotiating various contracts with partners, vendors, and lessors," a Vistara spokesperson told Moneycontrol.

The spokesperson added that the airline also cut salaries "with the intent of protecting all jobs at Vistara."

On new ways to bring in additional revenues, the airline cited its ancillary service that allows passengers to book an extra seat for themselves to ensure that the next seat is empty. "Vistara Upgrades is another such initiative launched recently to augment our revenue," the spokesperson said, and added that the airline is also focusing on cargo operations, for which it has got approval for carriage of cargo on seats.

The statements came in response to queries after the aviation business of the Tata Group came under the spotlight amid the legal battle with the Shapoorji Pallonji Group.

In a statement on September 23, it had said that "several issues...continued to plague the group. Be it the operations of Tata Steel UK, where over the last three years alone the operational losses have increased by an additional 11,000 crores, or the Group’s aviation businesses."

The Tata Group has interests in two airlines. Vistara is its joint venture with Singapore Airlines. It also formed a joint venture with AirAsia to launch AirAsiaIndia.

The FY20 report card

In FY20, Vistara's pre-tax loss increased to Rs 1,814 crore, said a report in Business Standard. This is despite a 54 percent jump in revenue to Rs 4,738 crore.

Explaining its FY20 performance, the airline reflected that expansion and high operational expenses put pressure on margins.

"Over the last year, we expanded our network by close to 50 percent, launching eight new domestic destinations and starting international operations to five destinations in quick succession," said the spokesperson.

The airline also nearly doubled its fleet size by the end of the financial year ending March 2020, added the executive.

Vistara has a fleet of 43 aircraft, which include Airbus A320s and a Boeing 787-9.

"Operational expenses remained high throughout the year," added the spokesperson, "including the increasing price of ATF and depreciating Rupees against US dollars."

Commenting on the impact of the coronavirus pandemic, the executive said, "Our growth journey got severely impacted with the outbreak of COVID-19 and the temporary suspension of operations during the nationwide lockdown. There was a long period of no revenues that led to depleting cash reserves, while some of the significant expenses/fixed costs continued. The financial impact was witnessed by all the players in the sector."