With Indian Airline industry vying for

rejuvenation in terms of comprehensive

inclusion of passengers, there exists strong
need of full-service carrier in Indian
aviation scenario in 2016. The poor show of
Public sector air carrier Air India, record
multimillion loss of low cost carrier Spice
Jet and failure of premium service carrier
Kingfisher Airlines have demonstrated
inefficiencies of operations. This calls for a
better positioning of airline brand with
long-term strategy.

Strategic
Management
Study on Tata Vistara –
Group-04

Jyothi Heda
Debabrata Mahapatro
Sudhindra Majumdaru
 STRATEGIC MANAGEMENT
A STUDY ON TATA VISTARA

Table of Contents
1. Introduction .................................................................................................................................... 2
2. Trends & Challenges in Indian civil aviation industry: .................................................................... 3
3. Tata-Vistara Airlines ........................................................................................................................ 3
a) Way in for Tata-Vistara into the industry: .................................................................................. 4
b) Best Entry Strategy Used? ........................................................................................................... 4
SWOT analysis for Vistara: .................................................................................................................. 5
PORTERS 5 Forces: .............................................................................................................................. 5
PESTLE Analysis of Vistara:.................................................................................................................. 6
c) Addition of this has increased profits. ........................................................................................ 7
I. Industry: Combined estimated losses of the three full-service carriers — Air India, Jet
Airways and newly launched Vistara — stood at $1.28-1.31 billion during the period, with the
government-owned Air India alone accounting for a whopping $900-920 million. India currently
has nine airlines in the country. ...................................................................................................... 7
D) Current Status? Reason. ................................................................................................................. 9

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1. Introduction

The Indian civil aviation industry is on a high growth trajectory. India has a vision of
becoming the third largest aviation market by 2020 and is expected to be the largest by 2030.
The civil aviation industry in India has ushered in a new era of expansion driven by factors
such as low-cost carriers (LCC), modern airports, foreign direct investments (FDI) in
domestic airlines, innovative information technology (IT) interventions and a growing
emphasis on regional connectivity. Simply going by the market size, the Indian civil aviation
industry is amongst the top 10 in the world with a size of around US$ 16 billion.

Between April 2015 and January 2016, the number of international passengers flying to and
from India grew by 7.6%, while domestic passenger traffic was up 20.6%. By 2020, India’s
airports are expected to carry as many as 369 million passengers compared to the current 190
million.

Source: https://www.theatlas.com/charts/E1NRzwEal

By 2015, there were seven national air carriers namely—Indigo, Jet Airways, Air India, Spice
Jet, GoAir, Vistara and AirAsia India. In addition, regional carriers such as Air Costa, Air
Pegasus and Trujet provide the much-needed regional connectivity.

However, it has not been an easy flight. Over the past two decades, 17 airlines have shut
down—the most significant one being Kingfisher Airlines. Companies lost a staggering
Rs60, 000 crore during this period.

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In India, air traffic in terms of aircraft movement and passenger traffic has increased during
the last three years. The total aircraft movements and passengers have registered a compound
annual growth rate (CAGR) of 3.3 per cent and 5.6 per cent respectively during FY11 to
FY14. In the April-May period of the current financial year, aircraft movements and
passengers have increased by 5 per cent each over traffic handled during the corresponding
period of FY14. The freight traffic during April-May, FY15, also grew by 9.9 per cent over
traffic handled during the same period of the last fiscal. The Government of India has played
a key role in promoting the Indian aviation sector. The Government of India has approved the
construction of five budget airports to improve regional connectivity and work on them have
started from FY15.

2. Trends & Challenges in Indian civil aviation industry:

India's aviation sector has been going through rough skies. The last few years had the biggest
names bleeding in the airline space in India. The problem lies in luring the customers.
According to a rough estimate, nearly 99.5 percent of the world's third largest economy have
NOT seen the insides of an aircraft. Most Indian carriers therefore are facing financial ruin.
This indicates that the revenue-source of most passenger airline companies is not expanded
yet. Some recent initiatives such as allowing import of ATF are a step in the right direction,
but more proactive measures are needed in order to make the industry more competitive and
investor friendly. The positive implications of allowing 49% FDI in Indian airlines are slowly
becoming evident.

3. Tata-Vistara Airlines
Vistara, a full-service airline, is a joint venture between Tata Sons Ltd. and Singapore
Airlines (SIA). In Vistara, Tata Sons holds 51% stake and Singapore Airlines hold 49%
stake. It is one of the new entrants in Indian aviation industry. The airline, which is offering a
three-seat configuration — economy, premium economy, and business class — hopes to
attract passengers with its unique offerings. The airline‘s premium economy segment, the
first of its kind in the country, offers ample of leg space, apart from an upgraded food menu
(from the one offered to the economy class passengers). Its plush interiors are relaxing to the
eye with dull and bright shades matching in juxtapose to give the fliers a homely atmosphere.
The vibrant food menu, which changes every week, is also expected to hit a chord with
passengers. The airline will also be hoping that its cabin crew‘s emphasis to make all
passengers comfortable, irrespective of seat configuration, with every passenger being
enquired by individually — a common practice among international airliner.

The tagline of Vistara is ‘Fly the new feeling’. Vistara has the highest on-time performance
records when compared to other domestic carriers and focuses on exceeding customer’s
expectation every time.

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a) Way in for Tata-Vistara into the industry:

The way ahead in light with current industry scenario:

Looking at the overall behaviour of Indian consumers across sector, one can easily say that
value for money is a key focus for them, especially in the service sector. This means that
while a segment of consumers often prefers the cheapest option available, there is a huge
segment of consumers, which weighs what, is it that they are getting out of their money. So
they may want a specialized service, better seats, meals, lounge access, etc. and they might be
inclined to pay premium for it. However, the question is how much premium? In addition, do
they really see value out of that premium? If the Tata-SIA's Vistara can work that equation
well along with the right cost structure, it can make space for itself in this cost driven airline
industry.

Vistara has brought some new features for Indian fliers. From a premium economy class to a
plush lounge at Delhi Airport and tablets for inflight entertainment for the business class,
the airline has attempted to tap the premium market, dominated by Jet after the collapse of
Kingfisher Airlines. It has changed the flight menu five times in two years.

b) Best Entry Strategy Used?

Vistara started operations when the sector, like most places in the world, had become a field
for low-cost carriers. In a country where the cost of running an airline is among the highest in
the world and the duration of a flight stretches to 150 minutes, customers were happy to
sacrifice comfort for pricing. Therefore, it has been a tough fight for the airline, which brands
itself as a premium one.

We believe Vistara used the best strategy to enter the market. A global giant and a leading
airline come together. Vistara has brought some new features for Indian fliers. A first of its
kind Premium economy similar to business class like food and seat option at a lower cost.
After Kingfisher’s collapse, there was a need for premium service, which was dominated by
Jet air.

 First Airline to offer THREE CABIN SERVCE.

o 16 Business, 36 Premium Economy, 96 economy.
 Customer mind-set is changing from Price focus to something, which values quality
over price.
o Attempted to tap the premium market, dominated by jet air after the collapse
of Kingfishers.

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Let us look at SWOT analysis for VISTARA:

SWOT analysis for Vistara:

Strengths Weakness
 Financial Backing: TATA & SIA are  Less number of aircrafts compare to
both cash rich company and good its competitors.
credit worthiness. SIA posted a net  Less connectivity.
profit of $623 MILLION(2017-18) o Both International &Domestic
 Professional Leadership: Tata Sons
is a well known and well respected for
its leadership.
 Vistara provides great in-flight
experience even in Economy class
with food as part of normal ticket.
 Excellent advertising and branding
exercise has enhanced its presence
in the Indian airline industry

Opportunities Threat
 Govt. regulation change to allow 49%  Indian fliers are more Price sensitive
FDI share in civil aviation. compare to global.
 Aviation fuel price decreased in last  Lack of brand awareness.
year.
 Increase in domestic air traffic.
 Ude Desh ka Aam Naagrik(UDAN)
Scheme by Govt. is a regional airport
development and "Regional
Connectivity Scheme" (RCS)

PORTERS 5 Forces:

Threat of Threat of new Competitive Bargaining Power Bargaining Power

substitution entrants rivalry Suppliers of Buyers
Other mediums A high capital High Fixed Costs Supply of aviation Direct customer
of transport requirement fuel. have different
would be options who are
required for a price sensitive.
new entrant.

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PESTLE Analysis of Vistara:

Political Economic Social Technological Legal Factors Environmental

Government Economic Development Advancement FDI limits for Impact of Air
Policy Growth of Tier-II cities of technology Civil aviation traffic on
within Aviation industry has pollution.
Industry been increases Impact of
better
connectivity
may increase
new Business
Opportunities
for other
sectors of the
society.

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c) Addition of this has increased profits.

Vistara, India’s youngest full-service airline, currently has a fleet of 14 A320s – the most recent of
which is a NEO variant, with a further six NEOS on order. The airline plans to induct wide bodies once
it becomes eligible to operate international services upon reaching a domestic fleet size of 20
aircraft. Vistara's first international route is expected to launch from the Winter Schedule 2018/19.
I. Industry: Combined estimated losses of the three full-service carriers — Air India, Jet
Airways and newly launched Vistara — stood at $1.28-1.31 billion during the period, with
the government-owned Air India alone accounting for a whopping $900-920 million. India
currently has nine airlines in the country.
II. Vistara reported losses of around 518 Crore however the top line growth is doubled to 1390
Crore.
III. Profits are not expected until 2020 at the earliest but the New Delhi-based carrier, which has
been flying domestically for more than two years, is growing nicely, the Singapore daily-cited
analysts as saying.
IV. On the pricing front, Vistara has been very competitive. Its fares are usually not the highest,
and if higher, the price difference between a low-cost carrier such as IndiGo and the airline is
less than a thousand rupees, or specifically – less than INR 500 on the Delhi – Hyderabad
sector. In 9 out of 14 cases, Vistara was cheaper than IndiGo on the sector, sometimes by as
much as INR 7,292. Below is the table, all fares in INR:

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Conclusion

 Vistara has come in to cater primarily to the business and corporate traveller, and leisure
travellers who are willing to pay for a certain degree of minimum services and treatment.
The airline’s true competitors are Jet and Air India, but considering the Singapore-airlines
level of service that Vistara ensures, the airline stands one cut above the rest.
 With the airline’s focus on the soft product rather than the hard, a threat it may face is from
its competitors – both low cost and full service, who may ramp up their levels of service to
match Vistara’s, at perhaps a more attractive price. The advantage Vistara has is the clean
image it comes with, and no baggage of the past.
 Vistara’s network focus seems to be on mature markets, the markets in which most of its
target traveller base is found. Its interline arrangement and loyalty program agreement with
Singapore Airlines will allow passengers to experience a seamless travel experience to
destinations together covered by the Singapore Airlines and growing Vistara network.
 Vistara is a nice airline that pampers you with class. However, clarifying the selling points of
Premium Economy, adding power sockets, and ensuring a uniform brand representation at
all touch points is much desired.

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D) Current Status? Reason.

Their Business Strategy to function with the following had marked its space in the area of Premium
airlines-

 No cheap fares, no discounts

 Loyalty by money, not miles
 Vistara is the first airline in India to offer a value-based frequent flyer program called Club
Vistara, where loyalty points are accrued based on actual spending on fares rather than
miles travelled. The airline has done away with the physical loyalty card. A registered Club
Vistara member gets points based on the money he has spent on travelling. It is also more
transparent and easier for customers to understand. As evidenced by recent industry trends,
there is an emerging move away from the traditional mileage-based to a value-based
scheme.
 Low-cost thinking, full-service offering
 Vistara is maintaining a lean structure of operations while offering a full-service product.
 No advertisement splash, no fanfare
 Three-class configuration
o Vistara is the first full-service carrier in India to introduce a so-called premium
economy class. Vistara’s 148-seater Airbus A320-200 will offer three separate
cabins, with 16 seats in business, 36 in premium economy and 96 in economy class.
 International Flights Expected to be in air by July, 2018

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 National carrier Air India is no longer India’s least punctual airline. Jet Airways’ on-time
performance (OTP) was judged the worst in eight of 12 months last year, with as many as a
third of its departures delayed. Vistara with 76% stood better than both market leaders-Air
India & Jet Airways.
 The three together make up India’s entire cache of full-service carriers, the only airlines that
offer frequent flyer program with privileges like zero cancellation and rebooking fees that
frequent flyers count on.

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