(A JV between Tata Sons and Singapore Airlines Limited)

Introduction
Vistara Airlines is a joint
venture between Tata Sons
and Singapore Airlines
Limited. The airline is
based in Gurgaon with its
main hub in Indra Gandhi
International Airport. The
airlines started its
operation on 9 January
2016. Vistara is derived
from the Sanskrit word
Vistaar, which means limitless expanse and the word tara, a star, which is depicted
in their logo.

Tata Group was founded by Jamsetji Tata in 1868 headquartered in Mumbai. The Tata
Group comprises of over 100 companies with operations in more than 100 countries,
exporting products and services to over 150 countries. The combined revenue of all
the companies of The Tata Group was $103 Billion in the financial year. Tata
employs over 580,000+ people worldwide. There are 30 publicly-listed Tata
companies with a combined market cap of about $134 billion.

Singapore Airlines operates fleet of 100+ aircrafts including Singapore Airlines Cargo
and SilkAir destinations, covering a total of 109 destinations in 40 countries.

SWOT Analysis

Strengths

Clean balance sheet: Without the baggage of huge losses will help Vistara to churn
the market and take a few risks in terms of pricing and be more imaginative in their
promotions.

Media Attention: Both Tata and SIA are well known companies thus enabling
Vistara to get the media attention it needs. As branding and advertising is a key
strategy to attract fliers in this sector.

Professional Leadership: Tata is well known and very well respected for its leadership
and values/ethics thus Vistara too will get the leadership and management it deserves.

First One: Tata was the first company in India to start an Airline (Now known as
Air India which was sold to the Govt Of India) thus it has a good history and
value associated with it which will help Vistara to imagine in a better way.

Financial Backing: Tata and SIA are both cash rich companies with good
creditworthiness SIA posted a Net Profit Of $804.4 million ($568.7 million) in its
fiscal year ended March 31 (2015-16) which proves the fact
that both the companies have a good business sense of Aviation business.

Weakness

Conflict Of Interest: Tata Sons also holds 40% stake in Air Asia India which is one of
Vistaras biggest rival thus creating a conflict of interest. Thus it might be difficult to
control two different airlines with different partnerships and objectives.

Low Occupancy Rate: Between January and March the occupancy rate of Vistara
was just 53% it did improve to 67% but it is still very low.

Premium Economy and Business: Vistara offers 35 per cent of its seats on every
flight in the business and premium economy categories. Its seat configuration is: 16
business, 36 premium economy and 96 economy. In contrast, Jet Airways offers just
7 per cent of total seats for business category.

The market is dominated by no-frill airlines making it difficult to sell premium product.

Opportunity
 The following report by IATA (International Air Transport Association) shows that
there has been growth in the demand for Aviation in Asia Pacific markets the
following data reveals the growth in Aviation industry in India proved by RPK and
ASK Growth rates. Vistara is operating in India thus enabling them to have a share
in one fastest developing countries with rising income levels.

Country RPK Growth ASK Growth PLF

INDIA 25% 25.2% 87.5

Explanation of measurement terms:

RPK: Revenue passenger kilometers measures actual passenger traffic

ASK: Available seat kilometers measures available passenger capacity

PLF: Passenger load factor is % of ASKs used.

Threats

Sluggish Indian Economy

Hostile Operating Environment and High Fuel Costs: In India Fuel Costs are
25% higher than global costs and 50% airline operating cost is Airline fuel

Competition : India is one of the world’s most competitive aviation markets with
competitors like IndiGo,SpiceJet,Air India etc it is very difficult for an Airline to
survive as price plays a major role in the Indian Market and only low cost carriers
have been able to profit from the masses.
Poor Performance Of Indian Airlines: Indian carriers are staring at an
estimated combined loss of $1.3 billion to $1.4 billion in FY 2015.

Conclusion
Vistara is an excellent example of the vision of the TATA Group. The TATAs always
wanted to have an airline of their own after the sale of Air India. It is too early to
judge if the company will be able to make profits or not as the company is still in
the early growth stage. Most of the TATA Companies are driven by the vision to
serve the people and profits from them are just considered as a reward for the
efforts. Strategic partnership with SIA will help TATA to understand the aviation
business at a global level.