Singapore Airlines-backed Vistara bets on upmarket model in frugal India

NEW DELHI - In the highly price-sensitive Indian aviation market, Vistara, a full-service carrier backed by local conglomerate Tata Sons and Singapore Airlines Ltd (SIAL.SI), is betting it can convince passengers to buy higher fares in return for superior service.

Though all airlines in India are feeling the pinch - with debt-laden Air India and Jet Airways (JET.NS) in such a parlous financial state they have been struggling to pay staff salaries on time - Vistara says its upmarket strategy is starting to bear some fruit.

The carrier has narrowed its losses and seen average fares rise this year as customers take to its product offering, including a domestic premium economy class, even though ticket prices at most rivals are falling, Vistara CEO Leslie Thng said in an interview at the carrier's headquarters.

"We have seen a steady improvement in terms of demand, in terms of load factor as well as in terms of the fare passengers are willing to pay," said Thng, a Singapore Airlines veteran who previously ran its Southeast Asian regional arm, Silkair.

India's domestic airline market, the world's fastest growing at 20 per cent a year, represents an enticing long-term opportunity for Tata and Singapore Airlines. But in the shorter term it has turned into a financial sinkhole - high oil prices and a weaker currency are not being recouped in fare prices, driving carriers into the red.

"That is a paradox," Association of Asia Pacific Airlines Director-General Andrew Herdman said of India. "It has a lot of exciting potential but from a business point of view, very challenging." Vistara, which started flying in 2015 and now has 22 Airbus SE (AIR.PA) A320 narrowbody jets and a 4 per cent domestic market share, has struggled financially as it scales up.