(June 26): The coronavirus outbreak is unexpectedly providing an opportunity to Singapore Airlines Ltd. to grab a share of the lucrative Indian market held by rivals Emirates Airline and Etihad Airways PJSC through a local affiliate.
Vistara, which Singapore Airlines jointly owns with Indian conglomerate Tata Group, is about to get its second Boeing Co. 787 Dreamliner jet, and expects demand for long-haul international travel from India to rise when travel restrictions lift, Chief Commercial Officer Vinod Kannan said in an interview. While the outbreak has delayed expansion plans for the airline, people will prefer direct flights as demand returns toward the end of the year, he said.
“There will be an increase in the number of people who want to travel direct, say, from India to Europe, because they don’t want to transit through another hub that increases travel time, that increases exposure,” Kannan said this week. “There’s actually a silver lining for us” both in terms of business travellers and people flying to visit their friends and relatives, he said.
The advantage for Singapore Airlines will come from the fact that India doesn’t allow foreign airlines to directly fly passengers to a third country. That’s where its local affiliate will step in, providing non-stop connections overseas and luring passengers away from Emirates and Etihad. The success of Vistara is crucial for Singapore Airlines -- which just raised about $6.2 billion (S$8.63 billion) by selling shares and convertible bonds -- as it needs more connections to its sprawling network in absence of a domestic market.
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Vistara, which started flying in 2015, has portrayed itself as a full-service premium carrier over the years, offering business and premium-economy seats, free meals and in-flight entertainment. It has bet on increased corporate spending in what was one of the world’s fastest-growing economies before the pandemic hit. But with companies now discouraging all non-essential travel, and tourism coming to a standstill, airlines are staring at an uncertain future.
“The fact is that now many companies are under stress because of the Covid situation, they have had to cut discretionary spends, and travel, unfortunately, becomes one of those,” Kannan said. “But if you look at it beyond that, may be toward the end of the year or next year, business travel will come back, there’s a need for people to meet, there’s a need for businessmen to travel and meet face-to-face with their suppliers, partners and so on.”
The lucrative market of flying passengers between the South Asian nation and Western Europe, Japan or beyond is now dominated by Etihad and Emirates, which connect through their hubs in Abu Dhabi and Dubai, accounting for about a fifth of total traffic. With Jet Airways India Ltd. shutting down last year after failing to compete with the likes of InterGlobe Aviation Ltd.’s IndiGo, only state-run Air India Ltd. and Vistara have widebody aircraft in their fleets which can fly non-stop to western Europe and the U.S.
Vistara has ordered 13 Airbus SE A320neo-family of jets and six Boeing 787-9 Dreamliners, apart from leasing dozens of narrowbody jets. Tata Sons, the holding company of India’s biggest conglomerate, set up Vistara with Singapore Airlines after an earlier attempt by the two partners in the mid-1990s failed.