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Vistara you see today is just tip of the iceberg: CEO Phee Teik Yeoh

Vistara Airlines, the recently launched Tata-Singapore Airlines (SIA) joint venture carrier, is expanding at a furious pace, and this makes its chief executive officer (CEO) Phee Teik Yeoh a busy man.

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Vistara Airlines, the recently launched Tata-Singapore Airlines (SIA) joint venture carrier, is expanding at a furious pace, and this makes its chief executive officer (CEO) Phee Teik Yeoh a busy man. What other Indian carriers achieved in over five years, he wants to do in four years, with even a Plan B of flying overseas in place; that is, if the 5/20 rule goes. Here, Yeoh parries queries from Praveena Sharma, intelligently dodging the controversial ones. Excerpts from the interview:

Now that the airline is in the air, what are the challenges that you are facing?

Starting our operations initially with 68 frequencies weekly, we have already scaled up and will now operate 164 frequencies a week by March, 2015. There were of course a few challenges, twists and turns, and unforeseen events but we faced them with enthusiasm, optimism and the will to succeed.
Now that we have launched our operations and customers have started to experience our product and services, it will take some time for the consumers to understand and appreciate the unique value proposition Vistara offers. We are hopeful and convinced that once customers experience our product and services and realise what they were missing out.

Do you think you have entered the market at a time when competition is stiff? How are you grappling with it?

I firmly believe that Vistara has entered the market at the right time. More airlines mean a growth in infrastructure, better connectivity, and a boost to tourism thereby enabling businesses and growth of the economy. This means a win-win situation for all stakeholders. Further, we had commissioned an extensive research before setting up operations and that helped us understand the gaps existing in the sector when it comes to customers' need and desires. It is a combination of both these factors that has made us confident that there couldn't have been a better time for us to launch Vistara.

You are adding flights at a quick pace, how sustainable is this? What market share are you targeting by the end of this year?

We see a huge potential for expansion in the Indian market and are committed to operate on a network combination of metros and non-metros where we see demand for a full service airline. We want to grow organically and have chosen to follow a robust well deliberated process of adding new destinations. By April, we will have six aircraft and the schedule that you see right now is just the tip of the iceberg.

The Centre for Asia Pacific Aviation (CAPA) has predicted domestic airlines to post profit in the current year, will this help you breakeven faster than you had expected? When do you expect to break even?

Indeed, there have been several good signs for the aviation industry in India which has immense growth potential. The recent reduction in fuel prices and the rupee stabilising are a big bonus to Indian carriers. We have recently started our operations and intend to drive cost leadership through disciplined control of non-customer facing expenses and innovative use of technology. At the moment, we are concentrating on scaling up our network and offer our customers the highest service standards. We will be focusing on exceeding customers' expectations consistently, and when we do so, breakeven will follow naturally.

The operating cost of an airline in India is among the highest in the world, where are you snipping cost to be profitable?

We will leverage the expertise and resources of our parent brands to reduce overhead costs. We have a healthy mix of insourcing and outsourcing models to keep our operations lean and effective. In fact we have already managed to avoid a few initial set up costs.

You have said you can start flying international routes as soon as the government scraps the 5/20 rule (where an airline needs to fulfill the criteria of 5 years and 20 aircraft to start flying overseas), what makes India attractive?

When we set foot in India, we knew there is a 5/20 rule. So, our operations, our structure, our plan have all been geared up for domestic operations for the initial phase. As and when the 5/20 rule is relaxed, we will have plan B. We will re-strategise and prepare ourselves for international skies as quickly as possible.

What are your expansion plans in India in terms of fleet size, market share and turnover? How much will you be investing in India?

A lot depends on the slots we receive from the authorities. By April, we will have six aircraft and we will gradually increase our fleet size to have 20 aircraft by the end of the fourth year of operations.

You have faced delays in launching your airline due to regulatory issues; Indian government has been talking about its commitment to "ease of doing business" in India, how different is it operating an airline in India today?

For us, the receipt of AOP (Air Operator Permit), activation of distribution channels and delivery of planes all happened in record time. I do believe that the environment is opening up and all stakeholders are working cohesively with the government to propel the industry to the next level. We expect the government to further enhance the ease of doing business by quickly removing the known impediments to the growth of Indian aviation.

Government is doing a lot to promote tourism in India, what more, in your view, should be done to expand the air passenger traffic in India?

We are optimistic about the pro-business and growth-oriented approach of the new government. By putting forward the new draft aviation policy, the government has certainly shown the right intention as they want to introduce a more accountable and responsible system within the industry and we are in complete support of the plan. We welcome the reformist approach especially around development of airport infrastructure and facilities for travellers. We look forward to the government setting actionable goals for achieving the desired milestones set in the policy related to reduced cost of operations, hub concept, ATF (aviation turbine fuel) pricing, reduction in taxes, MRO (maintenance, repair and overhaul) facilities and removal of 5/20 rule for domestic airlines to fly international.

What learning do you get from cases like SpiceJet and Kingfisher Airlines?

The year has begun on a positive note for domestic airlines, with oil marketing companies already having reduced jet fuel prices by 12.5% last month – the steepest cut since July 2014. Between October and December last year, jet fuel prices declined by 11%. This move will definitely bring relief to airlines as fuel costs account for about 40% of an airline's operating expenses. There is a vision of establishing India as a desired transit and hub airport for world traffic movement. In fact, once the 5/20 issue is ironed out India can be showcased globally as an attractive tourism and investment destination. In the coming years, companies will need to adopt a nimble approach to keep pace with trends as consumer behaviour changes rapidly.

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