The Economic Times daily newspaper is available online now.

    Tata group, Singapore Airlines pump ₹585 cr more into Vistara

    Synopsis

    With this latest funding, the two shareholders have invested ₹1,835 crore in the airline in the first seven months of this fiscal, surpassing ₹1,500 crore in FY20. Funds have been infused in proportion to their stakes, documents show.

    vistara-agencie-sAgencies

    Infusions will help the airline maintain liquidity as it has had to dip into cash reserves post-pandemic, to cover fixed costs and payments to aircraft lessors, according to executives aware of the matter.

    New Delhi: The Tata group and Singapore Airlines (SIA) have invested ₹585 crore in Vistara so far in this financial year — the second highest equity infusion in a single year in the airline by its promoters — to keep it afloat, as the pandemic takes a toll on air travel. The infusion is through the purchase of shares in a rights issue, according to documents seen by ET.

    This is the third tranche for Vistara by shareholders since air services were halted in India on March 24 in response to the pandemic. Domestic travel resumed in phases while international services have begun to nations sharing an air bubble with India.

    With this latest funding, the two shareholders have invested ₹1,835 crore in the airline in the first seven months of this fiscal, surpassing ₹1,500 crore in FY20. Funds have been infused in proportion to their stakes, documents show. Tata Sons owns 51% of Vistara, while Singapore Airlines owns 49%.

    Earlier infusions took place in April and July, when they subscribed to rights offers worth ₹500 crore and ₹750 crore.

    ‘Pace of Expansion Affected’
    Infusions will help the airline maintain liquidity as it has had to dip into cash reserves post-pandemic, to cover fixed costs and payments to aircraft lessors, according to executives aware of the matter. Domestic flights were suspended until May 25, after which travel restrictions were eased gradually. The ban on flights led to significant revenue erosion for airlines.

    “As a matter of policy, we do not comment on the financial information of the company,” said Vinod Kannan, chief commercial officer, Vistara, while noting that the pandemic had affected growth plans.

    “The current situation has surely affected the pace of our expansion, given the various factors, including restrictions on capacity deployment, continued suspension of scheduled international operations, lower demand, diminished passenger confidence, etc,” said Kannan. “However, we remain committed to our long-term expansion plans, albeit with temporary modifications.”

    Vistara has inducted narrow- and wide-body aircraft, including a second Boeing 787-9 Dreamliner and two Airbus A321 neos in the past few months, according to Kannan.

    The company had cash and cash equivalents of ₹700 crore, as per its financial statement for the year ended March 31.

    Vistara also has accumulated losses of over ₹4,400 crore since commencing commercial operations five years ago.

    Losses likely widened in this fiscal due to costs incurred in the absence of income for several months, experts said. The pandemic could delay the targeted break-even of 2023, they said.

    Shareholders remain committed to the expansion strategy and the long-term vision for the airline, Kannan said, when asked about any change in the break-even timeline.

    “While the last few months have severely affected business for all airlines around the world, we also see opportunities for ourselves to leverage our unique position in the market, for example, expected customer preference for direct flights within and outside India,” said Kannan.

    “Having said that, there are many unknowns in the equation at this point, as the situation is still evolving. Even with the encouraging pick-up in demand, Indian domestic travel in October 2020 was 57.2% lower than the same time last year,” he said. Much will depend on how soon a vaccine is available, apart from several other factors, for demand to return to pre-Covid levels, Kannan said.

    Market leader Indigo posted a loss of Rs 2,844 crore in the June quarter, mirroring industry-wide and global trends.

    Vistara has been in expansion mode, adding routes and flights, since Jet Airways was grounded in April 2019. The airline reported a 58% jump in revenue to Rs 4,700 crore in FY20. It almost doubled the number of weekly flights it was operating — from 880 to 1,500 — between April 2019 and March 2020.



    (You can now subscribe to our Economic Times WhatsApp channel)
    (Catch all the Business News, Breaking News Budget 2024 News, Budget 2024 Live Coverage, Events and Latest News Updates on The Economic Times.)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    ...more

    (You can now subscribe to our Economic Times WhatsApp channel)
    (Catch all the Business News, Breaking News Budget 2024 News, Budget 2024 Live Coverage, Events and Latest News Updates on The Economic Times.)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    ...more
    The Economic Times

    Stories you might be interested in