Vistara made a net loss of Rs 400 crore in FY16 on account of higher expenses towards maintenance, ground handling and sales and distribution.
The airline posted a revenue of Rs 713 crore, ten per cent lower than its projections and incurred expenses of Rs 1,113 crore. It made a cash loss of Rs 294 crore and a net loss of Rs 400 crore.
All the three listed airlines - IndiGo, Jet Airways and SpiceJet made a profit in FY 2016 on the back of reduction in fuel cost. While Vistara's loss is not surprising as start up airlines take time to break even, its unit costs are far higher than its peers.
An airline's unit cost also called cost per available seat kilometre (CASK) measures the cost incurred in flying a seat per kilometre. In FY16 Vistara reported a CASK of Rs 5.28 and a RASK (revenue per available seat kilometre ) of Rs 3.28.
Vistara CEO Phee Theik Yeoh informed the Tata Sons board that the gap between the unit cost and unit revenue was narrowing and the ability to reduce unit cost further would depend upon cost reduction measures which the airline plans to undertake in next 12-24 months. He said the airline had taken several steps to increase revenue including higher aircraft utilisation, innovative pricing, more partnership with foreign airlines amongst others.
He informed the board the unit cost were on the higher side on account of maintenance costs (14 per cent of total costs), ground handling and sales and distribution expenses. The airline will be cash positive by FY 2018-19 and make profit by FY 2020-21.
The management of AirAsia India also made a presentation to the Tata Sons board in the same meeting. Its CEO Amar Abrol presented a base case and bull case strategy for the airline in which the airline plans to fly 20 aircraft by CY18 in the base case and by CY17 in bull case.
He informed the board the airline had resorted to offering heavy discounts in order to improve the loads. Abrol said the airline plans to expand the network to new destinations including Hyderabad (already launched), Kolkata, Chennai and Srinagar in FY 2017 and Thiruvananthapuram, Surat, Bhubaneshwar, Lucknow, Raipur and Patna by FY 2018.