Vistara, AirAsia India seek quick fleet growth as aviation rules eased, sources say

By Siva Govindasamy

SINGAPORE (Reuters) - Vistara and AirAsia India, airline ventures of India's biggest conglomerate Tata Group, aim to boost their fleet sizes to 20 planes within a year and launch international services after the country overhauled aviation rules, two people familiar with their strategy said.

The Indian government revised on Wednesday its so-called '5/20' policy, removing a restriction that domestic carriers have to operate for five years before they can fly abroad. They must, however, still deploy 20 aircraft or 20 percent of total capacity in India, whichever is higher.

Vistara and AirAsia India, which began operations in January 2015 and June 2014, respectively, will prioritise services to the Gulf and flights to Southeast Asia to connect with their investors Singapore Airlines and AirAsia , added the sources, who declined to be identified as they were not authorised to speak to the press.

Singapore Airlines has a 49 percent stake in full-service carrier Vistara, while Southeast Asian low-fare pioneer AirAsia owns 49 percent of budget airline AirAsia India. Tata Group has a 51 percent stake in Vistara and 49 percent in AirAsia India.

AirAsia India CEO Amar Abrol said on Wednesday that the airline will increase its fleet from six to 20 aircraft "as soon as possible".

These will come from Malaysia-headquartered AirAsia, which supplies Airbus A320s from its large orderbook to affiliates around Asia. AirAsia declined to comment.

Vistara has 11 A320s and will get two more this year, and it originally planned to have 20 planes by June 2018. All of these are from leasing firms, and it will turn to them for more planes, said a source familiar with the company's plans.

Widebody aircraft could also be on the cards for Vistara, but that is not a priority, added the source.

Singapore Airlines referred questions to Vistara, which did not immediately respond to a request for comment.

Vistara has a three-class configuration with business, premium economy and economy cabins. This is geared towards the higher-yield international segment, where executives believe they can compete against Gulf carriers such as Emirates [EMIRA.UL], Etihad and Qatar Airways which dominate the market for travel to and from India.

International services by AirAsia India and Vistara may not significantly hurt incumbents such as Air India, Jet Airways and InterGlobe Aviation's IndiGo, some analysts said.

"We don't really see this as a negative for the competition because in today's global environment, the airlines also need to compete with carriers from abroad and they do not just face the local competition alone," said Pankaj Sharma, Head of Equities, Equirus Securities.

(Additional reporting by Aditi Shah in New Delhi; Editing by Muralikumar Anantharaman)