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Monday, August 19th, 2019

Vistara to turn profitable in 2020-21

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by December 22, 2016 General

MUMBAI: Vistara, the full-service airline started by Tata Sons in a joint venture with Singapore Airlines incurred more losses than anticipated in 2015-16 and is likely to make profit in 2020-21 as per the minutes of Tata Sons board meeting that took place in June this year. The minutes were submitted in a petition filed by ousted chairman of Tata Sons Cyrus Mistry with the National Company Law Tribunal.

As per the minutes, Tata SIA Airlines Ltd,. which runs Vistara, missed its budgeted revenue by 10 per cent for the year 2015-16 and reported a loss of Rs.399 crore as against budgeted loss of Rs.335 crore.

The board was informed that the revised financial forecast indicated an incremental equity requirement of Rs.600 crore as against Rs.300 core presented to the Tata Sons board earlier.

The board approved the infusion of not more than Rs.310 crore into the company as Tatas hold 51 per cent equity in the airline while the rest is with Singapore Airlines.

“The Board noted the revised equity requirement of Rs.600 crore of the Tata SIA Airlines Ltd and unanimously approved an invest amount of not more than Rs.310 crore instead of the earlier approvals for investment in Tata SIA Airlines Ltd.,” the board said.

The board noted that the transaction was for long-term investment by Tata Sons in the airline company.

The minutes also indicated that Vistara’s business model of providing premium economy seats had come under scrutiny by the Tata Sons board. It had been felt in the board that Vistara should put down a timeline of one year after which it should discontinue premium economy class should it continue to be unviable.

As per the presentation to the board by the airline’s management, Vistara would be cash positive by 2018-19 and would make profits by 2020-21.

Similarly, since AirAsia India, the other airline started by the Tatas in association with Air Asia, is incurring losses, Tata Sons had in the same board meeting, approved infusion of $25 million into this airline to support its operation.

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