SIA’s Vistara unlikely to be profitable in the coming years, analysts caution

India’s 5/20 rule remains a big concern.

Singapore Airlines has been counting on its joint venture with Tata Group to boost its coverage of India’s booming aviation market. The companies recently revealed that its proposed new airline will be named Vistara, but analysts now warn that the fledgling carrier is unlikely to be profitable in the next few years.

According to a report by OCBC, Vistara’s growth will be bogged down by strict Indian aviation rules, which states that an airline must have five years of domestic flights and have a fleet of at least 20 aircrafts in order to operate international flights out of India.

“We believe this is unlikely to change due to the intensifying lobbying by group of airlines including Air India and Jet Airways. With strong domestic competition to further suppress the yield, we do not expect profitability in its initial years of operation. Hence, we think Vistara will not be a growth driver for SIA in at least the coming years,” noted the report.

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