Shakeup of Indian airlines adds competition, business seats

India’s airlines are set for a landmark week, with two milestones days apart, that will redefine the competitive landscape in one of the world’s fastest-growing aviation markets.

Vistara operates its final flight on Monday before its planned merger with Air India kicks in the following day, marking the end of a complex and messy two-year long process. On Thursday, market leader IndiGo, operated by InterGlobe Aviation Ltd., debuts its business-class cabins on select routes as it ventures beyond budget travel for the first time.

The two developments mark major changes for India’s two largest airlines as the carriers expand and foray beyond their traditional areas of expertise.

By incorporating the Singapore Airlines Ltd.-owned Vistara into the much larger but unprofitable Air India, the Tata Group has taken on one of the most complicated aviation mergers globally that included navigating pilot protests which led to dozens of canceled flights this year.

The union will be a crucial test of the coffee-to-cars conglomerate’s ability to improve the quality of Air India’s services and turn around the loss-making carrier it bought from the Indian government in 2021 without losing the brigade of loyal Vistara fliers.

The challenge for the no-frills IndiGo, meanwhile, will be to revamp its image — it’s like India’s Ryan Air — and dent Air India’s supremacy in the premium sector.

“All the jabs that Air India and IndiGo are taking are aimed at each other’s strategy,” said Ajay Awtaney, founder of LiveFromALounge.com, a local aviation analysis platform. “It’s now a two-player game.”

Vistara’s Continuity

While Vistara’s routes, schedules, in-flight products and crew will stay the same for now, its aircraft will be identified using a separate Air India airplane code.

Even as the two merging airlines try to reassure passengers there will be minimal disruption, travelers and aviation enthusiasts across India are mourning the end of Vistara.

Launched in 2015, the airline gained popularity after the nearly three-decade-old full-service carrier Jet Airways Ltd. went bankrupt in 2019. Vistara swooped in to fill the gap in the market for India’s booming business-class travelers, backed by its co-owner Singapore Airlines and its track record of top-class service.

Vistara was the first airline in the country to offer flatbed seats and a premium economy cabin to aspirational Indian fliers.

‘Halo Effect’

“They were a big believer in creating this premium aura around the brand,” said Awtaney. “That “halo effect” has served them well to the end. They also realized from Day One the focus that an Indian full-service carrier has to have on the food.”

Devoted Vistara fliers are worried about the fall in cabin service standards post merger — one of the things that made the airline differentiate itself in an industry dominated by low-cost airlines. Air India has said Vistara’s catering is set to be extended to all planes across the new merged airline, in an effort to assuage some of such concern.

The combined entity will give Tata-controlled airlines a total fleet of 210 jets, with an additional 470 jets on order from Boeing Co. and Airbus SE. Its joint share of the Indian market will be 25 per cent based on September-quarter data from the local aviation regulator, with Air India controlling 14.7 per cent and Vistara on 10.1 per cent. Indigo had 62.5 per cent in the same period.

Vistara today begins “to fly into an exciting new future”, a pilot said in a plane announcement in a video posted on X by the airline on Monday.

Measuring Up

The Air India’s customer service has also been in the spotlight this year and not always for the right reasons, making fliers worry if it can measure up to its junior partner’s standards. Air India ranked the worst in the world for lost luggage as of Nov. 4, and has come under fire for delayed flights, poor food and dirty seats.

Meanwhile, the Air India and Vistara’s main competitor is looking to guard its market leading position and breaking out of its low-cost origins. IndiGo will start offering ‘IndiGoStretch’ business seats on some of its routes later this week, and has already launched a new loyalty program.

Starting at about 18,000 rupees ($213), the airline aims to expand its business-class service to all flights on India’s busiest route between New Delhi and Mumbai by early January next year, according to an Oct. 31 statement.

“India’s economy is soaring,” chief executive officer Pieter Elbers said in the statement. “IndiGoStretch will create a desired option for many who are aiming to travel business, some of them seasoned and some perhaps for the first time in their life.”

Premium travelers on its planes will get benefits like priority check-in, anytime boarding, a more generous baggage allowance and a five-inch recline seat.

Still, these perks might fall short of expectations of price-agnostic jetsetters who are used to hot food, foot rests and a 7-inch recline common in other airlines’ business-class cabins.

IndiGo’s offering “may affect 10-15 per cent of Air India’s business class”, according to Sanjay Lazar, aviation expert and chief executive officer at Avialaz Consultants. It is more likely to affect Air India’s aspirational premium economy cabins, he said.

Main Attraction

Indigo’s main attraction will be pricing, with business-class tickets starting at a price point that’s 30 per cent lower than Air India’s where a similar Delhi-Mumbai trip will cost about 26,000 rupees.

“IndiGo had a hole in its operations because they were missing out on a section of the customer which fly business class,” according to Sidharath Kapur, board member at Noida International Airport. “But I don’t think Indigo would be able to compete at a full-fledged business-class airline kind of product. I would say hardcore business class travelers would continue to be loyal to the full-fledged airline.”

IndiGo’s transformation from being just a budget carrier is also a step toward flying its widebody jets which are expected to be delivered from 2027 and will pave way for its long-haul offerings.

This will dial up the competition further with Air India and Vistara — the country’s only long-distance carriers currently.

“It is a long-term game,” Awtaney said. “They are both trying to get into each other’s turf.”