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With Vistara’s merger, Air India stands as India’s sole full-service airline

Indian skies see major shift as last of full-service competitors fades, leaving Air India as the only full-service carrier.

Prabhav Anand 10 November 2024 10:44

With Vistara’s merger, Air India stands as India’s sole full-service airline

As Vistara merges into the Air India Group, India’s aviation landscape will undergo a significant change.

With this move, the number of full-service carriers (FSCs) in the nation, once at five, will dwindle down to just one: Air India.

The merger also reflects a notable shift in foreign ownership within Indian airlines. After the liberalization of Foreign Direct Investment (FDI) policies in 2012 under Prime Minister Manmohan Singh’s government, foreign airlines were permitted to own up to 49% of domestic airlines.

This change opened the door for partnerships like Etihad’s 24% stake in Jet Airways and later led to the establishment of AirAsia India and Vistara, a joint venture between the Tata Group and Singapore Airlines, where Singapore Airlines holds 49%.

This consolidation marks the end of Vistara, which launched in 2015 and remained the only full-service airline to enter the Indian market in the past decade. Following the merger of Indian Airlines with Air India in 2007, India saw a wave of FSCs.

However, airlines like Kingfisher and Air Sahara vanished from the market over time, with Kingfisher ceasing operations in 2012 and Air Sahara (later renamed JetLite after being acquired by Jet Airways) folding in 2019 along with Jet Airways.

Jet Airways, once a prominent FSC with a 25-year history, was grounded in 2019 due to financial challenges and is currently on a path toward liquidation.

Starting November 12, Air India will hold its position as the only full-service airline in India’s aviation market.

India’s experience with airlines owned partially by foreign entities began with Jet Airways, where Etihad Airways took a 24% stake.

This was followed by AirAsia India, with a 49% stake held by Malaysia’s AirAsia and the remainder by Tata Group, and Vistara, in which Singapore Airlines owns 49% while the Tata Group holds the majority.

In the fast-growing aviation market, low-cost carriers (LCCs) like IndiGo have risen to prominence, reflecting global trends as well.

Although traditionally there’s been a distinction between FSCs, which include more amenities and services in ticket prices, and LCCs, which focus on route-specific profitability and simplified fleets, the line is increasingly blurred.

Today, even budget airlines offer premium seating options, making distinctions between the two models less clear.

For FSCs, the focus is often on overall network profitability and passenger comfort, with additional services such as meals bundled into ticket costs.

Meanwhile, LCCs prioritize cost efficiency through ancillary revenue and simplified, single-type fleets.

The consolidation in India’s aviation sector, as highlighted by Vistara’s integration into Air India, underscores a new era in which low-cost options dominate while the full-service model adapts, leaving Air India as the last player in a league of its own.

VTT

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