 "Watch out Jet, Air India: Vistara's three-class ticket strategy may go for the kill")
Vistara, the joint venture between the Tata group and Singapore Airlines, takes wing on 9 January with four flights daily on the Delhi-Mumbai sector and two a day on Delhi-Ahmedabad. And from the initial fare sheet made available to us, it is taking Jet Airways and Air India head on in terms of fares.
The lowest fare available on Vistara for its Delhi-Mumbai leg was priced at Rs 4,400 without taxes etc. A rough, back-of-the-envelope calculation shows the final one-way fare after service fee and taxes comes close to Rs 5,500. This is very close to fares available on 20-day advance purchase options for both Jet Airways and Air India as of now.
But Vistara’s pricing has some very interesting elements. The fare sheet shows 14 fare classes for a one-way journey but only 11 for a return journey on its network. There is no option to book a return Business Class fare as of now.
The airline has said it will not levy any fuel surcharge on its fares and also that cancellations done on the lowest two fare classes will be non-refundable. The cancellation fee for all fare classes is also mentioned upfront.
Vistara is the first domestic airline which will offer Premium Economy apart from the regular Economy and Business Class fares. The fare sheet makes it clear that the airline is giving a slight discount on return fares compared to one-way fares. Also, Premium Economy fares are about twice that of Economy while the differential becomes five times if we compare lowest one way economy and business class fares.
Will Vistara’s strategy of a three class cabin with steep price differentials work? All domestic airlines now offer a two-class cabin with Business Class occupancy at just 2/3rds.
Cleartrip’s Samyukth Sridharan told Firstbiz that the total daily seats currently deployed in the Indian domestic market are around 265,000 and only around 9000 (or 3.3%) are estimated to be business class seats. He termed three class service by Vistara as an “interesting move and there is no precedent for this in the domestic market though it is a tried and tested approach on international flights.”
“Even in a very price sensitive domestic market like India we feel that there could be a market (corporate travel and individual high-end leisure segment) that would see value in this offering. The critical thing here for the airline would be to be very clear to the consumer about the value proposition of their offering. Also, if you look at incoming international traffic into India, this product configuration could offer seamless class offering to the Premium Economy and Business Class passengers travelling domestically,” he said.
Vistara’s arrival has already shaken up competition. Jet Airways has gone back to being full service earlier this month after a disastrous experiment with running twin services, low fare and full service, for years. Air India says it has been offering premium economy on some of its flights already by not booking the middle seat in front three rows on its Airbus 319 aircraft on Delhi-Imphal and Delhi-Cochin flights. It is also offering discounts of up to 15% on Business Class seats through its Super Saver schemes launched earlier.
Will Vistara’s assertion that it will offer “seamless” service to passengers work to get it business despite stiff competition? Nitin Gurha of travel portal ixigo.com says, “Vistara’s positioning is of a premium airline…they have just stared on a few sectors and here could be some changes in the price points when they open for other sectors. However, the launch of Vistara is good news for the industry and more so for passengers as competition increases quality of service and expands the over all market share.”
The two things to watch out for would be how VIstara managed to get passengers to Premium Economy and Business seats. These two segments may depend heavily on corporate bookings.
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