Did the Tatas really have to merge Vistara with Air India?

A brand that was invested heavily by the Joint Venture had little chance of survival after Air India won the bid to purchase Air India, along with its subsidiary Air India Express and Air India’s stake in SATS. In November 2022, it became certain that Vistara would merge with Air India. 

The initial estimates as released by Singapore Airlines were for the merger to be complete by March 2024. Vistara had not made operating profits for even a single quarter when the decision and announcements were made about the merger.

The pandemic was still around and there were severe restrictions in various markets. Singapore Airlines was being bailed out by the local government and to justify loss-making investments would have been a challenging measure, especially without knowing how long the pandemic would last. 

The first indication of the merger came a few months before the merger, when Air India stated its goal of having a 30% market share. It clearly was not possible without a merger with Vistara.

The biggest challenge that a loyal Vistara traveller sees post-merger is the service level, especially for premium passengers and post the fall of Jet Airways. Except for the pandemic times, for which Vistara apologised and reinstated its meal service levels, Vistara was much loved for its food and service. 

As Air India scales up, apart from the aircraft issues that are being handled in one way or another – the service levels have not matched, and right from packaging to offerings – there continues to be a gap.

A premium subsidiary?

Airlines the world over have tried a low-cost offering subsidiary. From the biggies in the United States to some airlines in Europe and Singapore Airlines itself with Scoot – it’s LCC subsidiary, with which it also offers interline arrangements with full baggage transfer, single ticket issuance, and loyalty benefits.

Did India have a market for an air carrier being positioned as premium than Air India? A small and niche carrier that could be priced higher than Air India for its service and offerings and operate routes like those to London or metro routes in India?

 Indeed the one airline benefit goes away, but the codeshare amongst carriers – which Air India is doing with its low-cost subsidiary Air India Express, could well handle passengers effortlessly. While every carrier has thought about a step-down approach and tried it, like Air India – AIr India Express, Singapore Airlines – Scoot, and Jet Airways – Jetlite, the thought of a step-up approach has not crossed the minds for most airlines.

Clearly, there were two things that would go against the thought. First and foremost, portraying Air India to be a lower brand. With a higher brand recall and a very long legacy, Air India was definitely not open to being overshadowed. Second, the cost. With Vistara’s finances not up to the mark, and the case being worse for Air India, it made sense to consolidate and come out stronger than have two loss-making entities compete with each other with arms-length competition as per law. Costs always triumph over everything else and so it did, this time around.

Tail Note

For an entity that is still coming out from the Indian Airlines – Air India merger, many calling it incomplete, a new merger is another challenge, especially at a time when it makes regular news for being fined, facing delays, or something else.

One still wonders, if it had a chance to survive on its own with close cooperation with Air India, had the decision not been taken during the pandemic when the thought process of every industry was different than what it was before or after. Or if Air India would not have had the Tata legacy, had the group opted to continue with Vistara over Air India? Some questions have no answers and business has no ifs and buts, it’s now time for Air India.