Vistara to ramp up competition with low-cost carriers

Vistara, a full-service carrier, will introduce a new fare class from August 2 called “Economy Lite”, in a bid to attract more passengers. The new class will be a stripped-down version of its offerings.

Under “Economy Lite”, passengers will have to pay for on-board meals, while complimentary seat selection will be restricted to only a few seats and exclude emergency exit rows. Check-in baggage will also be limited to just one item . Passengers who book under the new class—expected to be priced lower than its existing economy class fares—will also be unable to upgrade even if they wish to pay a fee. The option of booking lounge access for a fee will also not be available. On cancellation of “Economy Lite” tickets, passengers will only be refunded the taxes that they paid.

In essence, the offering resembles what a low-cost carrier like IndiGo or SpiceJet provides, just that it will be on a full-service flight. This is for the first time that a full-service carrier in India has come out with such a fare class. Besides Vistara, the other full-service carriers that operate in India are Jet Airways and Air India.

All Vistara passengers apart from “Economy Lite” will continue to enjoy complimentary food, seat selection and other such services.

According to the airline—which is a joint venture between Tata Sons and Singapore Airlines—the offering follows “comprehensive customer research and feedback”, which made it decide to offer services on a “pay-for-what-you-value basis”. 

The offering is part of a menu-based pricing model that Vistara will switch to from later this week. For Vistara’s Economy Class—which is categorised as Standard and Flexi—a few services have been removed with regards to seat selection. Those seeking an emergency exit row seat will have to shell out extra. However, for all other rows, seat selection remains complimentary.

Under the Premium Economy segment, there are three fare classes—Value, Standard, and Flexi. Under the Value class, passengers are allowed a check-in baggage limit of 20 kg and would not be able to upgrade even if they want to pay a fee or through Club Vistara points. If a Premium Economy Value ticket is cancelled, passengers only get back the taxes paid. In Standard, the baggage limit goes up to 25 kg and for Flexi, it is 30kg. The same three fare classes are being offered under Business Class. Here, all services remain the same under Business Class Value, apart from the cancellation fees. If a Business Class Value ticket is cancelled, the passenger only gets back the taxes.

Different fare buckets for the same travel class is a common practice in airlines across the world. For example, airlines like Finnair and Etihad don’t allow passengers who booked tickets in the lowest fare bucket from paying extra to upgrade at a later date. However, the removal of services such as complimentary meals sparked a debate on social media whether Vistara could continue calling itself a full-service carrier.

Responding to the debate, Sanjiv Kapoor, chief strategy and commercial officer, Vistara said on Twitter, “On the passionate LCC [low-cost carrier] vs FSC [full-service carrier] debate: it is not the case that one will kill the other, there is room for both!  The top 10 most profitable airlines in the world are a mix of the two. Both need to continually evolve to meet the needs of their target customer segments.”

Kapoor also said on the social media platform that the plan for the new fare buckets had been in the works for more than a year, even when fuel prices were low and the development wasn’t a knee-jerk reaction to high fuel prices.

The new fare buckets, however, won’t stop passengers from being part of its loyalty programme, Club Vistara, and thus, earn loyalty points. But, the number of points earned will be, of course, different.

“Our new fare model also addresses customer feedback related to change and cancel fees. With ‘Vistara Freedom Fare’, we are offering flexi-fares at reasonable add-on rates to standard fares, and in exchange giving customers much lower or zero cancel fees along with other benefits. The attractive bundled features will provide more choices and value to customers and also help us enhance overall customer satisfaction,” Kapoor said in a statement.

Meanwhile, the airline’s passengers will also be able to enjoy in-flight entertainment for the first time through Vistara World, a free wireless system which streams video and audio content straight to passengers’ personal devices like laptops, tablets and mobile phones. The in-flight entertainment will be offered to passengers across travel classes. Jet Airways also offers such an in-flight entertainment offering on some of its flights.

Talking about the developments, Leslie Thng, chief executive officer of Vistara, said that a single-fare model had increasingly become redundant and carriers needed to acknowledge that. “It is the age of flexibility; of deciding for yourself; of doing things at your own terms. We observed this consumer behaviour over a period of time,” he said.

Currently, Vistara flies to 22 destinations and has a fleet of 21 aircraft. The airline is planning to launch its international operations by the end of 2018 and has placed an order for 19 new aircraft that includes both narrow-bodied and wide-bodied planes.