Why merging Brand Vistara with Air India makes sense: Experts explains

With a single airline brand, Tatas aim for quick business turnaround

The Tata group's decision to operate a single full-service airline after the merger of Vistara with Air India will enable faster turnaround and limit the expenditure on brand building, industry experts said.

On Tuesday, Tata group and Singapore Airlines (SIA) announced the merger that will make Air India the second largest domestic (IndiGo is the largest) and largest international carrier. The merger will be completed by March 2024.

The decision effectively means the phasing out of Brand Vistara. There is, however, no final word yet on the future look and product attributes of the merged airline. It is possible that the Vistara brand might still manifest itself in one way or the other, said a person familiar with the merger process.

The Tata group and SIA did not immediately respond to questions from Business Standard on the matter.

"From the very time the Tatas bid for Air India, this merger would have been thought through. The buyout would have made complete economic sense only if Vistara was to be a part of the same entity,” said N Chandramouli, CEO, TRA Research, a Mumbai-based brand intelligence and advisory firm. “The cost, time and energy involved in building and maintaining two brands is extremely high, and the merger will also bring in Vistara’s frequent flyers to Air India." 

Added Shashank Nigam, founder & CEO of Simpliflying, an aviation brand strategy firm, “Air India’s merger with Vistara completes the consolidation process within multiple Tata airlines. The simplicity of Air India’s structure significantly improves the chances of its successful turnaround."
 

On a consolidated basis, Air India made a loss of Rs 24,690 crore in the last three years. Both Vistara and AirAsia India, too, have been making losses since their inception and requiring regular doses of fund infusion.

"Vistara started small but in the last few years, it has rapidly expanded its fleet. But to become financially viable, it needed a bigger scale,” said Ambi Parameswaran, brand strategist and founder of Brand-Building.com. “That will happen if its operations are integrated with Air India. There are a lot of synergies possible and the market is looking for a big, strong alternative to IndiGo."

Vistara, which draws its name from the Sanskrit word “vistaar”, took to the skies for the first time in January 2015. The brand’s name and logo were designed by Bengaluru-headquartered design firm Ray + Keshavan. The name reflects "limitless possibilities and ambitions". 

The airline, which is popular with corporate fliers and celebrities, has many firsts to its credit: a premium economy cabin, a value-based frequent-flyer programme, Starbucks coffee on board, among others. 

"Vistara has a better product and brand perception than Air India, being among the top 20 global airlines (according to Skytrax, an airline and airport review and rating site),” said Nigam. "Even if Air India adopts the Vistara product wholesale, it will be a huge improvement on its currently uncompetitive cabin products."

The person aware of the merger processes quoted above said, "There is no decision yet about many aspects of future branding. For instance, what will be the name of the frequent-flyer programme of the merged airline? What will be the uniform and aircraft livery? When United and Continental Airlines merged in 2012, the brand name United was retained but the livery remained Continental's."

"Vistara was the inheritor of the brand legacy left behind by Jet Airways; an airline that believed in being ahead of the rest. Brand Vistara has been built with that passion," said Harish Bijoor, Bengaluru-based brand strategist and founder of Harish Bijoor Consults. "In the aviation industry, there is reality at one end and romance at the other. Running just one brand is a business reality. Preserving Vistara is romance. The Tatas have embraced business reality and its importance."