Indian skies left with just one full-service carrier after Vistara merger

With Vistara merging into Air India, the number of full-service carriers in India will drop to just one, marking the end of a 17-year era of multiple full-service carriers in the country

When Vistara officially merges with the Air India Group on Monday, India will see a major reduction in the number of full-service carriers (FSCs) in the country. The merger will leave Air India as the sole FSC in India’s rapidly expanding aviation sector, ending a 17-year period when multiple full-service airlines operated in Indian airspace.

Impact of merger: Singapore Airlines’ stake in Air India

As part of the merger, Singapore Airlines, which owns 49 per cent of Vistara, will retain a 25.1 per cent stake in Air India post-merger. This transition also signals the end of another Indian airline jointly owned by a foreign carrier following the liberalisation of foreign direct investment (FDI) norms in India.

Evolution of foreign airline ownership in Indian carriers

The liberalisation of FDI norms in 2012 by the UPA government under Prime Minister Manmohan Singh allowed foreign airlines to acquire up to 49 per cent of Indian carriers. This move paved the way for the entry of foreign investment into Indian aviation, leading to the establishment of AirAsia India and Vistara, as well as the acquisition of a 24 per cent stake in Jet Airways by Etihad Airways. However, Jet Airways collapsed in 2019, marking the end of another era.

Vistara: Last new full-service carrier in India

Vistara, launched in January 2015, remains the only full-service carrier to begin operations in the last decade. Since the merger of Indian Airlines and Air India in 2007, India has seen as many as five full-service carriers. Over the years, airlines like Kingfisher and Air Sahara disappeared, with Kingfisher ceasing operations in 2012 and Air Sahara eventually being integrated into Jet Airways. 

 

Following Jet Airways’ grounding in April 2019 due to financial instability, the industry is now set to have Air India as the only full-service airline in the country starting November 12.

Rise of the low-cost carriers

With rising air traffic and changing travel preferences, low-cost carriers (LCCs) have become more dominant in the global aviation market, with India’s leading airline, IndiGo, driving the shift.

 

A report by The Economic Times quoted a senior airline official as saying that the distinction between full-service and low-cost carriers is becoming increasingly blurred. Many low-cost airlines now offer premium services, such as business class seats, while FSCs continue to focus on providing a higher level of comfort, with services like meals included in the ticket price.

 

With the merger of Vistara and Air India, the landscape of full-service aviation in India is undergoing a major transformation. As the only remaining full-service carriers,  Air India is poised to play a dominant role in the country’s evolving aviation sector.