Vistara Air India Deal: Today, Vistara is set to merge into the Air India Group, making it a significant event in the Indian aviation sector. From now on, passengers looking to book Vistara services will need to visit Air India’s website. With this merger, Air India will become the only full-service airline in India. Over the past 17 years, the number of full-service airlines in India has dwindled from five to just one.
Impact of Foreign Investment Policy on Airlines
Due to liberalized Foreign Direct Investment (FDI) policies, foreign airline companies have increased their influence in the Indian market. Singapore Airlines currently holds a 49% stake in Vistara, which will be reduced to 25.1% in Air India after the merger. Full-service airlines include additional services within the ticket price, providing a comprehensive travel experience.
The Role of FDI in Airline Closures
Under the leadership of Prime Minister Manmohan Singh, the UPA government allowed foreign airline companies to acquire up to a 49% stake in domestic airlines, leading to investments like Abu Dhabi’s Etihad Airways buying a 24% stake in Jet Airways. This policy also contributed to the establishment of airlines like AirAsia India and Vistara. Over the last decade, there were five full-service carriers in India, but due to debt burdens and mergers, only two remained. Following the Vistara-Air India merger, Air India will be the sole full-service carrier in the country.
The History of Indian Airlines
The Indian aviation sector has witnessed many closures over the years. In 2012, Kingfisher Airlines shut down, and Jet Airways acquired Air Sahara, rebranding it as JetLite, which also couldn’t survive. In 2019, Jet Airways collapsed due to financial challenges, with another full-service carrier affected by financial irregularities, leading to its closure in April 2019.
Low-Cost Airlines Dominate the Market
As air travel becomes increasingly popular, low-cost airlines have gained a stronghold in the market. Indigo currently holds a 60% market share in India. Other prominent low-cost carriers include Akasa Air, SpiceJet, and Air India Express, which continue to attract high passenger traffic with budget-friendly fares.
