Will Vistara Take Off or Stall After Merging with Air India?

Summer has arrived. If you are also planning to spend your holidays chilling at a beach or skiing in hilltop locations, I suggest you book trains instead of flights. Why?

Because flights are being cancelled left & right, leaving passengers hanging midair (not literally, don't worry). The primary culprit of the year 2024 in the airline industry is Vistara Airlines. At least, that's the case until now.

Where there is a requirement for more flights due to summer being the tourist season, Vistara had over 150 flights either cancelled or delayed. Frustrated passengers took their disappointment to the platform of shared misery, I mean social media, and mayhem erupted.

One post became thousands of haters sharing their woes, which finally attracted the attention of the Ministry of Civil Aviation (MoCA). But now, the situation seems to be resolving with an upcoming merger. Come 12 November, 2024, Vistara will merge operations with Air India, creating a new entity in the airline industry.

In this article, we will discuss the situation at Vistara, its impact on the aviation industry, and your lives.

The Root Cause of Trouble at Vistara

Vistara Airlines was ordered by the government ministry MoCA to address the rising number of flight cancellations. They replied that the issue was the “unavailability of crew members.”

In case you don't know, every pilot has a fixed work schedule based on age, agility, and requirements. It's pretty similar to corporate employees having a fixed 9-5 or 10-6 work hour routine. There are days when, due to an urgent project or excess work, employees have to do overtime.

The condition at Vistara is like you (an employee) working for 3-4 hours overtime every day for the past month. Terrible, right? 😧

So, Vistara pilots had no choice but to go on a mass sick leave, which is considered to be the airline industry's version of a strike.  

Pilots are complaining about fatigue due to stretched rosters with high utilisation times. They want more rest time between flights as they feel overworked and underpaid.

But is there more to what meets the eye? Inside sources reveal that many pilots are not happy with a significant change coming at Vistara. Don't know what I am talking about?

Well, Vistara, which is the product of a joint venture between Tata Sons and Singapore Airlines, is soon going to be merged with Air India.  

Vistara-Air India Merger

In November 2022, Tata Group announced a merger between Vistara and Air India. This is part of Tata's larger plan to consolidate its airline holdings, including Air India Express and AIX Connect (formerly Air Asia India). Now that the NCLT has given its green light for the approval, a large fleet with 218 aircrafts is set to form soon.

Once the merger is complete, there will be two leading airlines under the Tata umbrella:

• A full-service carrier combining Air India and Vistara.
• A low-cost carrier formed by merging Air India Express and AIX Connect.

So, what would happen to Singapore Airlines? It will retain a 25.1% stake in the merged full-service carrier. Sweet deal, right?

I mean, superficially, being associated with the airline of the nation, Air India, is like representing the country in the aviation industry. It should be a matter of pride for both pilots & crew members. But that's so not the case.

Some pilots are apprehensive about the planned merger with Air India, fearing a loss of identity and benefits. Integrating Vistara with Air India is a complex process, and pilot concerns might stem from uncertainties about how the merger will impact their careers. Here are a few possibilities that's airing the doubts & worries:

a. Pay Revision:

Pilots are unhappy with a potential cut in their guaranteed monthly flying hours, which would lead to lower pay. This is because the airline wants to align its pay structure with Air India which has a different pay scheme.

b. Changed Work Structure & Culture:

Most employees resign from their companies due to a deteriorating work culture despite being in impressive designations & payslips. At Vistara, along with a pay downgrade, work culture and workload could also dive. Integrating the workforces and cultures of two different airlines can be challenging.

Vistara's management even gave an ultimatum to pilots and other employees to accept the new salary structure on an immediate basis or else be ready to lose their jobs. Harsh tactic but it seemed to have worked for the most part.

Now, now, don't think that the upcoming merger is only filled with shortcomings. It has its own set of advantages as well:

• The merger aims to create a stronger airline entity in India's aviation market, which we will discuss below.
• Combining routes and eliminating overlaps could lead to a more efficient network.
• Passengers might benefit from a broader range of destinations and potentially improved services.
• Singapore Airlines hopes to strengthen its presence in the Indian market through this deal.

Aviation Sector Overview & Vistara’s Standing

India's aviation sector is one of the fastest-growing in the world, fueled by a rising middle class and increasing disposable income. At present in 2024, the market size of the sector is ₹1.15 lakh crore, predicted to touch ₹2.16 lakh crore by 2030.

 The aviation sector is mainly divided into two categories:

• Low-cost carriers like IndiGo and SpiceJet hold the majority of the market share, offering budget-friendly travel options.
• Full-service carriers, known for premium cabins and amenities, have a smaller market share but are gaining traction with travellers seeking a more comfortable experience. Vistara & IndiGo 6E are a few popular options.

In terms of market shares, here are the top airlines in India as of February 2024 👇

Vistara is the second-largest domestic airline in India, with an approximate market share of 9.9%. It stands out as a premium carrier, offering features like spacious cabins, in-flight entertainment systems, and priority boarding. In fact, it was the first airline to introduce a premium economy in India.

Hence, it won’t be farfetched to say that Vistara has carved a niche for itself with its focus on customer service and a modern fleet. So, the ongoing flight cancellations and delays in commute is causing a huge damage to the airline’s reputation.

This could also be a deal breaker for the to-be merged entity since it’s still awaiting approvals from the regulatory parties as of yet.

What's Latest: 12 November

On 12 November 2024, Vistara bid a farewell. The Airline shared a heartwarming video on Twitter of its last flight, expressing gratitude to its customers for all these years of flying. It also hinted at establishing a new identity as Air India with the tag #ToLimitlessPossibilities

Vistara announced that beginning in September 2024, customers will gradually lose the privilege to book flights with Vistara for travel dates from 12 November, 2024 and onwards.

More than 1,15,000 passengers who scheduled their flights with Vistara after 12th Nov will now be flying under the Air India name. The company assures that the change in branding will not affect the overall service and onboarding experience.

The Bottom Line

Overall, the Vistara-Air India merger has the potential to reshape the Indian aviation landscape. However, successfully navigating pilot issues and integrating the airlines effectively will be crucial for its success.

Vistara’s CEO Vinod Kannan and other senior executives met with the pilots, promising them to “carefully scale back the network” and bring order to the excruciating schedule. The CEO also promised to discuss roster changes to accommodate the pay gap that the merger with Air India might bring.

All the corrective measures acknowledged by the executives will be brought on board starting in May. But would words be enough to solve the issues? Will travellers reach their destinations on time, and pilots get their much-needed rest and salary? These kinds of questions and more are yet to be answered.

The merger will transform Air India by enhancing its offerings with Vistara’s premium service culture and modern fleet. It will lead to competitive pricing and an expanded route network, especially in under-served international markets.

To be in the loop about the situation, visit Insider Bullets.

Read about another anticipated merger happening in the entertainment industry by reading the article- India’s Largest Media Entity: A Good Buy Time?