End of an era | Vistara’s legacy faces turbulent integration as it joins Air India’s wings

India’s finest domestic airline, Vistara, will cease to exist from Tuesday (November 12) following the integration with Air India.

A joint venture between Tata Sons and Singapore Airlines, Vistara Airlines started operations in 2015 and has since set new quality standards that were unmatchable in the sector.

Air India has indicated that while it will not be spun off into a separate division, passengers can identify the airline with its new code name, AI-2955 (from the earlier UK955).

Vistara was founded on redefining air travel in India by combining Tata's rich hospitality heritage with Singapore Airlines' service excellence. The airline commenced operations on January 9, 2015, with its first flight from Delhi to Mumbai. It quickly distinguished itself by offering a three-tier seating arrangement —Economy, Premium Economy, and Business —setting a new standard for domestic air travel.

Also read: What IndiGo customers can expect: Higher fares, more global routes

Over the years, Vistara expanded its network to include over 50 destinations within India and internationally. By introducing features such as India’s first domestic Premium Economy class and maintaining high on-time performance rates, Vistara built a loyal customer base and garnered numerous awards for service excellence.

Strategic implications

The merger with Air India marks a pivotal moment for both airlines. Following Air India's privatisation in 2022, Tata Group announced the consolidation of its aviation interests under a unified banner. This merger is part of the corporate restructuring and a strategic move to create a more formidable competitor in the Indian and international aviation markets.

Post-merger, Tata Sons will hold approximately 73.38 per cent of the newly formed entity, while Singapore Airlines will retain a 25.1 per cent stake. With this merger, Air India will have around 24.3 per cent market share and Air India Express (along with Air Asia India), has 4.8 per cent, and IndiGo, the largest Indian domestic carrier, owns 62 per cent.

This transition aims to maintain operational continuity while leveraging Air India's extensive route network. The merger is poised to create significant synergies: The combined fleet will enhance connectivity across more than 90 domestic and international destinations, providing passengers with more excellent choices and convenience.

To facilitate a smooth transition, Air India is deploying help desk kiosks at major airports, staffed by personnel ready to assist passengers during this period of change. Customers with reservations on Vistara flights have been informed about changes well in advance, ensuring they know how their travel plans may be affected.

Key personnel from Vistara will play crucial roles in the merged entity. Vinod Kannan, previously CEO of Vistara, will serve as Chief Integration Officer, ensuring the integration process is smooth and effective.

However, the merged entity will face several challenges going forward, and given the litany of complaints that keeps growing against Air India's services, it might take a lot more from the management to overcome these issues.

Key challenges

One of the most pressing challenges is the operational integration of two distinct airlines. Vistara has been known for its high service standards and modern fleet, while Air India has struggled with legacy issues and operational inefficiencies.

The ethos and operational styles of Vistara and Air India differ significantly. Vistara has operated as a premium airline focusing on customer service, whereas Air India has historically functioned more like a public sector undertaking (PSU). Merging these cultures will require careful management to ensure that Vistara’s high standards are not diluted.

Also read: IndiGo, SpiceJet’s profits amid challenges reflect industry resilience

The integration involves over 140 systems, including reservations, loyalty programs, and crew management. Ensuring seamless functionality across these systems is crucial for maintaining service quality. Any delays or issues in this integration could lead to customer dissatisfaction.

The merger will also impact employee morale and alignment across both airlines: There are concerns about discrepancies in job grades and retirement policies between Vistara and Air India employees. For instance, Vistara pilots have a retirement age of 60, while Air India pilots retire at 58. This difference has led to resentment among some Air India pilots, which could affect overall workforce morale.

Vistara employees may need help adapting to Air India's more bureaucratic systems. Training programs will be essential to ensure all staff align with the new operational protocols.

Air India's fleet modernisation is another area fraught with challenges. Air India operates many older aircraft that require significant upgrades. The backlog for in-flight systems and cabin interiors could delay service quality improvements. The integration process must prioritize these upgrades to ensure a competitive edge in the market.

Lastly, the financial health of the merged entity remains a concern: Both airlines have faced financial difficulties in recent years. The merger aims to consolidate resources but also inherits the financial burdens of both entities. Effective cost management strategies will be essential to ensure long-term viability. With IndiGo dominating the market share, the merged entity must develop strategies to compete effectively against low-cost carriers while offering premium services.

Hence, what remains to be seen is whether Vistara’s high quality standards will rub off on Air India.

Frequent flyers program

Vistara's loyalty program, Club Vistara, will be merged into Air India's Flying Returns program. This transition will involve the following key changes: All Club Vistara points (CV points), including unused complimentary ticket vouchers and upgrade vouchers, will be transferred to Flying Returns accounts at 1:1. This means that frequent flyers will retain the value of their accumulated points during the transition.

Also read: Singapore Airlines gets FDI nod from Indian govt for Vistara-Air India merger

Points set to expire in September or October 2024 will automatically convert to Flying Returns points on November 12, with an extended validity of at least one year from the migration date. This extension provides members with additional time to redeem their points. If existing Club Vistara members already have a Flying Returns account, the migration will be seamless. If not, a new account will be created using the same details as their Club Vistara account.

Air India is a member of Star Alliance, so Flying Returns members will now have access to earn and redeem points across 24 international airline partners. This expansion significantly increases the options available for earning and redeeming loyalty points compared to the limited partnerships under Club Vistara. Holders of co-branded credit cards associated with Vistara will continue to enjoy their current benefits until March 31, 2026. Post-merger, these cardholders will start earning Flying Returns points instead of CV points.

Frequent flyers will retain their existing tier status within the Flying Returns program for one year from the merger date. This ensures that loyal customers continue to enjoy benefits associated with their tier level during the transition.