Vistara takes off: Can it succeed where others have failed?

Moneycontrol Bureau

This afternoon, as a royal Aubergine and gold-tailed Airbus A320 landed in Mumbai, it marked the re-entry of the Tata Group in the aviation sector -- one that it pioneered in this country in 1932 and controlled till its firm, now called Air India, was nationalized in 1953.

Vistara, a full-service carrier (FSC) jointly operated by the Tatas and Singapore Airlines, today launched amid some optimism it would play a definitive role in making clear a distinction between FSCs and low-cost carriers (LCCs) and amid concerns over how it would thrive in a punishing industry that has zapped about every other player.

The carrier, helmed by former Singapore Airlines executive Phee Teik Yeoh, has often said it is cognizant of the environment it is taking off in and it would take all of Yeoh's experience – he previously served in the brutally-competitive UK market – to make sure it does not meet the same fate as Air Deccan, Sahara (both sold out after a few years of operations), Kingfisher (which folded operations in 2012) or SpiceJet (currently reeling under a solvency crisis).

Here's what Vistara has said it will do differently.

One, Yeoh has made it clear that as a FSC, it will not indulge in price wars that drives – often to its detriment – this industry.

It would price its ticket at a slight premium to its FSC rivals Jet and Air India but a highly-differentiated service. In return, it would focus on bringing a level of service ("full service is not just about free meals" he has quipped) at a price point not seen in the market before.

"Vistara will create demand where there is none today," he told Forbes recently , adding that there is an unfulfilled need in the market which it would fill.

This would be by done by treating passengers "as persons not numbers" and to offer them a "delightful experience" right from when they contact the company to book a ticket, according to Yeoh.

There are other things the airline is doing things differently: a frequent flyer program that takes into account actual spend instead of miles travelled, keeping a tight control on costs by staying away from glitzy advertising and – an innovation in the Indian air space – a new segment termed "premium economy" that would be slotted between economy and business.

As part of its unique three-tier configuration, a 148-seat aircraft will have 16 business seats, 36 premium economy and 95 economy seats.

The premium economy targetted at the high-end economy flier who is unwilling to upgrade to a pricey business class but who wouldn't mind some of the privileges, such as wider and semi-reclining seats and more legroom.

But experts believe that for the premium economy experiment – a common feature in several airlines abroad – to work, pricing will be key.

As of now, Vistara has said its premium economy tickets would be about double the fare of an economy ticket, but some – such as an executive with an online travel portal that a Financial Express article quoted – have suggested most economy passengers would upgrade only if the ticket was priced 20 percent higher.

Yeoh has been banking on an exponential upward shift in the demand curve and says his airline is well positioned to cater it when greater disposable incomes lead to an explosion in air travel.

But till then, the weather (the fall in crude price notwithstanding) could be turbulent.