Vistara introduced the premium economy service in India when it launched its operations in 2015. Nearly a decade later two other airlines — Air India and IndiGo — plan to introduce the premium product as they battle for market share in Indian skies.
While Air India has previously announced a $400 million plan to refurbish its Boeing 777 and 787 aircraft, it is now learnt that even the existing 27 Airbus A320Neo planes will undergo a retrofit starting in early 2024. The refresh will also include premium economy seating. Additionally, Air India is leasing 25 Airbus A320 aircraft and these too would come with premium economy seats. At present five of its Boeing 777 (ex-Delta aircraft) have premium economy seating.
A premium economy product would help in bringing product consistency with Vistara which is being merged with Air India. IndiGo on the other hand is looking to shed its no-frills image and introduce premium seats and hot meals on its Airbus A321 aircraft. This would help the airline as it widens its global footprint and expands partnerships with overseas carriers.
“We are constantly reviewing our product portfolio and positioning. For now, our focus is to build network, serve our customers and make sure the company is in a good position,” IndiGo CEO Pieter Elbers told businessline in a recent interaction. IndiGo is yet take a final call on the matter.
Demand up
Air India and IndiGo’s move to introduce premium economy cabins comes amid a pick up in demand for the product post pandemic. Global big carriers operating to India also offer the product with Emirates being the latest to introduce the cabin on its Bengaluru and Mumbai flights.
Travel firm FCM India has seen a 3 per cent and 1.7 per cent increase in economy class and premium economy class bookings driven by increase in domestic travel in 2023 compared to 2019. “With the international capacity not back to 2019 levels we have seen nominal decrease across first class and business class booking by 1.3 per cent and 3.8 per cent respectively,” it said.
“The Indian market is witnessing a strong and growing appetite for premium travel and this is despite increased pricing,” said Indiver Rastogi, president and group head (global business travel), Thomas Cook India and SOTC. “The three-class configuration has been one of our key strengths and we have every intention of offering it on as many routes as possible,” Vistara said in a statement. It did not share data on cabin-wise loads.
AI revenue growth
Air India has registered growth in load factors and network-wide revenue due to increase in flights, better pricing and improved revenue management. Business class loads too have gone up from 40 to 60 per cent. The airline has introduced a new menu and repaired broken seats in the aircraft. Revenue from ancillary sources too is growing. However, the airline is not able to target premium traffic in a big way because its product is weaker compared to rivals. “Business class traffic relies on product, pricing and frequencies. On routes like Delhi-Chennai or Delhi-Kolkata IndiGo offers many more frequencies than Air India. Things will eventually change as the airline revamps its product and adds aircraft,” said a consultant tracking the airline. Air India declined commenting on the topic.
“While for international operations, the premium economy makes sense due to the long stage length of the flight, domestically there has been a challenge to make people appreciate the value of the mid-cabin on the aircraft. In the past, Vistara had to sell premium economy at lower prices compared to the economy to fill up the cabin. Hope the learnings will be transferred to Air India as well,” said Ajay Awtaney, editor of the aviation website, LiveFromALounge.com