Will IndiGo’s business class offering shake up Air India, Vistara’s dominance?

While it may be early to predict a price war, industry observers noted that the sustainability of IndiGo's lower price point will be crucial as the airline expands its business class across its fleet.

Historically, IndiGo has maintained strong yields and revenue per available seat kilometre (RASK), and the impact of the new business class product on these metrics will be closely monitored.

A senior executive from online travel portal Yatra.com said that the market for business class passengers in India is small, with only about 2 percent of metro flyers opting for premium tickets.

"Premium flyers seek comfort and are willing to pay a higher price for it. IndiGo will need to deliver a compelling business class experience and rewards program to capture this segment," the executive said.

IndiGo’s plans

IndiGo is meanwhile confident in its new product, planning to launch business class tickets on 12 routes, starting with Delhi-Mumbai in mid-November, and expanding to cities like Bengaluru, Chennai, Kolkata, and Hyderabad within a year. The airline promises "specially curated" meals by Oberoi and business class seats with a plush feel and adjustable headrests.

IndiGo's business class seats will feature a coupe-style, 2-seat wide bay with a pitch of 38 inches, a width of 21.3 inches, a six-way adjustable headrest with neck support, and a 5-inch recline. The seats will also have an electronic device holder, a 60-watt USB-Type C power supply, a three-pin universal power outlet, and a two-part tray table.

The competition

In comparison, Air India's premium product offers a 40-inch seat pitch and 7-inch recline, along with other features like a leg rest, footrest, and in-seat power/USB charging ports. Vistara’s A321 planes come with 12 lie-flat seats, a 63-inch seat pitch, and extensive amenities including in-flight entertainment and Wi-Fi connectivity.

According to analysts, IndiGo's limited experience in operating a premium product will be tested as it competes with Vistara, regarded as India's best business-class carrier. At the 2024 World Airline Awards by Skytrax, Vistara won 8 awards, including 'Best Airline in India & South Asia,' while IndiGo and Air India won two and one award(s), respectively.

The Tata Group, which owns Air India and Vistara currently operates 58 planes and 63 planes, respectively, with business class configurations while IndiGo operates none.

"Selling and operating business class or premium economy requires experience and scale. Launching a product is only the beginning," an executive from the Tata Group, who refused to be named, told Moneycontrol.

He added that by the time IndiGo launches its 45 business class enabled planes by December 2025, the Air India will be operating close to 100 narrow-body aircraft with business class seats.

Air India will also be refurbishing 41 A320 aircraft in three-class configuration and all-new interiors by June 2025.

However, an executive from IndiGo told Moneycontrol that the airline is confident its product will not only cater to the existing customer base of business class passengers but will also be the stepping stone for travelers looking to transition into the market.

"IndiGo has historically managed to define the domestic market in India and going forward we expect our new business class product to do the same, first across the metro routes and in the future across the country," a senior executive from IndiGo said.

Air India and Vistara also offer their business class ticket customers complimentary lounge access, which so far IndiGo has not announced.

Strong brand presence

IndiGo also holds an advantage with its strong corporate customer base through its 6E SME program, which it can leverage to sell its premium product. The re-launch of Jet Airways is also expected to influence the business class market in India over the next five years.

"Most corporate companies in India are looking for a premium economy options for domestic travel over a luxury product, which is where we expect our product to thrive," the executive from IndiGo said.

He added that as most domestic flight in India are covered in the two hour time frame the need for luxury comes second to an efficiency, comfortable and timely performance for the Indian customer.

One challenge for IndiGo will be satisfying business class passengers without an oven to provide hot meals. "As IndiGo offers business class on select routes, the lack of hot meals will be a notable issue," said Ameya Joshi, an aviation analyst and founder of the aviation blog ‘Network Thoughts.’

In December 2022, an IndiGo passenger and an air hostess had a heated exchange over meal choices onboard a flight from Istanbul to Delhi, highlighting the importance of addressing food preferences.

IndiGo's entry into the business class segment is a significant development in Indian aviation. While the airline's competitive pricing and strong corporate customer base provide advantages, analysts maintain that it will need to navigate challenges related to service quality and customer expectations.