Vistara asked to review premium economy class

The board of Tata Sons, the largest stakeholder in Vistara, has asked the airline to discontinue its premium economy service if it proves unviable.

In a board meeting held in June where Vistara’s Chief Executive Officer Phee Teik presented the airline’s performance to the directors of Tata Sons, it was asked to review the viability of a threeclass configuration, unique to Vistara in Indian aviation.

According to the minutes of the meeting submitted by ousted Tata Sons chairman Cyrus Mistry to the Company Law Tribunal, Nitin Nohria, a non-executive director on the Tata Sons board, said the airline should put down a timeline of one year after which the service should be discontinued if it remained unviable.

Nohria said Vistara was the only airline that continued to believe there would be business from three segments.

For premium economy, in which tickets are priced higher than economy but lower than business class, Vistara provides services like priority check-in and boarding, extra baggage allowance and more leg space. Full-service airlines like Jet Airways and Air India have stuck to a two-class cabin configuration, business and economy. Vistara operates only on short-haul domestic routes, a segment dominated by low-cost airlines where the price war is fierce.

“A triple-class airline in a two-hour leg does not exist anywhere in the world, leave alone India. For such a class to be successful there should be heavy differentiation, which can bleed an airline in India,” said an executive with a lowcost airline. “One gets separate boarding facilities, there is metal cutlery and slightly more leg space and seat recline. I am not sure if passengers are willing to pay extra for these. On some routes the economy fare is higher than premium economy,” said Ajay Awtaney, a frequent flyer and writer of airline blog livefromalounge.com.

Vistara, however, sees no reason to discontinue the strategy. “It is a pioneering concept and demand has been steadily increasing. Our customers appreciate the unique value proposition. We do not have any plans to discontinue the three-class configuration,” a Vistara spokesperson said.

Premium economy seats are higher priced than economy class, but lower than business class with additional benefits of priority check-in, extra baggage allowance, more leg space. Vistara is the only airline which provides three class cabin...