While the full service carrier Vistara is reducing the number of seats in its business and premium economy class as part of its new plan, it still sees demand for them. The only thing, according to the airline is that its pricing should be right for which it has decided to offer deep discounts in business class fares beginning next month. The airline believes this will help it find the sweet spot between revenue per seat and load factor.
In the new seat configuration, Vistara’s aircraft will have 8 business class seat compared to twice as many till now. The premium economy seats would be reduced by one-third to 24. This would mean that the aircraft would have 126 economy seats compared to 96 as of now.
“Business class passengers are willing to pay more than economy but not 10 times or 6 times more. The secret of revenue maximization lies in filling up planes more than maximizing your fares,” Sanjiv Kapoor, chief strategic and commercial officer, told FE. He added that the industry’s experience suggests that lowering fares has often been compensated by increased demand. Kapoor, who was the chief operating officer of the then struggling SpiceJet before joining Vistara, employed deeply discounted fares at regular intervals to shore up demand. He believes similar strategy could work for Vistara to get more fliers in its premium and business class sections.
The full service airline, as part of its market research, found out that the business class demand has declined by 10% over the last two years, primarily due to excessively high fares for the business class seats and a sluggish economy. Vistara maintains that bringing down seats in business class and premium economy is an acknowledgment of sluggish demand but not an admission of doubt over profitability of a full service carrier in the country.
The airline has already started to test waters by slashing its business class fares by nearly 30% from its earlier fare for travel up to April 15. The carrier will review the passenger data from this period and take a decision on extending the same offer or possibly employing a new one with even deeper fare cuts, Kapoor said.
However, while Vistara business class fares are much lower than what they were before March 9 –the starting date for slashed fares—a look at its discounted fare and a comparison with competitor Jet Airways paints a mixed picture.
02/04/16 Bilal Abdi & Sumit Jha/The Financial Express
To Read the News in full at Source, Click the Headline
In the new seat configuration, Vistara’s aircraft will have 8 business class seat compared to twice as many till now. The premium economy seats would be reduced by one-third to 24. This would mean that the aircraft would have 126 economy seats compared to 96 as of now.
“Business class passengers are willing to pay more than economy but not 10 times or 6 times more. The secret of revenue maximization lies in filling up planes more than maximizing your fares,” Sanjiv Kapoor, chief strategic and commercial officer, told FE. He added that the industry’s experience suggests that lowering fares has often been compensated by increased demand. Kapoor, who was the chief operating officer of the then struggling SpiceJet before joining Vistara, employed deeply discounted fares at regular intervals to shore up demand. He believes similar strategy could work for Vistara to get more fliers in its premium and business class sections.
The full service airline, as part of its market research, found out that the business class demand has declined by 10% over the last two years, primarily due to excessively high fares for the business class seats and a sluggish economy. Vistara maintains that bringing down seats in business class and premium economy is an acknowledgment of sluggish demand but not an admission of doubt over profitability of a full service carrier in the country.
The airline has already started to test waters by slashing its business class fares by nearly 30% from its earlier fare for travel up to April 15. The carrier will review the passenger data from this period and take a decision on extending the same offer or possibly employing a new one with even deeper fare cuts, Kapoor said.
However, while Vistara business class fares are much lower than what they were before March 9 –the starting date for slashed fares—a look at its discounted fare and a comparison with competitor Jet Airways paints a mixed picture.
02/04/16 Bilal Abdi & Sumit Jha/The Financial Express
