As India’s only full-service carrier, Air India now holds a unique—and potentially problematic—position in the market. Since its merger with Vistara, Air India offers premium services unmatched by low-cost carriers (LCCs) like IndiGo, SpiceJet, Akasa Air, and Go First. While this development centralizes full-service options, it could lead to serious concerns for both consumers and the industry.
1. Impact on Consumer Choice and Service Quality
Full-service airlines traditionally offer a more comprehensive travel experience, including complimentary meals, enhanced baggage allowance, and lounges. With Air India as the sole full-service provider, Indian consumers face limited choices if they seek such offerings. This centralization of premium services could diminish incentives for the airline to enhance its customer experience. For instance, high ticket prices, limited flight options, and infrequent upgrades may become a concern if a single provider does not feel the pressure of direct competition.
2. Challenges to the Tourism Sector
India’s tourism sector relies heavily on a balanced mix of low-cost and full-service carriers to cater to different traveler segments. With LCCs dominating (holding around 80% of market share), international tourists may find limited premium domestic travel options, which could deter high-end travelers expecting consistent, high-quality service throughout their journey. Limited full-service choices could also raise the price of premium domestic flights, affecting India’s appeal as a luxury tourism destination and potentially slowing growth in that segment.
3. Market Saturation with Low-Cost Carriers
The LCC dominance in India creates cost-effective choices for passengers, making air travel accessible. However, this saturation also brings risks, especially as these carriers focus on high-frequency, short-haul routes to keep operating costs low. These models may compromise certain service aspects and may not support routes with lower profitability. For the aviation industry, relying too heavily on LCCs can lead to market volatility. For instance, SpiceJet and Go First have faced financial instability, while Akasa Air, a recent entrant, is still navigating its growth path.
4. Duopoly Concerns with IndiGo and Air India
IndiGo and Air India collectively control about 71% of the market, leading to a potential duopoly. If these two major players begin to dictate pricing structures, smaller carriers may struggle to remain competitive, leading to reduced market dynamism. For a country where demand for air travel is projected to grow (Airbus forecasts 685 million Indian air travelers by 2042), a duopolistic structure could limit flight availability and affordability, stifling the industry’s potential.
5. Need for New Full-Service Entrants
India would benefit from additional full-service carriers to counterbalance Air India’s position and mitigate the risks of monopolistic practices. Healthy competition could lead to better services, competitive pricing, and more options for passengers. This would align India with other large aviation markets like the U.S. and Brazil, where multiple full-service and low-cost airlines coexist, benefiting consumers and ensuring a resilient, diverse market.
In conclusion, while Air India’s status as the sole full-service airline allows it to cater to premium passengers, it could lead to negative effects in the long term, particularly on service quality and tourism. India’s aviation sector would benefit from policy measures that encourage the entry of more full-service carriers, fostering a competitive environment that enhances options and service standards for passengers.
