Air India launches a basic fare removing complimentary meals.

Air India launched a Basic fare, a new Economy option on select domestic routes that removes the complimentary meal. Existing Value, Classic and Flex fares remain unchanged.

Aeraltus Take: This follows a familiar full-service carrier playbook seen across Europe and North America, which is to unbundle the mainline product while a low-cost subsidiary serves the most price-sensitive demand. Air India's narrowbody fleet is now standardized enough to support it. Air India Express is still working toward the cost base needed to fully play its role, and the group's FY25/26 loss has accelerated the process.

The FY25/26 loss of more than ₹26,700 crore is the trigger everyone is citing. It matters, but the structural story sits elsewhere.

Aeraltus has previously shown that airlines control only one layer of a much larger cost stack, which is crew and operational costs. Basic fare is the first visible attempt to reshape the layer carriers actually influence, which is the product itself.

The timing depends on what changed underneath. Air India's A320neo fleet has largely standardized around a single Vistara-derived cabin. One fleet, one cabin product in a 3-class configuration. That makes an unbundled fare commercially coherent rather than a discount attached to inconsistent onboard experiences.

Air India Express faces a different challenge. The merger left it operating A320s and 737s across both single-class and two-class layouts. Cabin standardization has progressed more slowly than at mainline. That matters because Express was built to compete on cost for the budget traveller. A mixed fleet raises complexity and keeps unit costs higher than operators such as IndiGo (InterGlobe Aviation Ltd) have to contend with.

Premium Economy is the detail that confirms the segmentation strategy. Air India retained a product for a niche segment of passengers willing to pay for additional comfort and service on domestic routes. Everything below it now moves closer to direct competition with IndiGo, with meals and flexibility increasingly sold separately.

The model itself is well established. Lufthansa retained Eurowings. Air France retained Transavia. North American legacy carriers followed similar structures with unbundling as ULCCs expanded.

The subsidiary exists because mainline unbundling eventually reaches its limit. Meals, baggage and flexibility can be separated from the fare, but a full-service carrier still carries network, staffing and operational costs that a true low-cost airline does not.

Air India needs both parts of the strategy. Mainline has now reached the point where meaningful unbundling is possible. Air India Express is still working through the fleet integration needed to fully play its role.