Air India buys 540 planes, in biggest ever deal
The purchase is estimated to cost Air India a whopping $82 bnAccording to Bloomberg, the previous single largest jet order was a 460-plane deal by American Airlines in 2011
PremiumNEW DELHI : Air India Ltd on Monday made aviation history with the biggest aircraft order ever, agreeing to purchase a total of 540 aircraft from Boeing and Airbus that will help the Tata Group airline expand its horizons in India and abroad.
The purchase of short- and long-haul aircraft is estimated to cost Air India a whopping $82 billion according to the list price, though the actual cost would be lower since bulk orders come with discounts and incentives.
Of the total 540 aircraft, 470 are firm orders, and the rest 70 are options with Boeing that Air India can exercise in the future. The 470 aircraft include 250 Airbus and 220 Boeing planes, with the first of them landing later this year. According to Bloomberg, the previous single largest jet order was a 460-plane deal by American Airlines in 2011.
“The first aircraft to arrive will be 25 brand-new Boeing B737-800s and six Airbus A350-900s in the second half of 2023, with deliveries really ramping up in 2025 and beyond. In the meantime, our capacity growth will continue to be supported by the previously announced lease-in of additional narrow-body and wide-body aircraft and the restoration-to-service of the remainder of our grounded fleet," Air India CEO Campbell Wilson said in an email to employees.
Of the total order, about 450 aircraft are single-aisle aircraft from the Airbus 320 family and Boeing 737 MAX, which will fly domestic and short-haul international flights. The rest 90 planes are dual-aisle planes which will fly to Europe and the Americas.
Announcing the aircraft orders earlier in the day, N. Chandrasekaran, chairman of Tata Sons Ltd, said the group is committed to making Air India a world-class airline. “The wide-body A350 aircraft will be used to fly all ultra-long distances across the world," he said. The order with Airbus also includes 210 narrow-body A320neo family jets. The conglomerate also has a significant option to increase the fleet order once the airline grows," he said.
“Air India is not just another project. It is a national project. There are huge expectations. We are going through a major transformation because we are committed to building a world-class airline known for safety, on-time performance, the best of Indian hospitality and modern fleet and a wholesome experience for every passenger, whether they are in the first row or the last row," Chandrasekaran further said.
He added that the Tata Group plans to bring commercial aircraft manufacturing to India at some point. “We are working on bigger partnerships, and one of our ambitions is to bring in commercial aircraft manufacturing at some point in time in the future. We have teams aligned on both sides, and we see this moment as the most significant moment for Tata Group, Air India, Indian aviation and for the manufacturing sector in India," Chandrasekaran said.
The virtual event to announce the order was attended by Prime Minister Narendra Modi, French President Emmanuel Macron, Tata Trusts chairman Ratan Tata, commerce minister Piyush Goyal, aviation minister Jyotiraditya Scindia, Airbus CEO Guillaume Faury and Air India’s MD & CEO Campbell Wilson.
“This deal demonstrates deepening relations between India and France but is also a reflection of India’s success and expectations in the civil aviation sector. Today, the aviation sector is an integral part of India’s development and strengthening aviation is an important aspect of our national infrastructure strategy," Modi said at the event.
US President Joe Biden called the agreement “historic". “This purchase will support over one million American jobs across 44 states, and many will not require a four-year college degree," a White House statement said.
With this order, Air India intends to make the country a hub for international flights and provide Indians with direct connectivity to various parts of the world, which is in sync with the government’s aim to make India a hub for aviation.
Currently, a big chunk of Indian passengers flies to various parts of Europe and the Americas, transiting airports in the Middle East, Europe and Southeast Asia. “The time is right for India to become an international hub," Airbus CEO Faury said.
The order is “a critically important milestone" for India, aviation consultancy CAPA India said in a report.
“It is making up for the growth deficit that Air India has experienced for the last decade and more... Air India will have to commit to more orders, sooner than later, to take into account the replacement cycle for incumbent aircraft and the tremendous growth potential of the market," CAPA said in its report.
Others said the order would fuel India’s international business. “It would certainly lead to higher competition intensity. There is huge potential for everyone to expand international business in the next 5-10 years. Therefore, we expect double-digit revenue growth for most industry players over the next three to five years," Mitul Shah, head of research, institutional equity at Reliance Securities, said.
The Tata Group won a 100% stake in full-service carrier Air India and its low-cost subsidiary Air India Express in January 2022 under the government’s privatization programme. Since then, AirAsia India, formerly a joint venture between AirAsia and Tata Group, has become a 100% subsidiary of Air India. In November, the Tata Group also announced that Vistara, a 51:49 joint venture between Tata Sons and Singapore Airlines, will be merged with Air India, with Singapore Airlines holding 25.1% of the merged entity.
Air India currently has 113 aircraft. The group’s total fleet size stands at 219, including AirAsia India with 28 planes, Vistara with 54, and Air India Express with 24 jets.
The Tata Group is eyeing to create an Air India brand umbrella which will have a single low-cost platform and a single full-service platform by the end of 2023. The former will be a merged entity between AirAsia India and Air India Express. The full-service carrier will be the merged entity between Air India and Vistara. The company has also implemented a five-year plan called Vihaan to capture a 30% share in the domestic and international markets.
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