Air India Ltd. has signed agreements with Airbus SE and Boeing Co. for what could become the largest purchase of jetliners in commercial aviation history, as the carrier seeks to reinvent itself with a fuel-efficient fleet that can take on local low-cost rivals and powerful Gulf airlines like Emirates.
(Bloomberg) — Air India Ltd. has signed agreements with Airbus SE and Boeing Co. for what could become the largest purchase of jetliners in commercial aviation history, as the carrier seeks to reinvent itself with a fuel-efficient fleet that can take on local low-cost rivals and powerful Gulf airlines like Emirates.
The airline has agreed on the outlines of the accord with the two planemakers and may formally announce the deal as early as next week, according to people familiar with the talks, who asked not to be identified because the negotiations are confidential.Â
Airbus stands to win about 250 orders and commitments in total, made up of 210 of the A320 single-aisle family models and 40 A350s wide-bodies, the people said. Boeing has secured about 290 possible purchases, with 190 737 Max aircraft and the option for 50 more, as well as 20 787 Dreamliners and the same number as a possible top-up, alongside 10 777x aircraft, the people said.Â
The final tally could still change because of the complicated structure of the deal, which is made up of firm orders, memorandums of understanding and letters of intent, both of which are less firm than an outright purchase accord, the people said.Â
Officials for Airbus, Boeing and Air India declined to comment.Â
Air India and its parent, Tata Group, spent months negotiating the massive transaction, which should allow the carrier to upgrade service and reliability while lowering fuel costs. It’s also an attempt for the storied airline, founded under Tata in the 1930s, to win back traffic from Gulf rivals such as Emirates or Qatar Airways, which have built a business model ferrying Indians to the US and Europe via their huge hubs in Dubai and Doha.Â
China Upswing
Carriers around the world have been upgrading and refreshing their fleets to cash in on the rapid rebound in travel after the Covid pandemic. Locking in fresh aircraft commitments had become a matter of urgency for Air India as the supply of newly built jetliners became increasingly constrained.
After China abruptly ended many of its harsh coronavirus measures in December and last month threw open its international borders, the travel upswing has only gathered pace. Airlines are ramping up their long-haul capacity, enticed by the prospect of the world’s biggest outbound tourism market being open for business again and betting that demand more broadly will return to pre-pandemic levels in 2023.
Tata bought Air India last year in the most high-profile privatization under Prime Minister Narendra Modi. The transaction ended decades of attempts to offload the money-losing, debt-laden carrier that survived on years of taxpayer bailouts.
Market Consolidation
As part of the purchase, the group is consolidating its aviation business, which includes four airline brands. Tata said last year it would merge Air India with Vistara, which it jointly holds with Singapore Airlines Ltd. That agreement will give Singapore Air a 25.1% stake in the combined carrier.
The deal is also a big win for Airbus and Boeing, both of which have local ventures with the Tata Group, India’s largest conglomerate. The manufacturers have benefited from the rise of budget carriers in India that have placed mega orders in past years. In 2019, Airbus landed one of its biggest-ever deals with the sale of 300 narrowbody planes to Indian budget carrier IndiGo, worth more than $33 billion at sticker prices.
While Air India’s latest order further cements Airbus’s lead in narrowbody aircraft, it also gives the European manufacturer an important win in the widebody space that’s historically been the domain of Boeing.
–With assistance from Julie Johnsson.
(Updaes with background on market consolidation)
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