New Delhi: Air India made waves in the global commercial aviation sector this week when it signed two major aircraft deals with Airbus and Boeing. It’s set to purchase a total of 470 aircraft — 250 from European manufacturer Airbus and 220 from US-headquartered Boeing — making this one of the largest orders placed in the global aviation history.
The deals come about a year after the Tata Group took over the reins of the loss-making airline in January 2022.
Talace Pvt Ltd, a subsidiary of the Tata Sons, had emerged as the winning bidder for Air India in October 2021, after quoting an enterprise value of Rs 18,000 crore, helping bring the ‘Maharaja’ under the Tata Group again after 68 years.
While the estimated $80 billion deal can be seen as Air India’s big bang, ‘We are back and we mean business’ announcement to the world, its significance expands much beyond that. Three global leaders — US President Joe Biden, French President Emmanuel Macron and UK Prime Minister Rishi Sunak — hailed the deal as “landmark”, “significant”, “historic” and a “new success” in the aerospace sector, while emphasising deepening of ties with India.
And so, Air India is the ThePrint Newsmaker of the Week.
‘What’s to celebrate?’
Although the announcement was received with a gush of enthusiasm across the board, with the media calling it “the mother of all aviation deals” that puts India on the global aviation map, the opposition said there was nothing to celebrate in the deal as no jobs will come to India.
Those exulting about @TataCompanies owned @airindiain buying 470 aircraft’s should answer one simple question-
HOW MANY MANAFACTURING OR OTHER JOBS WILL THE AIRCRAFT ORDER CREATE IN INDIA ?
ANSWER IS ZERO
THEN WHAT PRAY ARE WE CELEBRATING? https://t.co/VMxiegdzWw
— Manish Tewari (@ManishTewari) February 16, 2023
Congress MP Manish Tewari also alleged that the airline is “downsizing personnel—Employees to aircraft ratio. Workforce will come down.”
However, on the other hand, Biden announced that this deal will support over one million American jobs across 44 states, and Sunak too said it will “support and create highly skilled jobs in Wales and Derbyshire and help boost exports and grow the economy”.
With new management, Air India is on a five-year transformation journey, to establish itself as a “world-class global airline with an Indian heart”. The roadmap, called Vihaan.AI, focuses on dramatically growing both the network and fleet, revamping customer proposition, and on-time performance.
Under the two deals, Air India also has the option to take additional aircraft at already-negotiated production slots and/or prices, which if exercised will take the total order to an even bigger number.
The deals will add much needed muscle to Air India’s fleet, after many years of lack of investment and growth, thus making it more competitive. This deal is also being hailed as a testament to the positive impact of divestment on the working of Air India. An order of this size would have been highly unlikely under public ownership, it has been argued.
Currently, Air India has a fleet of 115 aircraft, and its group companies Air India Express and AIX Connect (previously AirAsia India) have 26 and 28 aircraft, respectively. This is significantly lower than the current fleet of about 300 aircraft of its domestic rival Indigo.
A new turn for Air India
The Air India Group is in the process of merging its two low-cost subsidiaries. Tata Sons has also announced plans to merge Air India with full-service airline Vistara – a joint venture between Tata Sons and Singapore Airlines. Tata Sons hold a 51 per cent share in Vistara.
The influx of new aircrafts – the first of which to arrive will be 25 brand-new Boeing B737-800s and 6 Airbus A350-900s in the second half of 2023, will also help Air India in its transformation journey, especially in the areas of safety and customer service. These will not only modernise the airline’s fleet, but help it expand its global network. The bulk of the order will arrive from mid-2025 onwards.
The Air India order consists of both wide-body and single-aisle aircraft, including 40 Airbus A350s, 20 Boeing 787s and 10 Boeing 777-9s wide-body aircraft, as well as 210 Airbus A320/321 Neos and 190 Boeing 737 MAX single-aisle aircraft. While the A350 aircraft will be powered by Rolls-Royce engines, the B777/787s will have engines from GE Aerospace. All single-aisle aircraft will be powered by engines from US-headquartered CFM International.
The newly acquired aircraft will come with an entirely new cabin interior — a great new for flyers and the company, especially at a time when flying with the ‘Maharaja’ was becoming synonymous with poor traveller experience. Ask anyone who has travelled in Air India in recent times and chances are they would have a story to share about the dilapidated cabins and dysfunctional entertainment and charging systems. However, these complaints could soon be things of the past.
Air India is making efforts to enhance customer experience, and has previously announced plans to spend $400 million to refit its existing wide-body B787 and B777 aircraft with new seats and inflight entertainment systems. The first of these refitted aircraft will enter service in mid-2024.
While the turnaround for Air India is still about 3-5 years away, the deal is being touted as a turning point for the entire Indian aviation sector, whose potential remains unrealised. Aviation experts expect other major domestic airlines to follow suit and place orders for 1,000-1,200 aircraft in the next 24 months. In fact, Air India itself may need to place orders for more aircraft in the coming years to keep pace with the growth in passenger traffic.
As per the data released by the Directorate General of Civil Aviation, the domestic passenger traffic in India grew 13.69 per cent year-on-year in December 2022 with airlines flying 127.35 lakh passengers during the month.
Market leader IndiGo carried 69.97 lakh passengers during the month and accounted for 55.7 per cent share of the market. Air India carried 11.71 lakh (market share of 9.1 per cent), Vistara flew 11.70 lakh passengers (9.2 per cent market share), AirAsia carried 9.71 lakh passengers (7.6 per cent), SpiceJet carried 9.64 lakh passengers (7.6 per cent), Go First flew 9.51 lakh passengers (7.5 per cent) and new entrant Akasa Air also carried 2.92 lakh passengers (2.3 per cent market share).
Views are personal.
(Edited by Prashant)