Air India’s mega aircraft order could change India's aviation dynamics

Tata Group-owned Air India recently announced its decision to acquire 470 aircraft – 250 from Airbus and 220 from Boeing – in the largest-ever order made by any airline globally so far. Industry experts say the move is significant as it may help the Maharaja, which of late had been struggling with losses, regain its lost glory.

“Four hundred seventy is a large number and makes a huge impact, which Air India needs to make,” V Thulasidas, former Chairman and Managing Director of Air India, told The Federal in a telephonic conversation from Thiruvananthapuram. “Air India is in a different league altogether now. It has very diplomatically divided the numbers between both the manufacturers.” 

Thulasidas was helming Air India in 2005 when the airline, then controlled by the government, signed a deal for purchasing 68 Boeing aircraft. This was the last time that the Maharaja ordered new aircraft. Shortly after, Indian Airlines also signed a deal for 43 Airbus aircraft. In 2007, Indian Airlines and Air India were merged and the new Air India had 111 brand new aircraft, which the merged entity used to carry forward the legacy inherited from its founder JRD Tata.

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Air India has, of course, come a long way since then. The last decade saw it incur huge losses – the brand Air India lost its appeal, leaving the government with no choice but to sell its stake. After one failed attempt by the government to sell it, Air India was finally sold to the Tata Group in October 2021. The company took full charge of the airline in January last year.

The order for 470 aircraft is a major step under the Tatas to help Air India get back some of its old glory.

Perfect timing

Those from the industry say Air India could not have chosen a better time to induct new aircraft in its fleet. There are various reasons for this. According to Thulasidas, the aircraft ordered during his time must be at least “12 plus years old now, as the aircraft were being delivered over a period of time”. Air India could do with a new fleet that is fuel efficient, has better technology and interiors that can match the competition, he added.

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Nripendra Singh, global director, aerospace and defence, Frost and Sullivan, said the latest Air India order is good news for international traffic, both to and from India. “This move could prove to be the foundation of tough times for Middle Eastern and European carriers operating from India,” he said.

He added that even the bilateral deals that India has with other countries for the number of flights that airlines from one country can fly to another, are likely to undergo changes. Air India is expected to start exercising the allocated rights and also negotiating for more in terms of seats and frequency.

Some white tails in the mix?

Yet, concerns remain. Singh, for example, expresses concern about the aircraft delivery schedule as both the original equipment manufacturers (Boeing and Airbus) are already stretched for deliveries till 2025.

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Perhaps it is for this reason that Satyendra Pandey, Managing Partner, Aairavat Technology and Transport Ventures, provides another perspective when he says that some of the deliveries from the 470 aircraft Air India order will be white tails that were earlier meant for China with deliveries destined for Russia. 

‘White tail’ refers to aircraft which are ready, but are yet to be delivered to the concerned customer. Instead of being delivered to customer A they eventually end up being delivered to customer B, which in this case is Air India.

More acquisitions by rivals likely

Also, there is every likelihood that the action in the Indian aviation skies may hot up further.  AT-TV, an independent advisory firm that offers support to leasing companies, banks and private equity in the aviation space, maintains that two more aircraft orders by competing Indian airlines are likely to be announced in the coming months.

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Thulasidas adds that apart from Air India and IndiGo, an aviation market the size of India’s needs one or two more major carriers as also a few regional ones. Whether the aircraft orders that AT-TV is hinting at are from new airlines or from existing players still needs to be seen. 

What Aairavat’s Pandey points out also remains to be seen. According to him, what must not be lost in the mega order announcement is that at some point in the future, the Tata Group is working on bringing commercial aircraft manufacturing into the country.

“Effectively this means that Airbus may set up an assembly line in India (currently the only Airbus assembly line in Asia is in China). The government will likely push for a similar outcome with Boeing. There is already a joint venture that has been established on the defence side to co-produce helicopter fuselages and aerostructures. In the future, a similar JV for commercial aircraft would be much sought after,” he observed. 

(The writer is a senior aviation journalist based in New Delhi.)