Air India’s purchase of 470 new aircraft from Boeing and Airbus is a big deal indeed. And in more ways than one. At a commercial level, it indicates the first stirrings of ambition in the Maharajah to regain his lost throne. At the country level it has implications for India’s domestic manufacturing drive and jobs, and finally, at a strategic level, the deal underlines the heft that India’s market brings to its international political powerplay.
To put the deal in perspective, the number of planes booked now is more than twice Air India’s current fleet of about 220 aircraft . And the last big order from the airline was 16 years ago for 111 aircraft! The deal configuration is interesting as unlike its competitors, Air India has opted to continue with its current strategy of a fleet divided almost equally between Boeing and Airbus despite the implications for overheads. The purchase of 40 wide-bodied Airbus A-350, and 10 Boeing 777X planes indicate the serious plans of the airline to expand its international network, though a part of the new planes could replace its ageing 777 fleet. The airline’s plan appears to be to win back traffic on the India-US and India-Europe routes currently dominated by Emirates, Etihad and Qatar Airways, which is the right strategy. Air India will take delivery of 25 Boeing 787 planes as early as end of 2023 which will boost and renew its fleet in the domestic operations. Of course, the airline will have to find the funds for these this year but the other aircraft will be delivered beginning 2025 only which will give the airline a breather in financing them. It will be interesting to watch how Air India finances the deal and what role the parent, Tata Sons, plays in it.
From a national perspective, the deal could have spin-offs in terms of a boost to domestic manufacturing capacity and jobs. Tata Sons chairman N. Chandrasekaran has indicated that the group, which already produces critical aircraft parts, will look at manufacturing commercial aircraft in India. Indeed, given the size of India’s orders from different airlines, it may not be out of place for the government to persuade one or both of the suppliers to set up assembly facilities in India, as Airbus has done in China. More jobs will be created in both the front and back ends of the airline business as fleets expand. A rejuvenated Air India is good news for fliers who have seen their options shrink in recent times. Post-pandemic, air travel has taken off with almost 100 million passengers taking to the skies in the first nine months of this fiscal year, showing a big 63 per cent growth.
India’s large and growing market, and deals such as Air India’s, provide heft to the country on the global stage. That the US and French Presidents joined Prime Minister Narendra Modi to announce what was just a commercial deal shows the importance of the orders for their respective economies. India should use this leverage to channel manufacturing investments into the country along with technology transfers. If our policymakers need a copybook, China can provide one.