A historic order from Air India to buy up to 500 aircraft from Airbus and Boeing might be placed soon. This occurred months after the Indian government’s airline was formally acquired by the Tata Group conglomerate as part of a $180 billion agreement. In a recent announcement, Tata Group also said that Air India and Vistara, its joint venture with Singapore Airlines, will combine. This move would significantly increase its domestic and international market share.
Why is this deal so substantial?
According to a report from unnamed industry sources, the purchase calls for at least 400 narrow-body aircraft and at least 100 wide-body aircraft, including multiple Airbus A350 and Boeing 787 and 777 aircraft. If the agreement is signed, it will surpass American Airlines’ combined order of over 460 Airbus and Boeing planes placed more than ten years ago as one of the largest acquisitions by a single airline in terms of volume.
Tata group looking to take over a significant share of traffic flows to and from India which is currently dominated by foreign airlines like Emirates. If the deal is inked, the purchase could take at least a decade to be delivered, and could cost over $100 billion dollars. This comes as the plane giants have faced an increase in demand following the ease of COVID-19 pandemic restrictions.
In a broader sense, if the acquisition of the extra 500 planes is completed, it will have a big positive impact on the Indian economy because India is one of the world’s greatest markets for airlines as more Indians search for easy and reasonably priced travel choices. Additionally, it would considerably advance Indian Prime Minister Narendra Modi’s goal of growing the GDP to $5 trillion.
Tata’s present stake in the indebted flag carrier;
Earlier this year, Tata acquired the nation’s debt-ridden flag carrier from the Indian government. Additionally, the company disclosed that it will invest more than $400 million to renovate the cabins of all of its wide-body aircraft. It added that this included the addition of a premium economy cabin. Midway through 2024, the first aircraft with the upgrades will be introduced.
Has the Tata-owned airline made any purchases yet?
There have been reports of a landmark purchase on the horizon by Tata-owned Air India. The Economic Times, citing anonymous sources, said that the Air India is close to signing a deal with Boeing Co. to buy up to 150, 737 Max planes. It added that the company is likely to place an order for at least 50 jets while they may later procure as many as 150.
Hurdles to this potential purchase;The airline was once known for its lavishly decorated planes and stellar service in the 1950s, very few opt for the airline now either on domestic or international routes. It is largely perceived as another government department synonymous with being an unreliable and shabbily managed airline with mounting debt. The airline had a net debt of Rs 60,000 crore ($600 billion) at the time of purchase by Tata Sons.
Tata group’s ambitious revival of Air India faces several hurdles, according to a Reuters report. The airline might struggle to procure the medium-haul Airbus A321neos that were reportedly being ordered for the Air India-Vistara tie-up. The European planemaker has sold out for at least the next five years or more.
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