Orders come as India’s growing middle class drives rising demand for affordable air travel.
Air India has announced orders for a total of 470 Boeing and Airbus passenger jets as the company scrambles to tap into rising demand for affordable air travel from the country’s growing number of middle-class consumers.
India’s largest international airline and second-largest domestic airline is buying 220 Boeing planes worth $34 billion and 250 passenger jets from European planemaker Airbus.
The purchase of Boeing is the US planemaker’s third-biggest sale ever in dollar terms and second-biggest-ever by volume.
US President Joe Biden called the deal “historic” and discussed it over the phone with Indian Prime Minister Narendra Modi. The call was part of a series of high-level responses as the scale of India’s needs presented a rare gold mine for the competing aircraft giants in an industry where the winner usually takes all.
Air India is trying to reinvent itself by expanding its operations and modernizing its fleet. The new jets will help the airline’s owner, Tata Sons, compete against emerging low-cost competitors including India’s dominant carrier IndiGo.
“India will be the world’s third largest market in the aviation sector,” Modi said in a video conference call with Tata Sons chairman Natarajan Chandrasekaran and French President Emmanuel Macron.
India is estimated to need more than 2,000 aircraft over the next 15 years and “today’s historic announcement will help meet that growing demand,” he said.
The Boeing order includes 190 of its 737 Max aircraft, 20 of its 787s and 10 of its 777Xs. The purchase includes customer options for an additional 50 737 MAXs and 20 of its 787s, totaling 290 aircraft for a total of $45.9 billion at list price.
Based in Toulouse, France, Airbus will provide Air India with 40 A350 Airbus widebody aircraft and another 210 A320neo narrowbody aircraft, Chandrasekaran said in the tender.
Airbus did not disclose the financial terms of the deal, which could be worth tens of billions of dollars.
“Today is a historic moment for India, for Air India and for Airbus,” said Airbus CEO Guillaume Faury, who was also on the phone. The size of the order “shows the appetite for growth in the Indian aviation industry. It’s the fastest growing in the world.”
Chandrasekaran said the A350s would be used to “fly all the ultra long-haul routes around the globe”. Single-aisle A320s are typically used on short-haul routes. He said the airline has “significant options” to increase its order.
“It is important for the industry because given the recent turmoil in the Chinese market, India is the alternative growth market,” said independent aviation consultant Bertrand Grabowski.
“India is also sending a strong political signal that it wants to remain committed to the West at a time when it appears ambiguous about Russian sanctions,” said Grabowski, a former banker with extensive international business experience.
Demand for air travel in India and elsewhere in Asia has surged over the past decade, fueled by rapidly growing economies that have boosted incomes and made travel more affordable for millions of people.
“There’s a lot of catching up to do” for Air India, said Brendan Sobie, a Singapore-based independent aviation analyst. It competes with newer low-cost airlines, which have been moving faster to meet demand for domestic flights, as well as foreign carriers, which are formidable competitors on international routes, he added.
Tata Sons, India’s oldest and largest conglomerate, regained ownership of the heavily indebted national airline last year. The Tata Group pioneered commercial aviation in India when they founded the airline in 1932. It was taken over by the government in 1953.
Modi and Macron welcomed the Airbus deal, both saying it was a sign of strengthening the “strategic partnership” between their countries.
Macron called the deal a “new success” and an opportunity to “explore new areas of cooperation with India”.
Tata integrates Air India into Vistara, which it operates jointly with Singapore Airlines, and into Air Asia India, which it operates with Malaysian discount operator Air Asia.