Air India’s Latest Deal : Biggest Aviation Deal

Air India has recently been taken over by Tata Group. Air India holds 13% of the Indian aviation part with 4400 domestic and 1800 international landing points. The fleet size is 127 Aeroplanes working currently. The airline is a mammoth, stuck in the mud of debt. However post the bid win the group has been constantly focused on converting the airline into a profitable vehicle.

The first plan for the same was to combine all their other airlines under one name only. This began with the merger of other airlines held by Tata. Apart from this the group noticed one thing. The flights of Air India had to maintain a high cost for domestic flights especially in comparison with Indigo and GOAir.

However to overcome this and to push their international flight number as well the group was constantly planning to acquire some new jets since the time of overtaking Air India from the Government. This finally came true when the Group announced its latest purchase of an aeroplane fleet. 

Air India’s Aeroplane Purchase Deal

Tata group recently made history when the group announced the biggest aviation deal of the world. The deal from Air India includes a buy order of 540 aeroplanes from Boeing and Airbus together. The order includes 470 firm orders and 70 are the options that can be later executed by Air India with Airbus. This makes the total order value at 540 planes.

The previous biggest deal in the history of aviation was the purchase of 460 planes by American Airlines in 2011. However this order has already made history and is the biggest order placed till date.

This deal will cost the company around 82 billion dollars but due to the bulk order the actual price of the same must be lower. The major number of planes added are for the short haul international and domestic flights. Total of 210 Airbus 320 and 190 Boeing 737 Max will be added for the same purposes. For long Haul flights to America and Europe, 40 Airbus a350, 40 Boeing 787 and 10 Boeing 777X will be added.

Among the entire order the initial delivery will begin by the end of 2023 and will continue till the end of 2033. Thus this is an entire 10 year plan. The order announcement was made virtually and the meeting was attended by the Prime Minister of India Mr. Narendra Modi alongside the French President Emmanuel Macron. Sir Ratan Tata also marked his presence along with commerce minister Piyush Goyal, Airbus CEO Guillaume Faury, Aviation Minister Jyotiraditya Scindia and Air India CEO and MD Campbell Wilson.

Deal Outcomes

The deal is definitely going to strengthen the relations between France and India due to huge liquidity transferring hands and the job opportunities added due to this deal. As per Joe Biden this deal will present more than a million jobs across the USA in all 44 states with a few not requiring the 4 year college degree as well. The future plan of Air India is to make the commercial jets in India itself and these are plans to execute the same in longer run. The prime minister of India said that this would strengthen the Aviation infrastructure in India which is the need for the better future of India. 

This deal will provide the Indians with a direct connectivity to the different parts of the world without rerouting their flights from one place to another. The company intends to make India an international hub for aviation by direct connectivity to various parts of the world. 

Current Capacity of Air India

The airline currently holds 113 Aircrafts under Air India. Apart from this due to the recent merger plans, AirAsia which is now a complete subsidiary of Air India adds 28 planes to the list, Vistara ads 54 planes to the list and Air India Express adds 24 jets to the same. This takes the total count of the planes at 219 currently. As per the plans intended by the board of the airline they plan to capture more than 30% of the entire domestic and international markets within the next 5 years. This plan is named as Vihaan. 

The major reason to place such a huge order is the cost factor and connectivity factor on both the axes. On X axis the cost of Air India is higher than most of the other airlines due to the debt faced and limited airlines. However with the increased fleet more flights could be run and this could provide more revenue for the company with a lower costing. On the other hand as the CEO said they want to connect India to the world directly and hence this deal would be playing a major role for the same. 

The competition in the domestic  markets is going to see a major rise in the near term as GoAir, Spicejet and Indigo have the major flights currently and hence Air India would definitely penetrate into their market area with the new planning put into action.