Air India nears historic order for up to 500 jets

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Air India is close to placing landmark orders for as many as 500 jetliners worth tens of billions of dollars from both Airbus and Boeing as it carves out an ambitious renaissance under the Tata Group conglomerate, industry sources said on Sunday.

The orders include as many as 400 narrow-body jets and 100 or more wide-bodies, including dozens of Airbus A350s and Boeing 787s and 777s, they said, speaking on condition of anonymity as finishing touches are placed on the mammoth deal in coming days.

Such a deal could top $100 billion dollars at list prices, including any options, and rank among the biggest by a single airline in volume terms, overshadowing a combined order for 460 Airbus and Boeing jets from American Airlines over a decade ago.

Even after significant expected discounts, the deal would be worth tens of billions of dollars and cap a volatile year for an industry whose jets are back in demand after the pandemic but which is facing mounting industrial and environmental pressures.

Airbus and Boeing declined to comment. Tata Group-owned Air India did not immediately respond to a request for comment.

The potential order comes days after Tata announced the merger of Air India with Vistara, a joint-venture with Singapore Airlines, to create a bigger full-service carrier and strengthen its presence in domestic and international skies.

That deal gives Tata a fleet of 218 aircraft, cementing Air India as the country’s largest international carrier and second largest in the domestic market after leader IndiGo

Air India, with its maharajah mascot, was once known for its lavishly decorated planes and stellar service but its reputation declined in the mid-2000s as financial troubles mounted.

Founded by JRD Tata in 1932, Air India was nationalised in 1953. Tata regained control in January and has since been working to revive its reputation as a world-class airline.

The planned order reflects a deliberate strategy to win back a solid share of traffic flows to and from India, which are currently dominated by foreign carriers such as Emirates.

Air India also wants to win a bigger share of regional international traffic and the domestic market, setting up a battle on both fronts with IndiGo.

Delivered over at least a decade, the 500 jets would both replace and expand fleets in the world’s fastest-growing airline market, while contributing to Prime Minister Narendra Modi’s goal of expanding the economy to $5 trillion.

But experts warn many hurdles stand in the way of Air India’s ambition to recover a strong global position, including frail domestic infrastructure, pilot shortages and the threat of tough competition with established Gulf and other carriers.

Separately, Air India would spend more than $400 million to refurbish the interiors of its entire wide-body fleet to attract more flyers after the carrier was taken over by Indian conglomerate Tata Group at the start of this year, it said on Thursday.

The refurbishment will involve introduction of a premium economy cabin, it said in a statement, adding that the first aircraft with refurbished interiors will enter service in mid-2024.

“Air India has committed to attain the highest standards of product and service befitting of a world class airline. We know that, at present, the cabin product on our 40 legacy widebody aircraft falls short of this standard,” the company said.

The airline is working closely with partners to speed up the refit process and is leasing at least 11 new widebody aircraft with brand new interiors in the meantime, it added.

Once known for its lavishly decorated planes and stellar service, state-owned Air India was swept into a downward spiral due to mounting debt and ballooning losses. The carrier drew flak for poor maintenance and delays as it struggled to pay staff and suppliers on time.

The troubled airline, which had been up for sale for years, was taken over by the Tata Group in January after winning a $2.4 billion bid.

Last month, Tata said it was merging Air India with Vistara, its joint venture with Singapore Airlines, to create a bigger full-service carrier that will strengthen its presence in domestic and international markets.

Autos-to-steel conglomerate Tata will hold 74.9% of the combined entity, while SIA (SIAL.SI) will own the remaining 25.1%, the Indian group said in a statement on Tuesday.

SIA will invest $252 million into Air India as part of the deal, Tata said, with the pair aiming to complete the merger by March 2024, subject to regulatory approvals including from India’s aviation ministry, central bank and antitrust watchdog.

Agencies

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