An Indian airline that was neck-deep in debt for decades made a dramatic comeback this week, announcing two back-to-back billion-dollar deals that are shaking the $2.7 trillion global aviation industry.
On Feb. 14, Air India, India’s oldest airline, bought 500 new planes from American aviation company Boeing, and another 250 from France’s Airbus—the “single largest order” by any airline in history in a deal worth more than $100 billion combined.
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India is the world’s fastest growing aviation market, with its civil aviation market worth $900 million. The industry is expected to grow to $4.33 billion by 2025, according to the government. India’s domestic aviation market is also expected to become the world’s third largest by next year.
The orders are significant, especially for Air India that was deep in debt for over two decades and required nearly $3 million a day of taxpayers’ money from the Indian government—who owned it for over 70 years—to keep it afloat. This was until the Indian billionaire Tatas family bought it last year and paid off more than $2 billion in debt, while paying the Indian government $360 million in equity.
Ajay Awtaney, who runs the Indian aviation analysis platform Live From a Lounge, told VICE World News the deal is significant for Indian Prime Minister Narendra Modi and his big privatisation ambitions of state assets, of which Tatas’ acquisition of Air India was a part.
“This order reflects ambition and the company’s intention to grow its network and influence substantially,” said Awtaney.
On a congratulatory note, Modi said the deal reflects the successes and aspirations of India’s civil aviation sector. Under his nine-year rule, the number of airports across India has gone from 74 to 147. “Strengthening the civil aviation sector is an important aspect of our national infrastructure policy,” he said.
This is also the year when India begins its year-long G20 presidency, which is set to boost Modi’s growing influence globally. This comes at a time when India’s foreign policy has been under scrutiny for its vaguely neutral stance on Russia’s invasion of Ukraine, which was criticised by world leaders.
This week, U.S. President Joe Biden and the UK Prime Minister Rishi Sunak sent congratulatory messages to India, saying the orders will boost hundreds of jobs in their countries.
On Thursday, Reuters reported that Air India has the purchase rights to buy 370 more aircrafts from Airbus and Boeing over the next one decade.
The Air India-Boeing deal was preceded by “secret” discussions for over a year, according to a Reuters report, in a luxury London hotel owned by the Tata family.
“The convergence of the political will of the country to regain sovereignty of international connectivity, combined with the ambition of the mighty Tata [family],” Airbus Chief Commercial Officer Christian Scherer told Reuters. “If things are done right it has all the ingredients to be really solid.”
India’s civil aviation history is intricately linked with Air India. The Tata family founded Air India—India’s first indigenous airline—in 1932. It was then acquired by the Indian government during the nationalisation of private sectors in 1953.
Over the years, the airline was hurt by a combination of rising aviation fuel prices, competition from low-cost airlines, and its own financial mismanagement. Originally, the airline was branded “Your palace in the sky,” with Indian royalty-themed luxury services and design. Today, its aircrafts are known for their poor, tattered condition. In 2020, at the height of the pandemic, around 600 Air India employees were furloughed in cost-cutting measures.
As Air India sank, the country saw a meteoric rise of domestic low-cost airlines, which took over the country’s aviation market in a way that it even killed India’s second-largest carrier, Jet Airways a few years ago.
But recently, low-cost carriers have been facing a decrease in trust over service and flight irregularities. In 2021, Indian airline company Indigo—which controls more than half of the Indian domestic aviation market, and is currently Asia’s largest budget airline—called the Air India revival “formidable competition.”
Last year, Air India announced that they will spend over $400 million on refurbishing interiors of its existing widebody planes, which are used for international travel.
Brendon Sobie, a Singapore-based aviation analyst who runs a consultation firm called Sobie Aviation, told VICE World News Air India has massive catching up to do.
“Its existing aircrafts are old, the company hasn’t grown and it has lost market share,” he said. “These order numbers look spectacular, but when you look at individual components, it’s a lot less spectacular.”
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