Finance
Air India’s massive 470-plane order to Boeing and Airbus could grow even larger because the airline has the option to purchase an additional 370 planes from the manufacturers, according to chief commercial and transformation officer Nipun Aggarwal.
The current 470-aircraft order is the largest ever placed by an airline in one go anywhere in the world, surpassing American Airlines’ 2011 order for a total of 460 aircraft. The previous largest order by an Indian carrier was IndiGo’s 300-aircraft order in 2019.
“The order comprises 470 firm aircraft, 370 options and purchase rights to be procured from Airbus and Boeing over the next decade. The Airbus firm order comprises 210 A-320/321 Neo/XLR and 40 A350-900/1000. The Boeing firm order comprises 190 737-Max, 20 787s and 10 777s. We have also signed up for long term maintenance of the engines with CFM International (CFM), Rolls-Royce and GE Aerospace,” Aggarwal said via a post on LinkedIn
A firm order is the number of aircraft that the buyer has committed to purchasing. Firm orders are typically accompanied by options, which allow the airline to purchase additional planes at a later date and price. Options, unlike firm orders, are not binding on the buyer.
When the twin orders were announced on February 14, Boeing mentioned that Air India has the option to purchase an additional 70 planes in addition to the 220 on the firm order. There was no word at the time on whether there was an option in addition to the firm order for 250 Airbus planes.
“In addition to the 470 aircraft on firm order, Air India has secured a number of options and purchase rights. These give us the option, but not the obligation, to take additional aircraft at already-negotiated production slots and/or prices so that we can nimbly accommodate further growth and manage risk,” Air India CEO Campbell Wilson had said in an internal communication to employees.
Air India and Air India Express operate a fleet of approximately 140 planes, the vast majority of which are narrowbody aircraft. Air India currently relies heavily on Airbus planes for domestic operations, while its widebody fleet is made up of Boeing planes. Air India Express only flies Boeing narrowbody planes.
Former Indian Airlines and Air India placed an order for 111 planes, including single-aisle Airbus planes and twin-aisle Boeing planes, over 17 years ago. The two government-owned airlines of the time were later merged to form Air India.
Since the return of Air India to the Tata Group a little more than a year ago, the new owners have been focused on improving the product offering while also planning an extensive expansion for the airline. A five-year roadmap–Vihaan.AI–was prepared with the objective of substantially growing the airline’s network and fleet in a bid to put it on a “path to sustained growth, profitability, and market leadership”.
The twin orders are an important part of that strategy. Air India is also refurbishing its existing planes and attempting to get a few grounded planes back in the air. It is also leasing planes to expand its network and will continue to do so until the newly ordered planes are added to the fleet.
“The first aircraft to arrive will be 25 brand-new Boeing B737-800s and 6 Airbus A350-900s in the second half of 2023, with deliveries really ramping up in 2025 and beyond. In the meantime, our capacity growth will continue to be supported by the previously announced lease-in of additional narrowbody and widebody aircraft and the restoration-to-service of the remainder of our grounded fleet,” Wilson had told employees.
Source:IE
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