✈️ Soaring to New Heights: Air India's $80 Bn Deal Decoded
Ready for takeoff! Air India's blockbuster aviation deal is set to change the game in the industry. This could bring massive economic benefits to India, the UK, the US and France. How? ReadOn!
840 aeroplanes! $80 billion deal!
That’s the biggest order in aviation history, placed by none other than Air India!
You must have already read this news by now! After all, it's everywhere!!!
Even Rishi Sunak, the UK PM posted about this on LinkedIn.
He’s not the only world leader who is excited by this news.
From PM Modi to US President Biden, this deal’s got everyone super happy.
Wondering why these Abdullahs are deewana about this begaani shaadi?
ReadOn!
🔍 Decoding the Air India Deal
Air India is planning on buying 470 aircraft from Airbus (250) and Boeing (220).
Why not order from just one company like IndiGo? The different aircraft would need different maintenance teams, different equipment, and whatnot. Wouldn’t ordering from the same company be better?
Nope, because Air India needs a lot of aircraft.
It has not only ordered 470 aircraft, but also has the option to acquire 370 more!
Now, there’s no way one company would be able to fulfil all of these orders in time.
So, it makes sense to order from both companies to save time.
This brings us to our next question...
🤔 Why Does Air India Need So Many Aircrafts All of a Sudden?
Here's why Air India may be placing this bulk order:
Placing a bulk order gets you discounts.
Placing a bulk order gives you priority. Both Airbus and Boeing will work hard and fast to keep Air India happy.
Air India wants to rule the international skies. To achieve this, it needs to have an impressive fleet. Right now its fleet is only 220 aircraft strong.
Here’s a look at how many aircraft other major airlines have:
Source: Visual Capitalist
Does India need so many aircraft?
IndiGo, which is India’s biggest airline by market share and fleet size, has only 300 aircraft!
So, what does Air India plan to do with 470 new aircraft?
🧠 Air India’s Game Plan
Ever since Tata got its hands back on Air India, it has had one vision: Make sure that Air India rules the skies again.
To do this, it needs low-cost carriers.
However, its low-cost carrier airlines, Air India Express and Air Asia, currently only have 52 aircraft.
So, it needs more low-cost aeroplanes.
But Air India is only buying 190 low-cost 737 MAX aircraft.
What about the rest of the planes?
You see, Air India is now going international with its ambition: it wants to rule the international skies. Its competition is no longer just IndiGo or SpiceJet.
It is now competing with international airlines like Qatar Airways, Emirates and Etihad.
Air India’s main focus right now is the India-US and India-Europe air routes.
If it is successful in gaining market share in the international flight segments, it could be huge for India!
Just like how many Indians currently travel to Dubai or Doha to get a flight to Europe or US, residents from South East Asian countries could now travel to India to catch flights towards the West.
This would boost Indian tourism and our economy.
What’s more, India needs more flights.
78% of respondents of an YouGov survey claim they want to travel this year!
And we've already started acting on this aspiration.
In August 2022, we spent $1.5 billion travelling abroad.
This number is double the $784 million we spent in August 2019!! To meet our travel needs, we will need 2,210 aircrafts over the next two decades!
So, Air India’s move makes sense, no? It is snapping up aeroplanes now to be able to capitalise on the high demand as soon as possible.
💡An interesting insight: Air India may be turning the aircraft leasing model that IndiGo introduced on its head.
You see, many airlines no longer buy aeroplanes. They lease them. This helps reduce a large chunk of cash outflow and helps airlines achieve profitability.
But Air India is different. Because it has the backing of Tata Sons, which has a high creditworthiness, it could borrow and purchase planes at a much lower cost than leasing them (lease rentals are anyway increasing rapidly!)
And now, the most interesting part.
Why are the US, UK, and France celebrating?
🤑 One Deal to Boost All the Economies
With this one deal, Air India has given their economies a boost right before a major recession.
Making so many aircraft will require a lot of manual labour. This will create jobs in France and UK, where Airbus manufactures aircraft, as well as the US, where Boeing operates.
Biden has claimed that the deal will create 1 million jobs across 44 states!
This deal could also strengthen India’s ties with foreign countries.
What’s more, this could convince Boeing and Airbus to set up plane assembly facilities in India. This would increase employment in India and boost our economy.
Interesting how one deal can change the lives of so many people, no?
But will this deal help Air India become India’s favourite airline? Can it defeat IndiGo? Only time will tell…
Until then, ReadOn!
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