With its record aircraft purchase, Air India has joined the ranks of ambitious international carriers. It tentatively agreed on Tuesday to purchase nearly 500 aircraft from Airbus and Boeing to compete with domestic and foreign rivals.
According to those involved in the negotiations, it took months of closely guarded negotiations near Britain’s Buckingham Palace to reach the largest deal ever reached by a single airline. Which culminated in a celebration over coastal Indian curries.
In a diplomatic embrace between the leading G20 nations on Tuesday, secrecy was broken as leaders praised the agreement. The Tata Group, which reclaimed ownership of Air India last year after decades as a publicly owned company, made six paragraphs available.
It demonstrates how new breed of private airline owners is transforming the financially risky Indian airline industry with IndiGo founders.
Under the condition of anonymity, insiders described how the deal had been in the works for more than a year. Reuters reported in December that the parties were getting close to a record 500-plane agreement as the deal’s astounding scope started to take shape.
Deal-making took place primarily at St James’ Court, a luxurious Victorian hotel in London’s West End close to Buckingham Palace.
Negotiators from the airline, planemakers, and engine titans camped out at the Tata-owned hotel and adjacent suites for days on end in the hothouse setting of a traditional aircraft industry negotiating ritual known as a “bake-off.”
Now Boeing had chance to take back ground in the single-aisle jet market in India and cut into Airbus’ sizable lead. Airbus desired a larger share of the competitive competitor’s wide-body market. Both were unable to sweep the entire order due to overflowing order books.
Insiders claim that General Electric is the biggest overall winner as it secures the majority of the lucrative engine contracts, with its CFM joint-venture with Safran defeating Raytheon-owned rival Pratt & Whitney on Airbus A320neos. The sale of 40 Airbus A350s boosted Rolls-business Royce’s as well.
GE’s victory was a long time coming, highlighting the difficult process of negotiating strategic agreements in the aviation industry.
It won a tender in 2014 for 27 engines for Air India A320 aircraft. It quickly persuaded Vistara to accept its engines for seven aircraft, which led to a later order for 70 aircraft. IndiGo, which replaced Pratt & Whitney after experiencing technical difficulties that Pratt claims have been resolved, marked a turning point.
Analysts warn that Air India’s plans still face numerous challenges. To seriously impact the firmly established hubs of Doha and Dubai, it needs better service and efficiency.
But dealmakers will remain drawn to India because of its potential. IndiGo is considering placing a separate 500-jet order.