Tata negotiating aircraft order for Air India with Airbus and Boeing

Planemakers Boeing Co and Airbus SE have met executives from India’s Tata Group in recent weeks to discuss future plane orders for Air India, two people familiar with the matter said.

In January, Tata regained ownership of state-run carrier Air India after nearly 70 years in a USD 2.4 billion equity-and-debt deal. While the airline has lucrative landing slots, the group faces an uphill task to upgrade Air India’s ageing fleet and turn around its financials and service levels.

Air India has a mixed fleet of over 140 Airbus and Boeing planes, and industry executives estimate it would cost Tata more than USD 1 billion to refurbish the ageing aircraft.

Tata negotiating aircraft order for Air India with Airbus and Boeing

Bloomberg reported on Thursday, February 24 that Tata had begun preliminary discussions with the planemakers and lessors for jets including Airbus A350-900s and Boeing 787-9 Dreamliners, citing people familiar with the matter.

The talks are at a preliminary stage, with Tata Sons assessing the right fleet mix and no decisions taken yet on aircraft type or order size.

The carrier is in discussions for new Airbus or Boeing narrow-body jets that form the mainstay of Air India’s domestic and short-haul operations, as well as wide-body aircraft capable of flying as far as the US, the people said.

Air India, one of the world’s first buyers of the Boeing Dreamliner, operates the oldest versions of the fuel-efficient workhorse.

A deal for 50 brand new 787-9 jets could be valued at USD 14.6 billion at sticker prices, although discounts are common in such large transactions. Air India, one of the world’s first buyers of the Boeing Dreamliner, operates the oldest versions of the fuel-efficient workhorse, although several of them remain grounded due to a lack of parts.

Airlines typically order jets years in advance because manufacturing capacity at planemakers is limited and getting early delivery slots remains a challenge. Demand for narrow-body jets, such as those in the A320neo and 737 Max families of aircraft, is particularly high, meaning it can take years after an order is placed to induct aircraft into a fleet.

Air India’s average fleet age is more than 10 years.

“In terms of fleet, we know we have work to do,” Natarajan Chandrasekaran, chairman of the Tata Group, told Air India employees earlier this month at an internal company briefing. “We will address it with utmost urgency.”

Air India will increase the number of aircraft it has – both wide-body and narrow-body – and will move to do that with speed in the coming months, Chandrasekaran told staff. Air India’s average fleet age is more than 10 years.

The airline, with its maharajah mascot, was once renowned for its lavishly decorated planes and stellar service championed by founder JRD Tata. Air India was founded in 1932 and nationalised in 1953.

Air India is the third airline brand in the Tatas’ stable as it holds a majority interest in AirAsia India and Vistara.

Since the mid-2000s, however, Air India’s reputation has declined as financial troubles mounted. It flew widebody planes with business class seats in poor repair and grounded some of its new 787s to use for spare parts.

Tata, the autos-to-steel conglomerate, operates two other airlines: Vistara, in a joint venture with Singapore Airlines, and AirAsia India, which operates in partnership with AirAsia Group.

(With Inputs from Bloomberg and Reuters)

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