There’s been a lot of splashes made by Air India today as it signed itself for a major fleet renewal, with both Airbus and Boeing taking the spoils.
But what have they signed up for?
We have Letters of Intent – not Firm Orders
Let us kick off with the terminology here first. Air India, Airbus and Boeing have had Letters of Intent (LoI)’s signed today. These are not Firm Orders (the point where the order is lodged in the order book of a manufacturer).
Rather, it is an instrument that states formally states what someone (or an organisation) plans to do although this is not a legal promise or official contract.
LoI’s are very much the point where an airline and OEM can start nailing down specifics of requirements and it is common to see them in the aviation industry as a precursor to an order being lodged.
Sometimes a Memorandum of Understanding (MoU) is used. An MoU is typically a legally non-binding agreement between two (or more) parties, that outlines terms and details of a mutual understanding or agreement – but without establishing a formal, legally enforceable contract.
Today, we are looking at the results of Letters of Intent.
What are the raw numbers?
The raw numbers from both letters of intent are:
- 140 Airbus A320neo
- 70 Airbus A321neo
- 6 Airbus A350-900
- 34 Airbus A350-1000
- 190 Boeing 737 MAX + 50 Options
- 20 787 Dreamliner + 20 Boeing 787-9 options
Starting with the Airbus Announcement
Repeating the numbers above, Tata Group-owned Air India has announced its commitment to order 250 Airbus aircraft to boost its domestic and international operations.
The commitment includes 140 A320neo and 70 A321neo single-aisle aircraft as well as 34 A350-1000 and six A350-900 wide-body jets. Deliveries are set to commence with the first A350-900 arriving by late-2023.
In Quotes
Campbell Wilson, CEO and MD, of Air India said:
“Airbus has been a longstanding partner of Air India, and these new aircraft will play an important part in delivering Vihaan.AI, Air India’s comprehensive transformation and growth strategy,”
“A core element of this transformation is the significant expansion of our network, both domestically and internationally, coupled with the elevation of our on-ground and onboard product to world-class standards. This order marks the start of a new chapter for both Airbus and Air India.”
Christian Scherer, Airbus Chief Commercial Officer and Head of International added:
“This is a historic moment for Airbus and for Air India. India is on the verge of an international air travel revolution and we are honoured that our partnership with the Tatas and our aircraft solutions will write that new chapter for the country’s air-connectivity,”
“The A350’s unique capability will unlock the pent-up potential of India’s long-haul market, its technology, long reach and second to none comfort will enable new routes and passenger experience with better economics and enhanced sustainability. Alongside the A350s, the A320 Family fleets will be the efficient, versatile asset to continue democratising and decarbonising air travel in the country – from domestic, regional, up to international levels.”
“We salute Air India for its visionary strategy, picking the two reference aircraft types in each of their categories. We are thrilled and humbled to see these aircraft become the cornerstones of Air India’s renaissance. This fleet will propel the airline globally where it deserves to be – with the best.
Meanwhile at Boeing
To go over the numbers again, Boeing has secured an LoI for 220 aircraft with 70 options. This is split into 190 Boeing 737 MAX Family, 20 Boeing 787 Dreamliners and 10 Boeing 777X aeroplanes.
The options are split into 50 additional 737 MAXs and 20 787-9s.
Models and splits have not been disclosed, but given that the press work talks about both the Boeing 737 MAX 8 and MAX 10 in the short-haul markets, it would be safe to assume that these are the types that have piqued Air India’s eyes.
In terms of wide-bodies, again, no 787 models were mentioned, but considering the airline has options for 20 Boeing 787-9s, logic would dictate they would order more (although the carrier is an operator of the 787-8 currently).
In Quotes
Campbell Wilson, CEO and MD of Air India, said:
“This acquisition of nearly 300, highly advanced Boeing jets is a core element of Vihaan.AI, the comprehensive transformation and growth strategy we are pursuing at Air India,”
“These new airplanes will enable us to dramatically expand our network, both domestically and internationally, and will come with a completely new, world-class onboard product enabling passengers to travel in the highest levels of comfort and safety. With this order, we are delighted to take our long relationship with Boeing to a new level.”
Stan Deal, president and CEO of Boeing Commercial Airplanes, said:
“Air India’s selection of Boeing’s family of passenger jets shows their confidence in our products and services in the world’s fastest growing aviation market, and their decision will support engineering and manufacturing jobs at Boeing factories in Washington state, South Carolina and across our supply base,”
“With the industry-leading fuel efficiency of the 737 MAX, 787 Dreamliner and 777X, Air India is well positioned to achieve its expansion plans and become a world-class global airline with an Indian heart.”
Pently of work for others too
There is going to be plenty of work in the pipeline for others too if the LoI’s get converted into firm orders – with engine OEMs eyeing a piece of the pie (most likely Pratt and Whitney, as well as Rolls Royce).
On top of that, you bet that connectivity suppliers and interior suppliers will be circling to add value to the cabin- in terms of wifi, seats, inflight entertainment, interiors, carpets and so on.
The next few months could be interesting as the supply chain is lined up to deliver Air India’s requirements.
The current state of play
Working from Airfleets.net, Air India’s Active fleet includes:
- 15 Airbus A319
- 9 Airbus A320-200
- 26 Airbus A320neo
- 13 Airbus A321
- 5 Boeing 777-200LR
- 12 Boeing 777-300ER
- 24 Boeing 787-8 Dreamliners
Through its Air India Express subsidiary, it also operates 25 Boeing 737-800 aircraft. Air India Regional is an ATR operation, operating 2 ATR42 aircraft and 19 ATR72s
It goes without saying this is a massive order compared to an active fleet of 104 aircraft. 470 aircraft represent over-quadrupling the fleet.
Looking beyond Air India, there is also AIX Connect (Air Asia India), which has 23 Airbus A320-200 and 5 Airbus A320neo aircraft in its fleet. There is also the number of aircraft operated by the TATA/SIA joint venture Vistara which has 55 aircraft.
Letters of Intent are wonderful. Firm orders are better.
The challenge for Airbus and Boeing will be to convert these Letters of Intent into Firm Orders. which will require hard cash and negotiation to deliver the fleet. That may involve financing the fleet by leasing the aircraft or going to the markets to raise capital for such investment.
There will be plenty of hard bargaining ahead as well as airline transformation – probably the hardest part to come. Seth at PaxEx.Aero has a good article on other steps the airline will need to at least consider as they move forward.
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