Air India Makes History

Air India’s multi-billion dollar order of 470 civil aircraft, including 220 from Boeing and 250 from Airbus, is the largest single aircraft order in the history of civil aviation. With enormous implications for India’s aviation industry and economic growth as well as global competition for the Middle East’s leading carriers, this is a giant step towards positioning both Air India and India as leading players in the global aviation industry. 

What’s the significance of this order for Indian Aviation? 

  1. A transformational order for Air India it will change the ‘balance of competition’ for airlines that currently dominate the regional airspace. 
  2. In the long-term it will transform short-haul (domestic and regional) for Indian’s and long-haul (UK USA, Australia) travel for India’s large diaspora
  3. It is an important step towards establishing India as a regional aviation hub a global industry powerhouse. 
  4. New aircraft will be cleaner and more efficient and therefore help reduce the industry’s national carbon footprint. 

Why has Air India made such an enormous investment in a new fleet? 

  1. Air India is India’s largest international airline and second largest domestic operator. Taken over by the TATA Group in 2022, it is in the midst of a transformation plan to modernize its fleet, expand its international footprint and improve regional connectivity. 
  2. The first order for Air India since 2005, it is a much needed and massive replacement and refreshment of its fleet
  3. It is a vital step towards expanding its services in currently underserved markets especially for Indian diaspora travelling to and from US, UK and Australia 
  4. Internationally, Air India’s competitors in the Middle East, Emirates, Etihad and Qatar Airways, currently account for 60% of India’s international air traffic to the US, UK and Europe. That is traffic and revenue that Indian airlines, such as Air India, are losing out on.
  5. In terms of potential too, India has a lot of catching up to do. For instance, even though India and China have similar populations, India has only 700 registered aircraft compared to China’s 3000. Outstanding aircraft orders by Indian airlines toral around 1270 including Air India’s record-setting order. Based on further orders expected over the next two years, industry experts predict there will be 2500 registered aircraft in India by 2040. 

Does India have the infrastructure needed to support this transformation? 

Recognizing the significance of a strong aviation industry to a thriving economy, India has been making transformational investments in this sector over the last few years to develop and build a world class aviation ecosystem. 

Some important initiatives include: 

  1. Setting up training academies for pilots and flight staff, infrastructure such as airports and MRO facilities as well economic policies, financial services and regulatory frameworks that will enable it to compete with global aviation hubs. 
  2. Developing its own aircraft leasing hub and becoming a leading player in the aviation financing industry. In 2020, the Indian government designated aircraft leasing an approved financial product amongst permitted financial services in GIFT City, a special economic zone and international financial services centre (IFSC), established in 2015. At the time, 70% of its commercial aircraft (against a global average of 45%), were leased, mostly in Ireland. Now with over a thousand aircraft expected to enter the order pipeline, the need for a competitive and comprehensive domestic aircraft leasing sector has become even more urgent.
  3. Expanding and modernizing airports: over the last few years, India has doubled the number of airports in the country to 140, is planning to build another 80 by the end of the decade and is investing in modernizing, refurbishing and expanding existing sites. 
  4. Setting up pilot training academies to train and develop local talent. 
  5. Encouraging MRO service providers to set up local operations which is attracting investment in supply chains, manufacturing plants and other MRO operations. 
  6. Investing in upgrading air traffic control operations, a vital prerequisite to the dramatic increase in air traffic envisioned over the next decade. 

Indian Aviation: The future’s looking bright

Air Transport currently contributes around 4% to India’s economy. Greater and more efficient inter-city connectivity will boost both business and leisure travel as well as tourism, which already accounts for 10% of India’s GDP. India is one of the world’s largest and fastest growing markets. Home to the world’s most popular tourist destination, large domestic and diaspora market, and excellent geographical location, over the next decade, expect India to emerge as a strong player in the global aviation industry.

More Insights

Future Aviation Forum

Fintech in Saudi Arabia

Transforming MRO: Eyes Everywhere