Air India inks deal to buy 500 new planes

Air India has sealed a jumbo deal for about 500 new planes worth more than $100 billion at list prices, in what could become the single largest order by any airline as it seeks to reinvent itself under its new owners, industry sources told Reuters.

The deal, split equally between France’s Airbus and rival planemaker Boeing, was first reported by Reuters in December and could finally be announced as early as next week, the sources said.

Air India has agreed to purchase 250 Airbus planes, split between 210 single-aisle A320neos and 40 widebody A350s, and 220 Boeing aircraft including 190 of its 737 MAX narrowbody jets, 20 787 widebodies and 10 777Xs.

While Airbus and Air India signed the agreement on Friday, Boeing agreed its deal with the airline on Jan. 27, a date that marks a year since Tata regained ownership of the former state-run carrier, sources told Reuters.

Airbus declined to comment. Air India did not immediately respond to an email seeking comment outside of regular business hours.

In a note to employees on Jan. 27, the airline said it was “finalising a historic order for new aircraft”.

The order reflects Air India’s strategy to modernise its ageing fleet and re-capture a solid share of trips between India’s large overseas diaspora and cities such as Delhi and Mumbai, dominated mainly by Gulf rivals such as Emirates with its young planes.

The deal for 400 narrowbodies will also allow Air India to win a bigger share of regional international traffic and the domestic market, setting up a battle on both fronts with IndiGo.

While the Airbus figure is slightly lower than the 275 originally envisaged, the sources did not rule out a provision by Air India for top-up acquisitions or leases at a later point.

It was not immediately clear to what extent the numbers in the agreement included options that could change the total tally when the final orders are in.

The record order aims to put Air India in the league of large global airlines and make it an influential customer for planemakers and suppliers at a time when its home market is seeing a strong post-COVID-19 travel surge.

Air India, with its maharajah mascot, was once known for its lavishly decorated planes and stellar service but its reputation declined in the mid-2000s as financial troubles mounted.

Under its new owners, the airline is looking to restore its reputation at home and abroad as a storied carrier with impeccable service and world-class planes.