Monday, August 01, 2022

Global and Indian companies’ line up for a pie of the Indian skies, notwithstanding the handicaps

In mid-July, an Airbus forecast caused waves in the rarefied world of aviation. According to this projection, India is the world’s fastest-growing air travel market. There was a good reason for this prognostication. Air India – in its new Tata-led avatar – is moving towards a decision on a $50 billion jet order, arguably one of the biggest in the history of the aviation industry, which could lift this sector out of its pandemic-induced morass. There is little doubt that the size of this Air India deal, once it goes through, will reinvigorate a sagging world aviation market.

What had set off the race towards a pulsating finish was its proposed final orders – the purchase of 70 wide-body jets including Airbus A350s and Boeing 787s and 777s, and up to 300 narrowbodies, industry insiders revealed.

The new Air India owner, Tata Group, wanted this mega allocation to be split between Airbus and Boeing, the world’s two biggest airline manufacturers.

That the deal could not come in time to galvanise the recently concluded, sedate Farnborough Air show on July 22, is probably more of happenstance.

Both global majors are making a `final push’ with the order, their executives making the customary dash to India to close the deal.

With the stakes being sky high, no easy decision can be expected and the outcome at this stage – even despite the declared intent – remains unknown.

Boeing CEO Dave Calhoun flew to India ahead of the Farnborough Airshow, which began on July 18, keen to showcase a revival of its 737 MAX. While officially, the companies have withheld comments, there were indications that executives from Boeing, too, had visited India recently in pursuit of a combined order for 200-300 narrowbodies and 30-70 wide-body jets. The chase is clearly ‘in the works’ and no one group is letting go of it easily, as can be expected. 

Naturally, in a Covid-stricken world, with the global market a little more than gloomy, both the American firm and the European consortium are keen on concluding deals in the depressed wide-body market section.

Industry experts say the deal would be worth some $50 billion at list prices, but closer to $20-25 billion after steep industry discounts, given the state of economic downturn.

Of particular interest is Boeing’s revival of its 737 MAX passenger airliner, which was grounded worldwide between March 2019 and December 2020 after 346 people died in two crashes, Lion Air Flight 610 on October 29, 2018, and Ethiopian Airlines Flight 302 on March 10, 2019.

The Boeing 737 MAX’s grounding notice was withdrawn by US’s Federal Aviation Administration (FAA), which recertified the aircraft in 2020. The change allowed Boeing to resume deliveries of its only current narrowbody product. Subsequently, more and more regulators have been giving the MAX the green light.

01/08/22 Financial Express

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