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February 20, 2024
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Air India is to use a combination of cash flows, likely induction of funds from the shareholders, and exploring other options such as sale and lease back to finance its order for 470 aircraft which has a book value of $70 billion. Campbell Wilson, Managing Director and Chief Executive Officer, told media during a virtual media interaction on Monday.

“So suffice it to say that there are a number of funding sources that we can and will take, and it is likely to be a combination of resources,” the CEO said. He declined to get into specifics of the financial transactions saying that the airline is a private company.

On February 14, Air India announced Letters of Intent for the 470 aircraft, which is almost equally split between Airbus and Boeing. The Indian carrier will acquire 40 Airbus A350-900/1000s, 20 Boeing 787-9s, and 10 Boeing 777-9s widebody aircraft, as well as 210 Airbus A320/321neos, and 190 Boeing MAX single-aisle aircraft. The A350 aircraft will be powered by Rolls-Royce engines and the B777/787s by engines from GE Aerospace. All single-aisle aircraft will be powered by engines from CFM International.

The Air India CEO said that six Airbus A350-900s will join the fleet before the end of the year and will have brand-new cabin products (which the airline has chosen). In a message to staff on the day the order was announced, Campbell announced that 25 brand new Boeing MAX 8s and six A350-900s will arrive in the second half of this year. The A350-900s are aircraft originally ordered by Aeroflot, but which can’t be delivered following sanctions on Russia.

No details about who gets what

In response to a question from AirInsight, Campbell Wilson declined to get into specifics of which airline in the group will get how many or which variety of aircraft from the 470 aircraft order. The Air India group includes Vistara, a joint venture between Tata Sons and Singapore Airlines, and AIX Connect, which has been created by integrating Air India Express and AirAsia India, both of which were low-cost airlines owned by Tata Sons.

Wilson said that the airline sees particularly strong opportunities to deploy the widebody aircraft on routes to North America, Europe, East Asia, and Southwest Pacific. Asked about AI’s interest in the cargo business, the CEO said these aircraft, particularly the wide-body aircraft, come with a lot of valuable cargo space. “Cargo is going to be a significant part of our revenue mix. And it is also a significant focus for us in building up the capability in systems necessary to take full advantage of the cargo opportunity,” he said.

No timeline for options

On the issue of the airline taking a call on the option to order more aircraft from both Boeing and Airbus, Campbell said: “We don’t have a timeline for exercising, or whether we do or don’t exercise the rights or purchase options. We will evaluate the market, our capabilities, and our needs before we take the call to do so as (this is) normal with these sorts of things. There is no timeline by which we need to notify the manufacturer or whether we wish to exercise the right. And obviously, that is something we will take into (account).”

Air India’s Chief Commercial Officer stated a day after announcing the LoI that Air India has options or purchase rights on another 370 aircraft. The published LoIs include options for 50 MAX and 20 787s but don’t identify options with Airbus. The European airframer has been unwilling to discuss any options.

He added that in the one year since Tata Sons have been running Air India, more than 20 aircraft have been returned to service while capacity has gone up by about 78 percent. Tata Sons were declared the winner for Air India in October 2021 by the Indian government but finally took complete charge only in January 2022. 

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Former Senior Deputy Editor at Business Line (aka The Hindu Business Line)

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