AI deal marks a key moment
The agreement holds major downstream implications and shows India’s economic might on the world stage
In the biggest deal ever struck by a single airline, Air India (AI), now part of the Tata group, announced its plans to buy 470 aircraft from Boeing and Airbus in an agreement potentially worth tens of billions of dollars. The deal, announced by Prime Minister (PM) Narendra Modi and the presidents of France and the United States, Emmanuel Macron and Joe Biden, respectively, represents a key moment in India’s aviation sector, which despite being among the fastest growing in the world, was pummelled by the pandemic, rising jet fuel costs and slim profit margins. The AI agreement has major downstream implications, especially in the manufacturing and technology sectors. And it is a crucial moment that showed an assertive India flexing its economic muscle and sitting on the global high table alongside countries that traditionally have never shared a relationship of equals with nations in the Global South.
AI will procure 250 Airbus aircraft, including 40 A350 wide-body aircraft for long-distance routes, and 210 A320 narrow-body aircraft for domestic and regional flights. A separate deal announced by Mr Biden said AI will buy 220 Boeing aircraft, a mix of 737 MAXs, 787s, and 777Xs, with an option for 70 more planes. The expansion will also need some augmentation in India of airline infrastructure, such as flight simulators. More importantly, it signals AI’s aim to take back a significant chunk of the international traffic from operators in the Gulf; any attempt to build a competing international hub in India will stimulate the aviation industry and generate thousands of jobs. In an under-served sector, where some experts estimate that around 2,000 aircraft will be needed over the next 15 years to serve a growing population from smaller towns and non-metro airports, this represents tremendous potential for growth, especially in manufacturing jobs.
The AI deal, despite being one struck by a private firm, is also a significant geopolitical moment. Statements by British PM Rishi Sunak and Mr Biden mentioned the number of jobs likely to be generated in their countries, underlining the economic might of the world’s fastest growing major economy, one that New Delhi is no longer shy to use for strategic and geopolitical purposes, and one that is likely to dictate India’s place in the world (irrespective of issue-specific or ideological differences). The AI agreement also showed the forward-looking nature of New Delhi’s engagement with the West, as opposed to its traditional defence and machinery ties with Russia.