Tatas may finalise deal to buy wide-body aircraft for Air India next year

The Tata Group acquired Air India back from the government with a winning bid of Rs 18,000 crore

The Tata Group will likely finalise a deal to buy additional wide-body aircraft for Air India’s long-haul international operations next year, people familiar with the plans told Moneycontrol.

“Discussions are ongoing with both Airbus and Boeing but the priority at the moment is to restart international operations, maximise utilisation of the current fleet and appoint a new CEO and managing director for Air India before taking a call on new aircraft,” one person said.

The new owner of Air India is also looking to test the efficiency of the carrier’s current wide-body fleet, which comprises mainly Boeing 747, Boeing 777 and Boeing 787 planes, before ordering new jets, the person said.

“The biggest priority for Air India at the moment is finalising a new management, especially a new CEO and MD. Once a new CEO and MD is appointed, his inputs will also be a key factor in finalising a deal,” another person said.

Tata Sons chairman N Chandrasekaran is currently the chairman of Air India. Ilker Ayci, former Turkish Airlines chairman who had been appointed as chief executive officer and managing director in February, later declined the positions.

The airline is in discussions with both Airbus and Boeing about A350-900s and 787-9 Dreamliners to be used for long-haul flights. Wide-body aircraft are typically big enough to accommodate two passenger aisles with seven or more seats abreast.

Vistara merger talk

According to one person, a decision on further aircraft acquisition will be taken only after discussions about a possible merger between Air India and Vistara.

Vistara is a joint venture of Tata Sons (51 percent stake) and Singapore Airlines (49 percent stake). It has a fleet of 51 aircraft – 40 Airbus A320, five Boeing 737-800NG, four Airbus A321neo and two Boeing B787-9 Dreamliner aircraft, according to its website.

Rolls-Royce Holdings, the engine maker for Airbus SE’s A350 jets, said the Tatas are looking at buying as many as 30 wide-body aircraft, according to a Bloomberg report last week. Chris Davie, a senior vice president in Asia Pacific for Rolls-Royce Holdings, told Bloomberg the proposed order will allow Air India to aggressively pursue international growth.

According to the report, an order for 30 A350-100 jets could be valued at $9.5 billion at 2018 sticker prices, although large discounts are common in big plane purchases. Based on prices provided by aircraft appraiser Avitas, the market value of 30 such jets was $4.5 billion in 2021.

Air India is one of four airlines operated by the Tata Group. The group holds majority stakes in AirAsia India, a joint venture with AirAsia Investment Limited (Malaysia), and Vistara, apart from budget airline Air India Express.

After acquiring Air India and Air India Express from the Indian government in January, the Tata Group rolled out a 100-day plan to improve the airline’s operational and service standards.

The conglomerate wants to expand the airline’s network, modernise its fleet, spruce up customer service and make it a technologically advanced carrier, Chandrasekaran said in his first address to the Air India staff in February.

Air India and Vistara agreed last month to transfer both domestic and international passengers to each other in case of a disruption in flight operations involving either airline.