Air India adds 100 more aircraft to its Airbus order

In September 2024, Airbus added orders for 85 aircraft under ‘Undisclosed Customer’ in its monthly Orders and Deliveries update. There was large-scale speculation that Air India had placed these orders, converting some of its options to firm orders. It turns out now that the speculations were right, and Air India has indeed converted its options for 90 A320neo family aircraft and 10 A350s to firm orders.

Air India placed a mega 470 aircraft order with Airbus and Boeing in February 2023, which was formally signed at the Paris Air Show later that year. This came with options for nearly 400 more aircraft. Air India has already rejigged its order with Airbus multiple times. It initially placed an order for 140 A320neo and 70 A321neo, along with six A350-900 and 34 A350-1000. The airline subsequently changed this to 20 each of A350-900 and A350-1000, six of which are with the airline currently. These six were destined for Aeroflot but were never delivered post sanctions on Russia following the invasion of Ukraine. The airline also swapped the order of A320s and A321s with the latest count being 70 A320neo and 140 A321neo. The order now stands at 570 aircraft, which had it announced in one go, would have been bigger than the 500 aircraft order of IndiGo — which is a record.

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A firm order is when an airline places a deposit for an aircraft and agrees to penalties if it wants to back out. Options are a way for airlines to purchase additional aircraft in the future. Typically, firm orders always have an options clause which helps the airline save time in negotiation since the rate and timelines are already agreed upon. However, it comes with a cut-off date and when not exercised, the options lapse. This is done to ensure that the aircraft manufacturer knows which production slots are available for sale.

However, more often than not, things change for the good and bad from an airline’s perspective. Issues with supply chains and aggressive sales commitment have meant that aircraft deliveries are delayed. On the other hand, airlines going down at regular intervals at some or the other place across the world means that some slots suddenly open up and depending on how the business is, can be sold at a premium or at a discount.

Why would Air India do this?

The delivery schedule of the earlier firm orders, as well as those converted from options, remains uncertain. However, considering that the production slots are full right up to the early part of the next decade and IndiGo’s mega 500 aircraft order is for deliveries starting in 2031, it is a fair assumption that these slots are for the next decade. Air India is now here for the long haul, and with the private management, has the leeway to take a long-term view instead of an occasional fleet renewal as was the case under the government ownership.

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Additionally, Air India’s order with Boeing is delayed. The MAX 8 meant for Chinese carriers made a quick beeline for India but deliveries were halted when the machinist union went on a strike delaying the schedule completely. The 77X has been perennially delayed and was to have entered commercial service many years ago. With a strong long-haul plan for Air India, any widebody would be a good widebody, and thus, additional A350s will be helpful.

The legacy 777s of Air India, as well as the 787s, are already over a decade or decade and a half old. At some point of time, even after the refurbishment, these aircraft will move out of the fleet and not all planes which Air India is scheduled to induct will be for incremental growth. The fleet plan right now would be fluid because of the supply chain constraints, though the airline would have hoped for more inductions as well as refurbishment by now.

How do OEMs handle this?

Under each contract, the aircraft manufacturer has a cut-off date for the airline to either confirm options or shift between the sub-types. In this case, while the A320neo family has a lot of commonality, there also remain a lot of different parts which go into the aircraft. The reverse calculation is based on the assumption that there is enough for the supplier’s supplier to be ready and the supply chain is not impacted by the choice or shift that an airline can make.

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Tail Note

Air India is likely to confirm more options to firm orders over a period of time and these 100 are just the beginning. The airline has stated in the past about its plans spanning having its own leasing unit at GIFT city, own MRO and a training academy, all of which is a continuous work in progress. The airline will also have a Flight Training Academy and training academy for engineers. All of this shows the commitment it has towards this business holistically. The question then goes back to the turnaround, when and how will it happen and when can the airline be profitable? The answer lies in the future.