We look at the likely value of Air India’s order in comparison to the list price, and examine the combined TATA group fleet today.
The airline, owned by TATA Group, announced the order on 14th February 2023.
IBA’s Market Value of the combined order is around US$ 41-42 billion (including both firm orders and options) based on our early 2023 value opinions.
The carrier likely secured a discount to market values, considering the size of the orders. It is important to stress that this only represents a commitment to order at this stage.
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A press release from Airbus reveals the Indian flag carrier has ordered 140 A320neo, 70 A321neo, 34 A350-1000 and 6 A350-900 aircraft, with the first delivery of the A350-900 is anticipated in late 2023. The aircraft will be used to expand existing routes and develop new services, as well as to support the carrier's low-cost business model. The A320neo and A321neo are powered by CFM LEAP engines and will provide improved fuel efficiency and reduced emissions, whilst the larger A350-900 and A350-1000 are powered by Rolls-Royce Trent XWB engines and will provide additional range and capacity. The order represents a substantial commitment to fleet modernisation and a desire to meet demand in the region.
The Carrier has simultaneously announced a commitment to order for 220 Boeing aircraft, with a further 70 options. This includes 190 737 MAX 8 and 10, 20 787-9 and 10 777X. This makes Air India the 11th customer for the 777X. The further 70 options are for 50 MAX and 20 787-9 aircraft.
“An order of this scale had been rumoured for some time, but its confirmation affirms the growth focus of the new Air India entity as the merger with Vistara completes. Air India dominates India’s international operations, with capacity twice that of competitor Indigo in 2022. The flag carrier is less prevalent in domestic operations, only operating a fifth of Indigo’s domestic flights in the same year. With this order containing such a significant number of narrowbody aircraft, we suspect that the new Air India may now be going after Indigo’s domestic market share”. - Neil Fraser. Manager – Airline Analysis
Fleet data from IBA Insight reveals that the combined in-service fleets of Air India, Vistara and AirAsia India total 228 aircraft, 205 of which are active as of 15th February 2023. The combined fleet has an average age of 9.1 years, 4.5 years below the market average.
If all the above orders were completed, we anticipate that the combined fleet would total 682 aircraft. This accounts for the likely retirement of the Boeing 737-800 from the existing Air India Express and Vistara fleets, which we anticipate commencing as more of the newer generation aircraft are brought online.
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