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Source: The post is based on the article “Fasten Your Seatbelt, India – Air India’s huge order has multiple implications, for the airline, for civil aviation, for policy and for manufacturing. Here’s a deep dive” published in The Times of India on 17th February 2023.
Syllabus: GS 3 – Infrastructure: Energy, Ports, Roads, Airports, Railways etc.
Relevance: About the Indian aviation market.
News: Recently, the Tata Group, which acquired Air India, has placed an order for 470 new aircraft. This is the largest ever deal in aviation in India.
About the new deal for Air India
|Read here: Modi, Macron, Biden announce: 470 Airbus, Boeing planes for Air India|
Where does the deal offer Air India?
Domestic significance: Locally, Air India faces a formidable competitor from IndiGo which flies a fleet of 308 aircraft and has more than 55% of the market locked up.
There’s also a fast-growing competitor in Akasa, which has captured more than 2% of the market in five months since its launch.
Air India after combining four entities (the others are Air India Express, AIX Connect and Vistara) has a fleet of 220 aircraft with 26% of the market. Hence, the deal will enable Air India to engage in a complete fleet renewal coupled with significant expansion.
International significance: The deal will a) Match features of international airlines like Emirates, Qatar Airways, Singapore Airlines, British Airways and Lufthansa and b) Enable Air India to enter, capture traffic flows and build foundations in markets such as Vietnam, Thailand, Indonesia, Malaysia and SAARC nations.
What does the deal offer for the Indian aviation market?
Over time, the Tata Group aims to bring commercial aircraft manufacturing into the country. If it was for Airbus, then the set-up of an assembly line will be their second assembly line in Asia after China. This would pave the way for boosting manufacturing and technology transfer agreements with Indian firms.
Note: Boeing already has an existing joint venture with Boeing on the defence side.
The deal will also help India to a) Forecast Indian aviation sector growth at a global level, b) Improve India’s economic growth prospects and geopolitical dynamics, and c) Help in leveraging geopolitical dynamics to provide a competitive edge for India’s international relations.
What should be done to improve the Indian aviation market?
The Indian aviation industry has two major challenges. a) India has a complex fleet infrastructure which challenges the seamless induction and deployment of mammoth aircraft orders, b) The deal does not provide adequate returns on capital unless there is a smooth deployment of aircraft.
To overcome that, India needs policy changes to develop airports as hubs, ensure proper air-traffic management, presence of adequate maintenance facilities and trained manpower.