INDIA — South China Morning Post (SCMP) reported on Sunday (11 Dec) that Air India is close to sealing a historic order for up to 500 jets costing US$100 billion from both Airbus and Boeing.

The orders include as many as 400 narrow-body jets and 100 or more wide-bodies, including dozens of Airbus A350s and Boeing 787s and 777s, sources said.

The deal ranks among the biggest by a single airline in volume terms, overshadowing a combined order for 460 Airbus and Boeing jets from American Airlines over a decade ago.

Air India also wants to win a bigger share of regional international traffic and the domestic market, setting up a battle on both fronts with another Indian airline IndiGo.

Delivered over at least a decade, the 500 jets would both replace and expand fleets in Air India. The airline was once known for its stellar service, but its reputation declined in the mid-2000s as financial troubles mounted.

But experts warn many hurdles stand in the way of Air India’s ambition to recover a strong global position, including frail domestic infrastructure, pilot shortages and the threat of tough competition with established Gulf and other carriers.

Purchase Of Jets Comes After Merger With SIA-Backed Vistara Airline

TOC reported earlier that the Tata group in India was in talks with Singapore Airlines (SIA) to merge their loss-making Vistara airline with the heavily debt-ridden Air India acquired by Tata. Thereafter, talks of purchasing hundreds of jets by Air India surfaced.

Tata was asked to buy the perennial debt-ridden Air India last year after the Modi government decided that the Indian government could not support it any longer. It had been making losses for more than a decade, since 2007.

The national carrier remained operational due to the continuous bailouts by the Indian government. In fact, the Modi government revealed that Air India was incurring losses of nearly US$2.6 million every day.

Tata was reported to have paid nearly US$2.4 billion and taken on additional mountains of Air India’s debt in order to acquire the failed airline.

After Tata took over Air India, it had been talking to SIA, wanting to merge their Tata-SIA joint venture company, the Vistara Airline, with Air India. Tata owned 51 per cent of Vistara, while SIA was 49 per cent.

Vistara was set up by SIA and Tata in 2013, as SIA wanted to follow Singapore’s former Prime Minister Goh Chok Tong’s direction to catch some “Indian fever”.

Since the establishment of Vistara airline, SIA has invested some $900 million into the venture. Vistara has never made a profit and ended the financial year 2021 in March with a Rs1.612 billion (US$19.7 million) loss.

In 2016, it suffered a loss of Rs400 million, with losses increasing by the year since then.

In fact, SIA and Tata actually needed to pour in an additional Rs1.2 billion to prop up Vistara last year.

SIA May Need To Inject S$880 Million Into Air India To Buy Jets

Two weeks ago (29 Nov), it was reported that SIA decided to go ahead with the merger and invest another S$360 million in the merged Vistara-Air India entity since without the investment, SIA’s share in the merged entity would drop below 20 per cent and it might not even get a board seat.

With the injection of S$360 million, SIA is able to get a 25.1 per cent stake and at least a board seat in the enlarged entity. Tata will own 74.9 per cent.

It was also reported that SIA might be forced to inject another S$880 million later if the Indian carrier decides to tap both its shareholders for additional funds for the purchase of jets.

With the latest additional $360 million in Air India, SIA would have invested almost $1.3 billion in its India airline venture. This could rise to as much as $2.1 billion, should it have to provide funds for Air India to buy those jets.

Defending SIA’s further participation in the airline venture in India, SIA CEO Goh Choon Phong, who took millions of dollars of salary when SIA was making big losses during the Covid period, said that SIA’s partner, Tata group, is one of the most established and respected names in India.

“Our collaboration to set up Vistara in 2013 resulted in a market-leading full-service carrier, which has won many global accolades in a short time,” he said.

“With this merger, we have an opportunity to deepen our relationship with Tata and participate directly in an exciting new growth phase in India’s aviation market. We will work together to support Air India’s transformation programme, unlock its significant potential, and restore it to its position as a leading airline on the global stage.”

In any case, if SIA does not have enough funds to inject into its India airline venture at any time, it could always launch a new rights issue to raise more funds from its shareholders.

Presently, Singapore-owned Temasek Holdings is the major shareholder of SIA.

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