India’s order for 470 aircraft from Boeing and Airbus, with an option of ordering 370 more planes, not only heralds a new dawn for India’s civil aviation sector but also provides a tremendous boost to the world’s leading economies of the US, the UK and France.
While India’s Prime Minister Narendra Modi described it as a reflection of his ‘’Make in India – Make for the World vision”, world leaders, including US President Joe Biden, UK Prime Minister Rishi Sunak and French President Emmanuel Macron, called it a game-changer.
Bidden said the AI deal would “further deepening bilateral ties” by creating 1 million jobs across 44 US states. According to Sunak, it demonstrated “the sky’s the limit for the UK’s thriving aerospace sector”. Macron hailed it as “a milestone in India-France strategic partnership”
Worth billion pounds
According to UK’s Department of International Trade, under the momentous deal for Airbus and Rolls-Royce to provide new aircraft for Air India is worth billions of pounds to the UK as a significant portion of the manufacturing process for the new aircraft will take place in the UK.
The wings will be designed in Filton, and assembled in Broughton, which is expected to bring an additional 450 manufacturing jobs and more than £100m of investment to Wales. The large A350 aircraft are exclusively powered by RollsRoyce XWB engines, which are assembled and tested in Derby.
The UK’s aerospace sector added £10.6bn in value to the UK economy in 2021 and employed 111,000 high-skilled people. PM Sunak said the deal “will create better-paid jobs and new opportunities in manufacturing hubs from Derby to Wales, so we can grow the economy and support our agenda to level up.”
Business and Trade Secretary Kemi Badenoch described the deal as a significant win for UK’s world-leading aerospace sector. “It’s a shot in the arm for UK exports as we aim to sell £1 trillion of goods and services a year to the world by the end of the decade”.
India is a major economic power, projected to be the world’s third-largest economy with a quarter of a billion middle class consumers by 2050. UK is currently negotiating a free trade agreement with India that would boost £34 billion bilateral trading relationship.
Reclaiming pole slot
The sheer size of the Air India deal – beating the American Airlines’ 460-plane deal in 2011 – indicates Air India’s desire to reclaim its pole position in India’s crowded aviation market and acquire a strategic edge to service the world, say experts.
Indian travellers currently rely heavily on Emirates, Qatar Airways, Etihad and other Middle Eastern airlines for overseas connections to Europe, US and other parts of the world. That could change as Air India’s new fleet are put into service.
The acquisition of wide-bodied aircraft, like the A350s, will allow Air India to penetrate markets like the US and Australia directly through non-stop flights between these destinations and India. These are lucrative routes to service the massive Indian diaspora that resides overseas. For many years after it was founded by the Tatas, and before it was nationalised by the Government in the 1950s, Air India was considered the global standard-bearer for service.
Sold back to Tatas
But following years of mismanagement under subsequent governments, a mounting debt burden and failed attempts to revive its former glory, Air India was sold back to the Tatas in a $2.4bn (£1.98bn) deal in 2021 marking a homecoming for the airline after 68 years.
Its potential under the Government was unexplored. The latest deal will silence the critics of Air India’s disinvestment under the Modi Government. It will take India’s uniqueness to the globe once again, after many years.
However to make a dent globally, Air India will need to start focusing beyond just India-originating passengers and generate more connecting traffic. For this, it will have to optimise its route network and also improve infrastructure. Under PM Modi the country is building at least 80 new airports over the next five years as part of its focus on State-led capital expenditure on infrastructure.
The Indian aviation market has seen a sharp recovery post pandemic, with domestic traffic growing by 48.9 per cent year-on-year, according to Government figures. More than 122 million Indians took internal flights in December 2022, the latest data shows.
India also is expected to be a major driver of growth in global aviation with domestic carriers expected to place orders for 1,500-1,700 aircraft over the next two years according to Centre for Asia Pacific Aviation India (CAPA India) estimates.
“This landmark deal between Air India, Airbus and Rolls-Royce demonstrates that the sky’s the limit for the UK’s thriving aerospace sector. It will create better-paid jobs and new opportunities in manufacturing hubs from Derby to Wales, so we can grow the economy and support our agenda to level up – helping to deliver on my five priorities for the country. The UK is already a top investment destination, and by building trade ties with growing economic powers like India we will ensure UK businesses remain at the forefront of global growth and innovation.
”RISHI SUNAK (UK Prime Minister)
“This is a significant win for the UK’s world-leading aerospace sector and one which will help to secure thousands of highly skilled jobs across the country and drive economic growth. It’s a shot in the arm for UK exports as we aim to sell £1 trillion of goods and services a year to the world by the end of the decade. We’re currently negotiating a trade deal with India which could boost trade by up to £28 billion a year by 2035. Export wins like this are another big step to our nations forming a closer trading relationship.”
KEMI BADENOCH (UK Business and Trade Secretary)
