IBA ANALYSIS: WHAT IS THE MARKET VALUE OF AIR INDIA’S AIRBUS AND BOEING AIRCRAFT ORDER?

Air India, owned by TATA Group, announced on 14th February 2023, its commitment to order 250 Airbus and 220 Boeing aircraft; a deal, based on list prices, valued at around $68 billion USD.

IBA’s market value of the order, based on early 2023 opinions, is around US$41-42 billion (including both firm orders and options). It is likely that the carrier secured a discount to market values, given the size of the orders.

An Airbus press release 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 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 provide improved fuel efficiency and reduced emissions, whilst the larger A350-900 and A350-1000 use  Rolls-Royce Trent XWB engines and give additional range and capacity.

The carrier has simultaneously announced a commitment to order 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.

The combined order, currently only a commitment, will if fully fulfilled, provide a major fleet modernisation and yield opportunities to meet growing demand in the region.

Neil Fraser, Manager – Airline Analysis at IBA, says: “There have been rumours of a major order from some time but its confirmation affirms Air India’s growth focus as they complete their merger with Vistara. Air India dominates India’s international operations, with capacity twice that of competitor Indigo in 2022.

“With this order containing such a significant number of narrowbody aircraft, IBA suspects that the new Air India may now be going after Indigo’s domestic market share. The domestic market has not been a major focus for Air India, whose flights have been a fifth of those operated by Indigo.”  

What does the combined Air India & Vistara fleet look like today?

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, IBA anticipates 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 IBA anticipates commencing as more of the newer generation aircraft are brought online.

Source : IBA