Secret London Conversations Led to Air India’s Massive Jet Order
Secret London Conversations Led to Air India's Massive Jet Order
Secret London conversations led to Air India’s massive jet order
How secret talks in London led to the huge order of planes by Air India. BENGALURU/PARIS: The Tata Group, which owns Air India, is now in the same group as other companies that want to become global carriers.
It tentatively agreed on Tuesday to buy almost 500 jets from Airbus and Boeing so it could compete with other airlines in the U.S. and around the world.
One airline made the biggest deal it has ever made
People who were involved in the talks say that it took months of secret talks that took place near Britain’s Buckingham palace and ended with a party over coastal Indian curries.
Tuesday, the agreement was made public, and leaders from the top G20 countries praised it in a diplomatic move. Tata Group took back control of Air India last year after the government had owned it for decades. They only put out six paragraphs. Its low-key announcement shows how a new breed of private airline owners, like IndiGo’s founders, are changing a financially risky Indian airline industry. Insiders said that the deal had been in the works for more than a year. They told details of the process on the condition that they not be named.
Last summer, serious talks started, and they went on until a few days before Christmas when a plan was made. As the huge size of the deal started to become clear, Reuters reported in December that the two sides were getting close to a record 500-plane deal. The place where most deals were made was St. James’ Court, a fancy Victorian hotel in London’s West End near Buckingham Palace.
A traditional way for the aircraft industry to do business:
Negotiators from the airline, plane makers, and engine giants stayed at the Tata-owned hotel and nearby suites for days at a time during a “bake-off,” which is a traditional way for the aircraft industry to do business.
They wanted a bigger piece of a market that was growing quickly and where many airline growth plans had come and gone.
Now, Boeing had a chance to get back on top of the single-aisle jet market in India and cut into Airbus’s big lead. Airbus wanted a larger share of the market for wide-body planes, which was led by its rival. Both had a lot of orders, so neither could get them all.
India was trying to get back the business of tourists and its own people who had moved away from the country. Politics set the stage, but the talks were about business, and they were tough.
Airbus Chief Commercial Officer Christian Scherer told Reuters on Tuesday:
“If things are done right, it has all the ingredients to be really solid,” Airbus Chief Commercial Officer Christian Scherer told Reuters on Tuesday. “The political will of the country to regain sovereignty of international connectivity coming together with the ambition of the mighty Tata.””Systematic and tough”
On a cold day in December, the battle for attention played out all over London. On one side of the city, Airbus was in talks with Air India, while on the other side, it was in court with Qatar Airways over the fate of similar A350 jets.
Air India got ahead of Qatar in the line for smaller jets:
Later, Airbus and Qatar Airways worked out their differences over contracts and safety, but Air India got ahead of Qatar in the line for smaller jets, even though sources say the Gulf airline also won a lot of money in damages.
Nipun Aggarwal, who is Air India’s chief commercial and transformation officer, and Yogesh Agarwal, who is in charge of buying planes, led negotiations that often went late into the night. Sellers kept coming up with new “best offers” while they ate room service.
“Air India negotiated hard, and even though the team has never worked in aviation before, they are very smart. They are as good at making deals as some of the best in the business “one person said.
Another person who saw the billions come together said that the Air India negotiators were “methodical, tough, and very smart”.
The restaurant has a Michelin star:
The London talks ended with dinner at the hotel’s Indian restaurant Quilon, which is known for its seafood and coastal food from places like Goa and Kerala.
Even though the battle between planemakers is the main focus of any jet deal, engines are often important and can speed up or slow down the deal as a whole. As engine talks went on, plans to make announcements on the anniversary of when Tata took over Air India fell through.
Insiders say that General Electric is the biggest overall winner because it gets most of the lucrative engine deals. Its CFM joint venture with Safran beats Raytheon’s Pratt & Whitney on Airbus A320neos. The sale of 40 Airbus A350s also helped Rolls-Royce.
GE’s win shows how long it can take to make a strategic deal in aviation. It took about 10 years to get to this point.
It won a bid for 27 engines for Air India A320 planes in 2014
Soon after, it got Vistara to use its engines on seven planes, which turned into an order for 70 planes later on. IndiGo switched from Pratt & Whitney to GE after technical problems that Pratt says have been fixed. This was the turning point.
Analysts warn that Air India’s plans still face a lot of problems. It needs to offer better service and be more efficient if it wants to make a real dent in Doha and Dubai, which are already very strong hubs.
But dealmakers will keep coming to India because of its potential. CAPA India says that IndiGo is considering putting in an order for 500 jets on its own.
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