Almost a boomerang effect.
After the trough of 2020, a dark year for aeronautics in the midst of the Covid-19 crisis, marked by 452 orders for new aircraft accumulated by Airbus and Boeing (a low water level close to that of 2009, following the subprime crisis), a wave of giant contracts has been surging on the market for several months.
As shown by the acquisition of nearly 470 aircraft by Air India, for a sum varying between 70 and 90 billion dollars (at the list price).
In volume, as in value, it is the largest acquisition in the history of commercial aviation.
The last XXL order placed by a company with the two manufacturers dates back to 2011: American Airlines had purchased 460 medium-haul aircraft, including 260 Airbus A320s and 200 Boeing 737s, for 38 billion.
Taken over less than a year ago by the Tata conglomerate, the Indian company, in bad shape, and now reorganized, is going on the offensive.
In detail, the letter of intent signed on Tuesday with Airbus relates to the purchase of 250 Airbus.
It was signed during a ceremony organized by videoconference, in the presence of Indian Prime Minister Narendra Modi and Emmanuel Macron, during the AeroIndia show (Bangalore).
At the same time, Air India has signed a firm contract for 220 Boeings (190 from the 737 Max family, 20 Dreamliner 787s and 10 777X, the modernized version of the widebody).
The A350 spearheads internationally
The signing of the firm order with Airbus is a matter
of “weeks
” because “
the negotiations have been very detailed and there are not many issues left to settle
”, specifies Christian Scherer, commercial director of the European aeronautics giant.
He specifies that all the planes ordered will be delivered from the group's European factories, in France and Germany.
In addition to this firm order, there is a leasing contract for 25 Airbuses with a lessor, which Air India will sign to meet its immediate needs.
Very specifically, Air India is buying 210 A320neo and A321neo family aircraft as well as 40 long-haul A350s, which “
our company will use to serve very long-haul routes across the planet
”, specifies N Chandrasekaran, president of Tata.
The agreement also includes a section for engine manufacturers.
Air India has chosen the Leap reactor, supplied by CFM International, a joint venture between the French Safran and the American GE, to equip its A320neo and A321neo, to the detriment of the Pratt & Whitney engine.
“
Our objective is to have a modern, efficient and high-performance fleet on all types of air routes
,” he adds.
Air India indeed displays great ambitions.
It wants to take 30% of the Indian domestic market, currently dominated by Indigo (more than 50%), whose fleet is 100% made up of Airbus.
And it wants to offer travelers an alternative to Gulf companies, such as Emirates, on long-haul flights, now operated by them to and from the subcontinent.
“
With this order, Airbus is selling its first long-haul aircraft to India.
That Air India chooses the A350 as the spearhead of its international ambitions marks a major success and is a source of pride
,” said Christian Scherer.
The order comes with a "
significant number of options
" for additional A320s as Air India grows to become "
a world-class airline
".
Amplify the France-India partnership
"
This achievement shows that Airbus and all its French partners are fully dedicated to developing new areas of engagement with India
," said Emmanuel Macron, during the videoconference.
Joe Biden was not left out, saying in a statement that the order signed with Boeing "
reflects the strength of the economic partnership between the United States and India.
".
India, which has been pursuing a "Make in India" policy for several years, intends to amplify its historic partnership with France.
At the show, Dassault Aviation, which has supplied combat aircraft to the Indian forces since 1953, is exhibiting a front section of the Falcon 2000 business jet, produced by the Franco-Indian factory located in Nagpur, in the wake of agreements following the the signing of the Rafale contract (36 units purchased in 2016).
“
Tata and Airbus are working on larger partnerships, including the production of commercial aircraft in India in the future
,” said N Chandrasekaran.
Will Airbus open a new A320neo Final Assembly Line (FAL) in India to meet the immense needs of the subcontinent?
“
This order shows that India is among the three largest regions in the world, along with the United States and China, in aviation.
Its traffic will double in the next ten years
», emphasizes Pascal Fabre, «Managing Director» at AlixPartners.
In its latest market study, Airbus estimates that India will need 2,210 new aircraft between 2022 and 2041, including 1,770 medium-haul, to support the growth of its air traffic.
The latter should grow by nearly 6% per year on average, nearly twice as fast as in the rest of the world, over the next twenty years.
India appears more and more as an alternative to China - in the context of tensions with the United States and the question of Taiwan - to welcome investments and select subcontractors.
But for now, “
we don't have any ongoing discussions to open an assembly plant.
India is already a major partner, via our engineering and digital services center with its 3,000 employees who include excellent engineers and IT specialists.
We also have many subcontractors in India who participate in Airbus programs.
And we are launching the assembly of the C295 military transport aircraft in India, in partnership with Tata
», develops Christian Scherer.
The latter sums up that the value purchased by Airbus in India is greater than that of an FAL.
Final assembly only represents between 5 and 6% of the added value of an aircraft.
The market regains visibility
The giant Air India order comes after other very large contracts.
At the end of 2021, Air France KLM got the ball rolling, signing a firm order of an unprecedented scale for the European airline group, for 100 A320s and A321neos to renew the fleet of Transavia, its low-cost airline, previously equipped only with Boeing 737NG.
The group has taken an option on 60 more aircraft.
In June 2022, United Airlines signed a historic contract with Boeing and Airbus for 270 new aircraft, including 200 Max and 70 A321neo, for more than $30 billion.
A month later, four Chinese companies acquired 292 Airbus A320neo type for 37 billion dollars, signing their largest acquisition since the start of the health crisis.
And easyJet announced the purchase of 56 additional A320neos.
The consequences are twofold.
Airbus and Boeing are drowning in orders as they face challenges in increasing production rates, due to the continued disorganization of global supply chains and the weakening of their ecosystem of subcontractors who are struggling to keep up. .
And “
the market regains visibility and shows significant growth potential.
The airlines, put on hold at the heart of the health crisis, are planning again and going back on the offensive internationally, to seek market share, as proven by the long-haul orders
. analyzes Rémy Bonnery, senior consultant at Archery Strategy consulting.
Prefer the train to the plane, a “European prism”
Air traffic has indeed recovered since the summer of 2021, a phenomenon which is accelerating with the end of China's zero Covid policy.
Last year, global air traffic reached 68.5% (79.6% for domestic flights; 62.2% for international flights) of its pre-Covid-19 pandemic level, according to the International Air Transport Association (Iata).
Strong demand is prompting companies to place orders.
But the phenomenon of giant contracts does not only concern the Asian region, which is less mature than Europe and the United States.
He is general.
It may seem paradoxical when the calls to stop flying and to prefer the train are multiplying and the imperative of energy transition is essential.
"
These concerns come from a very European prism, they are not as significant in the United States, and are even less so in India, China and more broadly in all of Southeast Asia,” notes Pascal Fabre
.
On the other hand, in the United States and in Europe, companies want to renew their fleets of aging planes - some are between 20 and 25 years old - with new generation, more fuel-efficient aircraft.
An A320neo consumes 20% less kerosene than an older generation aircraft.
An A350 can bring a gain of more than 30% compared to a classic A330 or an older generation Boeing 757, 767 or 777.
An aircraft that consumes less emits less CO2.
And its fuel bill is also lower.
However, the fuel item represents around 30% of an airline's operating costs.
While waiting for the commercialization of net zero pollutant emissions aircraft, which Airbus promises for 2035, purchasing modern and energy efficient aircraft meets a dual objective: