Tuesday, 20 June 2023

Airbus Lands Biggest Sale in Aviation History

by Rose White

For more crisp and insightful business and economic news, subscribe to
The Daily Upside newsletter.
It’s completely free and we guarantee you’ll learn something new every day.

Airbus Lands Biggest Sale in Aviation History

Airbus has landed its most lucrative deal ever.

On Monday, the world’s largest aircraft manufacturer secured the biggest deal in industry history: a 500 narrow-body plane order from Indian airline IndiGo. The reportedly multibillion-dollar deal places on full display the South Asian subcontinent’s status as a massive and rapidly emerging market.

The Increasingly Friendly Skies

The deal marks the landmark second Airbus sale to an Indian airline this year. In February, Air India placed an order for 470 new passenger jets — though that deal was split roughly 50-50 between Airbus and Boeing, with each supplying 250 and 220 aircraft, respectively. This time, Airbus is taking home all the booty and bolstering a homegrown Indian supergiant in the process. After taking flight as a scrappy start-up in 2006, IndiGo quickly ascended far higher than its domestic carrier competition. Today, the airline controls more than 60% of India’s market share, according to the nation’s Directorate General of Civil Aviation. For reference, industry runner-up Air India holds just under 10%.

It’s no secret why Western manufacturers are so eager to crack the market. The nation just surpassed China to grab the top spot on the world’s most-populous rankings list, and creating a homegrown aircraft manufacturing industry from scratch can take years if not decades (just ask China). In the meantime, air travel both within and through the country is set to fly even higher:

  • India’s gross domestic product is projected to grow nearly 6% this year, more than any other major emerging or advanced economy, according to the International Monetary Fund. That’s minting a fresh new middle class, and, ergo, a new class of first-time flyers. In the first quarter this year, passenger numbers surpassed 37 million, or roughly 6% compared to pre-pandemic 2019 levels, according to official government data.
  • In March, India’s government announced it would pour $12 billion into airport infrastructure projects, with Prime Minister Narendra Modi aiming to turn the nation into both a destination and a global connecting hub. Meanwhile, IndiGo plans to double in size and scale by the end of the decade. Its fleet currently contains 300 aircraft.

Grounded: Don’t get too excited too quickly. Airbus is still beset by production line issues, and earlier this year said its 75-planes-produced-per-month target now won’t be reached until 2026 — months after its original target. It’s why IndiGo won’t be receiving its new planes until… at least 2030, with the last of the order delivered by 2035. 30 Rock’s Liz Lemon reminds us, a pilot’s promise of a half-hour delay “means forever.” The same logic applies to airplane manufacturers.