In 2005 both Boeing India chief Dinesh Keskar and Airbus India chief Kiran Rao had smiling faces. They had each locked in big orders.
Air India had placed a mammoth order for 68 aircraft with Boeing which included 18 737-800, eight 777-200LR, 15 777-300ERs and 27 787-800 Dreamliners, while low cost carrier IndiGo placed an order for 100 Airbus A320-232.
Post the 2008 fuel price shock and 2009 economic crises, Keskar has a frown while Rao’s smile has got even broader.
Boeing’s biggest customer in India, the state owned and financially beleaguered Air India is wanting to cancel the balance of its Boeing 777-300ERs on order with the US airframe manufacturer.
The carrier has taken delivery of all 737-800’s and 777-200LR’s and 10 777-300ER’s and is waiting for the much delayed Dreamliners. Due to the massive growth of foreign carriers in India who have captured huge chunks of Air India’s traditional base — the long distance international traffic, Air India wants to cancel the balance five 777-300ERs which due to be delivered within the next 15 months.
Clearly under political pressure, Air India is considering replacing the 777-300ER orders with 737-800 orders which will be used by its low cost subsidiary Air India Express. Boeing is offering 10 737-800’s as a replacement but this is not enough for the carrier which is facing severe funding constraints. Air India wants the aircraft to be supplied at the prices that prevailed when the orders were placed, but Boeing thinks otherwise.
On the other side of the ocean so to speak, low cost carrier IndiGo has taken delivery of 25 of its 100 A320 order which is scheduled for completion by 2015. The carrier has taken approval from the Government for acquiring an additional 150 A320s for its post 2015 requirements.
The Wall Street Journal reports
IndiGo, operated by InterGlobe Aviation Ltd., has recently sought government approval to fly to destinations in South Asia and the Middle East from 2011. Two people with direct knowledge of the matter said in April that IndiGo has mandated four investment banks for an initial public offering to raise about 15 billion rupees ($337.8 million) in the current financial year that began April 1.
If on-going negotiations with Boeing fail, Air India can take a cue from India’s largest private airline Jet Airways; take delivery of their new B77Ws and sell them off to other carriers who might just pay a premium for the faster delivery.
However, this option will leave some powers that are with no gain, and that is not a viable option for Air India.