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Sunday, April 14, 2024

Airbus Secures $50 Billion Order as IndiGo Expands Fleet

Airbus booked a multibillion-dollar deal to supply 500 new narrowbody jets to India’s dominant budget carrier IndiGo, beating out another mammoth offer months ago by rival U.S.-based manufacturer Boeing (BA). The order, signed on the opening day of the Paris Airshow, represents a bold bet well into the next decade on an undiminished travel boom in the world’s most populous nation.

Airbus also finalized an agreement to supply 220 planes to India’s state-owned flag carrier, Air India. The orders, which include options to buy an additional 70 aircraft, are worth around $85 billion at current list prices, the Wall Street Journal estimates.

The orders come as Air India seeks to keep pace with the world’s fastest-growing aviation market, serving the largest population. The airline has long struggled with substantial financial losses and mediocre service, but its new owner is betting that a turnaround can revive the brand. The blockbuster orders will help boost Air India’s international market share and give it a leg-up against budget rival IndiGo, which has long dominated domestic routes.

Despite the Covid-19 pandemic, India’s economy has continued to increase, and its people are increasingly willing to travel for work, leisure, and to visit family members. The country’s airlines have a significant opportunity to tap that demand, but they have been constrained by aging aircraft and limited infrastructure for connecting cities with large populations.

Aviation companies are expanding production, investing in new services, and opening stores to capitalize on a growing Indian market. Tech firms, too, are gearing up for a wave of new consumer demand in the country, which is projected to become the world’s third-largest by 2022 and overtake China as the most populous.

As a result of the strong consumer appetite, air travel is growing faster in India than in any other country. The country’s airlines have placed record-breaking orders with Airbus and Boeing to meet the demand. That has made industry records tumble, even though manufacturers struggle to meet output goals because of supply chain snags. The surge in demand has pushed electricity peak demand to an all-time high this week, reflecting the soaring use of air conditioning and catching up on industrial activity after lockdowns were lifted earlier this month. The spike in demand has boosted oil and natural gas demand, helping lift global energy prices. The latest data show the world’s three biggest oil producers will increase production in June, but prices for crude and petroleum products have lowered stock markets. That may make the current upswing in global energy prices less sustainable.

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