Mega Air India deal will boost growth and employment in India and abroad

In the midst of global turbulence caused by Covid-19 pandemic and Russia-Ukraine war, India’s flag carrier Air India created a history in the aviation industry of the world when it placed the largest order for the acquisition of 470 passenger planes—of which 250 will be supplied by French Airbus while 220 will be supplied by American Boeing. As per Campbell Wilson, CEO of Air India, the list price of the mega deal with Airbus and Boeing is $70 billion.

India is the third-largest air passenger market, after China and the US. It is believed that other domestic carriers may make similar announcements in coming days to keep up with the competition in the domestic aviation market. If Civil Aviation Minister Jyotiraditya Scindia is to be believed, India is expected to receive more than 1,200 new aircraft by 2027, catering to new domestic and international routes fueled by doubling of operationalisation of airports in India since 2014. The number of airports has jumped from 74 in 2014 to 147 in 2022. The Indian aviation sector has witnessed a 48.9% yearly increase in domestic traffic.

However, with such deals, India seem to be in the driving seat with Americans, French and Britishers as passengers, eager to escape economic turmoil with New Delhi’s help. Elated over the deal, US President Joe Biden on February 14 said: “I am proud to announce today the purchase of over 200 American-made aircraft through a historic agreement between Air India and Boeing. This purchase will support over one million American jobs across 44 states, and many will not require a four-year college degree.”

French President Emmanuel Macron said France is committed to working closely with India in areas beyond the aviation sector. “This achievement shows that Airbus and all its French partners are fully dedicated to develop new areas of dedication with India,” Macron said. While terming it as a “momentous deal,” UK Prime Minister Rishi Sunak said it will support and create highly skilled jobs in Wales and Derbyshire and help boost exports and grow the economy. Prime Minister Narendra Modi said the deal will help the vision of both ‘Make in India’ and ‘Make for the World.’

Overall, the deal seems to be a win-win situation for all the major economies of the world. Moreover, for India, it has taken place at the time when it is aiming for becoming a $5trillion economy. Along with helping French, US and British manufacturing sectors, the deal will bring a significant heft to the Indian economy. It can be understood this way; Boeing has nearly 245 partners in India to supply various components to the American company for its aircraft making business. Similarly, Airbus has about 45 Indian suppliers which provide parts, design, and technology to the French aircraft company.

In terms of trade value, Boeing and Airbus source Indian products and services of worth Rs 8,000 crore and Rs 5,388 crore respectively. It should be noted that Air India’s parent company Tata also owns Tata Advanced Systems Limited (TASL) having a joint venture with different aircraft companies such as Airbus, Boeing, and Lockheed Martin to manufacture several critical components of aircraft industry within India.

Therefore, to say that Air India deal will be unhelpful in boosting Make in India effort is like discounting the fact about the country’s capacity to become the third economic power of the world in the near future. The Indian industry is already in partnership with European and American manufacturing firms, offering them products and services at a very competitive price.

In fact, Indian aviation manufacturing firms have cost advantage in terms of availability of skilled workforce at cheap wages, low transportation cost due to improved infrastructure and tax breaks. With the increase in demand from Airbus and Boeing, technology transfer could happen at a faster pace and that would prove to be an inflexion point in the Indian aviation manufacturing industry, creating millions of employment opportunities, increasing exports, and earning foreign exchange for the country.

Air India too will increase its employee’s strength to cater to new routes as well as higher flying frequency in order to achieve efficiency in operation. A few days ago, Air India announced that it would be hiring over 5000 pilots and cabin crew member in the year 2023. “We are adding 500 cabin crew members every month,” Air India CEO Campbell Wilson said. As per some estimation, over 2,00,000 jobs would be created in the aviation sector in the next few years.

In view of the rising demand for highly skilled manpower, the Airport Authority of India is setting up Flying Training Organisations (FTOs) in different locations across the country. There are already 34 FTOs operating at 52 bases. The country’s largest flying academy at Amethi in Uttar Pradesh has been permitted to carry out pilot training in Gondia in Maharashtra and Kalaburagi in Karnataka to enhance its flying hours and aircraft utilisation, which get severely affected during winter months.

Going by these developments, it will be fair to say that India is on the roll, setting one after another bench mark in majority of areas, including aviation sector, while at the same time providing the US, France, and the UK an occasion to cheer in the world where uncertainty has taken a huge toll on people’s happiness due to shutting down of factories and job loses --triggered by Covid-19 and Ukraine war.

***Shishu Ranjan is working as a Vice President in Barclays Bank, handling its Model and Risk Management unit, Dr Ajit Jha is an Assistant Professor at Institute of Studies in Industrial Development; views expressed are their own