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How Covert London Negotiations Resulted In Air India's Massive Plane Order

How Covert London Negotiations Resulted In Air India's Massive Plane Order
With its record aircraft purchase, Air India has joined the ranks of ambitious international carriers.
It tentatively agreed on Tuesday to purchase nearly 500 aircraft from Airbus and Boeing to compete with domestic and foreign rivals.
According to those involved in the negotiations, it took months of closely guarded negotiations near Britain's Buckingham Palace to reach the largest deal ever reached by a single airline, which culminated in a celebration over coastal Indian curries.
On Tuesday, secrecy was broken as leaders praised the agreement in a diplomatic embrace between the top G20 countries. Six paragraphs were released by the Tata Group, which took back control of Air India last year after decades of being owned by the public.
Its low-key announcement exemplifies a new breed of private airline owners transforming India's financially risky airline sector, alongside IndiGo's publicity-shy founders.
Insiders, who spoke on the condition of anonymity, said the deal had been in the works for more than a year.
Serious talks began last summer and lasted until just before Christmas, when broad strokes were agreed upon. As the deal's astounding scale began to take shape, Reuters reported in December that the parties were on the verge of a record 500-plane agreement.
St James' Court, a luxury Victorian hotel near Buckingham Palace in London's West End, was the epicenter of dealmaking.
Negotiating team from the airline, planemakers, and engine giants camped out for days at a time in the hothouse atmosphere of a classic aircraft industry negotiating ritual known as a "bake-off" at the Tata-owned hotel and adjoining suites.
They were vying for a larger share of a rapidly expanding market that has seen many airline expansion plans come and go.
Boeing now had the opportunity to reclaim its position in India's single-aisle jet market and cut Airbus' large lead. Airbus desired a larger share of the wide-body market dominated by its competitor. With their order books full, neither could sweep the entire order.
At stake was India's bid to reclaim visitors' and its own diaspora's business from highly efficient Gulf carriers. The context was political, but the discussions were commercial - and tough.
"The convergence of the political will of the country to regain sovereignty of international connectivity, combined with the ambition of the mighty Tata ... if things are done right it has all the ingredients to be really solid," Airbus Chief Commercial Officer Christian Scherer told Reuters on Tuesday.
On a chilly day in December, Airbus found itself in negotiations with Air India on one side of the capital while battling Qatar Airways in court over the future of similar A350 aircraft only two miles away. The attention-seeking competition played out across London at this time.
Although sources indicate that Qatar Airways, the Gulf airline, also won significant damages, Air India jumped ahead of Qatar in the line for smaller jets after Airbus and Qatar Airways later resolved their contractual and safety dispute.
Nipun Aggarwal, Air India's chief commercial and transformation officer, and Yogesh Agarwal, head of aircraft acquisitions, led the negotiations, which frequently went late into the night as sellers continued to submit new "best offers" fueled by room service.
"Air India negotiated hard and the team is very sharp despite having no prior aviation experience. They compare with some of the best dealmakers in the business," one person said.
The Air India negotiators were "methodical, tough, and very sophisticated," according to a second person who witnessed the billions come together.
The final meal of the London negotiations was served at the hotel's Indian Quilon restaurant, which has a Michelin star and is renowned for its seafood and coastal cuisine from places like Goa and Kerala.
Even though the competition between planemakers is the main focus of any jet deal, engines are frequently crucial and can speed up or slow down the larger transaction. As engine talks continued, plans for announcements on the anniversary of Tata's acquisition of Air India were postponed.
Insiders claim that General Electric is the biggest overall winner as it secures the majority of the lucrative engine contracts, with its CFM joint-venture with Safran defeating Raytheon-owned rival Pratt & Whitney on Airbus A320neos. The sale of 40 Airbus A350s boosted Rolls-business Royce's as well.
GE's victory was a long time coming, highlighting the difficult process of negotiating strategic agreements in the aviation industry.
It won a tender in 2014 for 27 engines for Air India A320 aircraft. It quickly persuaded Vistara to accept its engines for seven aircraft, which led to a later order for 70 aircraft. IndiGo, which replaced Pratt & Whitney after experiencing technical difficulties that Pratt claims have been resolved, marked a turning point.
Analysts warn that Air India's plans still face numerous challenges. To seriously impact the firmly established hubs of Doha and Dubai, it needs better service and efficiency.
But dealmakers will remain drawn to India because of its potential. According to CAPA India, IndiGo is considering placing a separate 500-jet order.

Christopher J. Mitchell

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