Air India will purchase more than 200 planes from Boeing, President Joe Biden announced Tuesday. It’s the third biggest sale of all time for the aircraft manufacturer.
The agreement will include 190 Boeing 737 MAXs, 20 Boeing 787s, and 10 Boeing 777Xs – a total of 220 firm orders valued at a list price of $34 billion, the official says.
Airlines do not pay full list price for commercial jets, especially when placing an order this large. But even a discount of 50%, which is not unusual, would mean a sale valued at $17 billion. That’s an important lift to a company still struggling to recover from the plunge in revenue and financial losses it suffered during the pandemic and the 20-month grounding of its 737 Max following two fatal crashes.
Boeing’s 2022 revenue came in at $66.6 billion, up $8 billion from the trough in sales in 2020, but far lower from its record 2018 revenue of $101 billion before the grounding. Boeing gets most of its sales revenue once a plane is delivered, and the 777X has yet to be built. The planes in this order are years away from delivery.
The Air India purchase will also include customer options for an additional 50 Boeing 737 MAXs and 20 Boeing 787s, totaling 290 airplanes. At list price, that order would be valued at $45.9 billion.
In a statement, Biden said the sale would “support over one million American jobs across 44 states, and many will not require a four-year college degree.”
“This announcement also reflects the strength of the U.S.-India economic partnership,” Biden wrote. “Together with Prime Minister Modi, I look forward to deepening our partnership even further as we continue to confront shared global challenges — creating a more secure and prosperous future for all of our citizens.”
Production will support three separate U.S.-based manufacturing lines, have a total economic impact of $70 billion across the United States and support an estimated 1.47 million direct and indirect jobs, a White House official said Tuesday.
India has been gaining some manufacturing business as Western tensions flare with China, including major companies that traditionally rely heavily on Chinese production. Apple is one such company, with Minister of Commerce and Industry Piyush Goyal saying the tech giant was already making between 5% and 7% of its products in India.
India is set to overtake China this year to become the world’s most populous country. The country’s massive and cheap labor force, which includes workers with key technical skills, is a big draw for manufacturers. Asia’s third-largest economy also offers a growing domestic market. In 2023, as global recession fears persist, India is expected to remain the fastest growing major economy in the world.
If it can sustain that momentum, India could become only the third country with GDP worth $10 trillion by 2035, according to the Centre for Economics and Business Research, after the US and China.
(BA) 737 Max has been plagued with problems, but production and orders for the troubled aircraft has picked up, boosted by an even larger order from United late last year. In June, Ethiopian Airlines took delivery of a 737 Max from Boeing for the first time since the March 2019 crash that killed all 157 people on board, and led to a 20-month grounding of the jet.
The company has plenty of other troubles in China, the world’s largest aviation market. It has been on the verge of being virtually shut out of the region as trade tensions between the United States and China have basically halted Boeing sales in the country for the last four years.
The company has not announced any sales to a Chinese passenger airline since November 2017, and the country banned the Boeing 737 Max for much longer than most countries. In January, a Boeing 737 Max took off in China for the first time since 2019.
Boeing has faced myriad problems in recent years, beyond the drop in demand for passenger planes that occurred during the pandemic. Delivery of the 787 Dreamliner widebody jets resumed last year after they were halted due to quality control issues.