State-run Indian, formerly Indian Airlines, signed an agreement on Monday for the purchase of 43 Airbus planes worth $2,5-billion, marking the domestic carrier’s first expansion in 15 years.
The deal was inked by Indian chairperson Vishwapati Trivedi and Airbus Vice President Kiran Rao at a ceremony overseen by Indian Prime Minister Manmohan Singh and visiting French President Jacques Chirac.
“It is a big order with a value of over $2,5-billion. It is a great achievement,” the head of European defence group Eads Noel Forgeard told reporters.
The deal, which has been under negotation since 2003, reached a “happy conclusion today”, Forgeard said ahead of the signing ceremony.
The formal signature of the deal after the government cleared the purchase last September caps years of tortuous negotiations between the Indian government and the European plane manufacturer.
The government said last September it agreed to the deal after last minute Airbus negotiations to lower the price by around $75-million.
The agreement marks the first purchase of new planes by the state-run domestic carrier in 15 years.
The deal with Airbus, 80% owned by the European Aeronautical Defence and Space Company (Eads) and 20% by Britain’s BAE Systems, will allow Indian to retire some of its ageing fleet, including Boeing 737s as old as 25 years.
Indian, which recently changed its name from Indian Airlines, is buying the planes to face up to intense new private sector competition and to meet rising demand for flights from the country’s burgeoning middle class.
The deal comes after India’s low-cost private carrier Air Deccan announced in December it would buy 30 A320 aircraft from Airbus for $1,5-billion for delivery starting in 2008.
Airbus and giant US rival Boeing are locked in intense competition for orders in India where air travel is booming.
The government has forecast 20% annual growth in domestic and international air traffic with passenger numbers due to hit 50-million in five years.
From its former monopoly position, Indian has seen its market share slump to around 33% of the domestic passenger market, behind Jet Airways, which has 43% and regularly wins awards for good service and food.
Last year, the government cleared Air India to order 68 Boeing aircraft following a closely fought contest between the rival aircraft makers in a deal estimated to be worth aournd eight billion dollars. – AFP