Air India Aircraft Deal and its Significance

Context

• Tata Group-owned Air India (AI) placed two mega orders, adding up to a staggering 470 aircraft — for 250 planes with Europe’s Airbus consortium, and 220 with Boeing Co. of the United States.
• This is the largest order placed by an airline in one go anywhere in the world, beating the 2011 order by American Airlines for a combined 460 aircraft. The biggest order by an Indian carrier before this was IndiGo’s 300-aircraft order in 2019.
• In this context, this edition of the Burning Issue will elaborate on the deal and its impact on the Indian aviation sector. The topic will be relevant for the GS3 Mains Paper under the subheading Infrastructure development and Airports.

Details of the Air India order

• The deal includes seventy of the 470 aircraft wide-body or twin-aisle planes for long-haul flights.
• Airbus has got the bigger order, but the Boeing order includes an option for a 70-plane top-up, taking the possible order size to 540 aircraft.
• The mega order cost for Airbus and Boeing aircraft is estimated between $70 billion and $80 billion.
• Ever since Air India returned to the Tata Group, the new owners have been focussed on sprucing up the product offering, while also planning an extensive expansion for the airline.
• A five-year roadmap–Vihaan.AI–was prepared with the objective of substantially growing the airline’s network and fleet in a bid to put it on a “path to sustained growth, profitability, and market leadership”.

About Indian Aviation Industry

• One of the fastest-growing: The Indian aviation industry is one of the fastest-growing aviation markets in the world.
• Undergone a significant transformation: Over the last decade, it has undergone a significant transformation, with the rise of low-cost carriers, increased competition, and modernization of airport infrastructure.
• Growth: The Indian aviation industry has been growing at a rapid pace in recent years. According to the International Air Transport Association (IATA), India is expected to become the third-largest aviation market by 2025.
• Domestic and International Market: The Indian aviation industry has a mix of domestic and international airlines. The domestic market is dominated by low-cost carriers such as IndiGo, SpiceJet, and GoAir, while the international market is dominated by full-service carriers such as Air India and Jet Airways.
• Government Support: The Indian government has been supportive of the aviation industry’s growth and has introduced several initiatives to encourage investment and development in the sector. These include the Regional Connectivity Scheme (RCS) called UDAN, which aims to improve connectivity to remote and underserved regions in the country.
• Infrastructure Development: In recent years, there has been significant investment in airport infrastructure in India. The country has over 100 operational airports, and several new airports are under construction or in the planning stages.
• Skilled Workforce: The Indian aviation industry has a skilled and well-trained workforce, with several world-class aviation training institutions. Indian pilots and cabin crew are in high demand globally.

What is driving Indian Aviation Sector Growth?

• Already third largest domestic market: India is the third largest domestic aviation market after China and the US. The annual domestic air traffic in pre-covid 2019 for India stood at 144 mn passengers.
• Income growth and demographic dividend: Increasing income levels, an aspirational middle class, competition between low-cost carriers and enhanced connectivity and infrastructure.
• Potential to become the 3rd largest international market: The government and the industry say India could become the third largest international — not just domestic — aviation market given the huge gap between potential and current air travel penetration.

How will Indian aviation shape up?

• A major shift could happen in the market: So far, IndiGo’s been the largest player with strong promoter support but there are visible signs of competition from Air India and Akasa Air. Indian airlines will eye a greater share of outbound international traffic from the current level of around 45%.
• While Air India is expected to cross foreign carriers in flights to US and Europe, IndiGo is eyeing Europe and East Asia by 2024. The government has asked airlines and airports to work towards multiple international hubs in India.
• According to IBEF, India is poised to improve its position from the 7th largest in civil aviation to the third largest in the next 10 years. Given India’s demography and increasing purchasing power, domestic air traffic will certainly move higher.

Significance of the deal

• Aspirational Air India: It has put Air India in the league of “aspiring” global airlines. The debt-ridden carrier, which was taken over by the Tata Group in early 2022, plans to turn into “a world-class proposition”. Experts say the bulk order indicates Air India’s intent to reclaim its “pole position” in the domestic aviation market, as well as expand its presence in international routes, BBC reported.
• Reduce Dependence on Foreign Flyers: the large fleet that will be acquired by Air India will help in reducing the dependence of Indian flyers on foreign carriers such as Emirates, Qatar Airways, Etihad and other Middle Eastern airlines. These orders directly synergize Air India’s fleet with Lufthansa and Singapore Airlines – all part of Star Alliance, the world’s largest global airline alliance,
• Help enter markets like the US: The purchase of wide-bodied aircraft like the A350s will allow Air India to enter markets like the US and Australia directly by offering non-stop flights from India to these places.
• Cater to the need of Indian aviation: Air India’s new fleet will help in catering to the needs of India’s growing aviation market. Demand for air travel is again seeing a surge in India and other parts of Asia after the COVID-19 pandemic. As per ICRA, with 986 lakh flyers, domestic air traffic increased 63 per cent year-on-year between April and December 2022 in India.
• May give a boost to Make in India and employment: The deal can also create jobs for Indians. The Tata group chairman has hinted that some of the aircraft parts could be manufactured in India, which will boost domestic manufacturing and create job opportunities.
• Improves India’s global Standing: the deal is “important for the industry because, given the recent turbulence in the China market, the alternative growth market in India,”
• Political signals: “India is also sending a strong political signal that it wants to remain attached to the West at a time when it has appeared ambiguous on Russian sanctions,”

Impacts on bilateral relations

• India-France: At a virtual event attended by the Tata Sons chairman and French president Emmanuel Macron said that the Air India deal reflects deepening ties between India and France, as well as the successes and aspirations of India’s civil aviation sector. This achievement shows that Airbus and all its French partners are fully dedicated to developing new areas of dedication with India.
• India-US: The Indian prime minister and US President Biden acknowledged the Air India and Boeing deal as a “shining example of mutually beneficial cooperation”. The two leaders also expressed a desire to bolster bilateral cooperation in space, semi-conductors, supply chains and defense co-production.
• India-UK: British prime minister Rishi Sunak also said the Airbus-Air India deal would generate employment opportunities around the UK. This is one of the biggest export deals to India in decades and a huge win for the UK’s aerospace sector.

Challenges

• Funding: When the Tatas took over the company, they had absorbed around ₹15,300 crores of the total debt of ₹61,562 crore belonging to the bleeding air carrier. Thus, it will be challenging for AI to raise a loan of US $50-60 billion to fund the deal.
• Mere customer: if the Make-in-India clause is not added to the deal’s final agreement, India could end up being a ‘mere customer’ of goods with the least direct benefit to the Indian economy.
• Operating costs are high: The Indian aviation industry has many difficulties, including high operating costs. This is caused by a multitude of things, including exorbitant fuel costs, airport fees, and taxes. If all these continued, the profit from these new aircraft will remain low.
• Infrastructure Barriers: The Indian aviation industry is further hampered by outdated air traffic control systems, insufficient ground support services, and restricted airport capacity.
• Regulatory Framework: The regulatory framework is a source of difficulties for the Indian aviation industry.

Conclusion

• Overall, the Indian aviation industry has come a long way in recent years and is poised for further growth in the future. There will be a shakeout in India’s aviation sector, with the ‘Maharajah’ once more ascending the throne to reign supreme over India’s skies.
• With a large jump in international air carriers from India, the deal promises to make India an international hub for air travel. The government’s support, investments in infrastructure, and skilled workforce will be critical to ensuring the industry’s success in the years ahead.

RBI nod to be payment aggregators

The payments arm of big technology companies Amazon and Google are among 32 firms that have been given in-principle approval by the Reserve Bank of India (RBI) to operate as online payment aggregators. Approvals have also been granted to Reliance Payment Solutions, a part of Reliance Jio Infocomm, and the payments platform of food delivery firm Zomato. The RBI has for the first time released a full list of the entities to which it has granted a payment aggregator licence, as well as those whose applications are still in process, and those whose applications it has rejected.

Who are payment aggregators?

1. Online payment aggregators can onboard digital merchants and accept payments on their behalf after getting a licence from the RBI. The central bank introduced a framework for such entities in March 2020.
2. Applications were invited until last September. Under the payment aggregator framework, only firms approved by the RBI can acquire and offer payment services to merchants, which bring them under the direct purview of the regulator.
3. According to RBI rules, a company applying for aggregator authorisation must have a minimum net worth of Rs 15 crore in the first year of application, and at least Rs 25 crore by the second year.
4. It also must fulfil the “fit and proper” criteria, and be compliant with global payment security standards.

Which are the entities that are yet to receive RBI’s approval?

1. Among the applications for payment aggregators that remain under consideration are those of prominent Indian start-ups such as PhonePe and Dreamplug Paytech Solutions, the parent company of Cred.
2. The applications of Paytm and the Naspers-owned PayU have been returned. This means these companies can continue to function as payment aggregators, but they cannot take on board new merchants until they receive RBI’s approval.
3. The applications of Ola Financial Services and CAMS Payment Services among others have been rejected. These companies cannot function as payment aggregators.

What other action is RBI taking to regulate fintech firms?

1. The RBI has prepared a “white-list” of digital lending apps in the country, which it might soon release.
2. In order to curb rising malpractices in the digital lending ecosystem, the RBI last August issued guidelines for entities engaged in digital lending that stated that all digital loans must be disbursed and repaid through bank accounts of regulated entities only, without the pass-through of lending service providers (LSPs) or other third parties.
3. Earlier this month, the Ministry of Electronics and IT (MeitY) banned 94 digital lending apps, including Indian startups such as LazyPay and Kissht. However, the ban on some of these entities was later revoked.

IAF develops indigenous ‘Vayulink’ platform

The Indian Air Force has come out with an innovative solution that would help pilots to deal with bad weather and also provide them jammer-proof uninterrupted communication with the base station. Known as ‘Vayulink’, the data link communication uses the Indian Regional Navigation Satellite System (IRNSS) that is also known as NAVIC, to send radio communication to the base station when the signals are low.

More about Vayulink

1. The important aspect of the technological solution is that it prevents fratricide or friendly fire.
2. The IAF has put up a gallery on Vayulink to provide information about its platform at the India Pavilion in the ongoing Aero India 2023.
3. Vayulink is an ad-hoc data link communication system, which when installed in an aircraft, gives the position of other aircrafts close by, encrypted traffic data over a secured channel.
4. When the planes are flying close to any friendly forces on ground during a combat situation, the aircraft display gives the position of such forces on the ground including tanks and troops beneath.
5. The advantage of the system is when you are going into combat, it prevents fratricide. It means, you are able to know where our ground forces are present.
6. The Vayulink system also prevents aircraft collision, provides better combat teaming and helps plan real-time basis where multiple teams can get together and go towards the target coming from different areas.
7. The system can also give the pilots data on the weather. When you are flying above the hills where there is no radio communication, the system can give you radio communication also.
8. Vayulink is helpful for the Air Force, Army and Navy, while it can be given to government services as well since the technology has been made by the Indian Air Force.
9. Vayulink has been developed by the IAF only and it is a very secure system.

Commissioning of ITER’s first phase

The first phase of commissioning of the seven-nation International Thermonuclear Experimental Reactor (ITER), of which India is a part, at Cadarache in France is expected in 2028.

What

1. India formally joined the ITER project in 2005 and is a 10 per cent stake holder. ITER-India is the nodal agency for the country’s participation in the $45-65 billion ITER project.
2. AV Ravi Kumar, scientific officer and head, outreach division of the Gandhinagar-based Institute for Plasma Research (IPR), and Kartik Mohan, scientist of ITER-India, said that of the nine packages which are India’s share of the project, four have already been delivered.
3. These are the cryostat (which is the world’s largest and heaviest component), the water cooling and heat rejection system, the in-wall shielding as well as the cryo lines and cryo distribution system. The remaining five are in the process of being delivered and are currently on schedule.
4. IPR and ITER-India, which comes under the department of atomic energy, are participating in the five-day Maha Edu Fest, which began at the Lokseva e-school in Pune. The event is organised by the Indo Science Education Trust and the NM Foundation and Research Centre.
5. The outreach division of IPR, which has set up this exhibition, has over 25 models, of which a majority are working interactive ones, depicting various forms of plasma, their many applications as well as models of ‘tokamak’ and details of the ITER project.
6. Though IPR has two ‘tokamaks’ — which are essentially devices where hot plasma is generated, magnetically confined and studied — no fusion reaction is carried out in these machines.
7. The studies carried out in these machines will help us learn more about hot plasma and how to sustain and control them, which are essential precursors to doing actual fusion reactions in the future.

Aadi Mahotsav Tribal Festival Inaugurated

The Prime Minister inaugurated the TRIFED’s Aadi Mahotsav tribal festival in New Delhi, saying that the coming together of the diverse tribal cultures of India at an event such as this one was “giving new heights to unity in diversity”. Today, India goes to some of the world’s biggest stages and presents the Adivasi culture as its own proudly— as a solution to global problems like climate change and global warming.  When people talk about sustainable development, we can proudly say that the world has a lot to learn from the Adivasis.

Tribal Development

1. The country was now achieving new heights of progress by prioritizing the development of some of the underprivileged sections of society.
2. The National Capital Region in Delhi, Haryana and Uttar Pradesh to come to the tribal festival in large numbers and purchase as many different artefacts and tribal products as possible to encourage the artisans and crafts people.
3. The government’s policies had benefitted tribal communities in the last eight or nine years, mentioning the setting up of over 3,000 Van DhanVikasKendras, 80 lakh self-help groups, the rise in Budget for tribal welfare over the years.
4. The boost to the Eklavya Model Residential Schools for tribal children, and a rise in the number of forest products that the government was purchasing at Minimum Support Price (MSP).
5. “Villages that used to be connected with separatism and extremism are now connected with 4G.
6. The youth, who used to get pulled into divisive efforts, are now accessing the Internet and becoming part of the mainstream. This is the stream of SabkaSaath, SabkaVikas, SabkaVishwas and SabkaPrayas which is reaching every citizen of the far-flung areas of the country.
7. This is the sound of the confluence of Aadi and Aadhunikta (modernity), on which the soaring edifice of New India will stand.”

Science Education For Adivasis

1. The demand for India’s tribal products is increasing. We are exporting to foreign countries. And among these are bamboo products, the demand for which is also rising.
2. The bamboo-cutting and use was prohibited by law, Govt.brought bamboo under the category of grass and removed all such prohibitions”.
3. Since language barrier was a problem for tribal children, his government’s New Education Policy addressed this and allowed for them to learn in their mother-tongues.

Cultural Practices

1. Tribal dance forms such as PuruliaChhau from West Bengal, Baguramba from Assam,Panthi from Chhattisgarh, TamangSelo from Sikkim, Gusadi from Telangana and many others.
2. The Aadi Mahotsav event was a representation of the country’s progress for 10 crore tribal population of the country