MUMBAI – Boeing Co. (BA) will invest $185 million in facilities in India and source 85 billion rupees ($1.9 billion) in products and services over a period of 10 years, India's civil aviation minister said on Wednesday.
The Chicago-based aerospace company will spend $100 million on a repair, maintenance and overhaul facility and $75 million on a pilot training facility, with a further $10 million on other facilities, Praful Patel told a news conference.
State-run Air-India also on Wednesday finally placed a firm order with Boeing for 68 aircraft.
"The introduction of these aircraft will allow Air-India to expand and modernize its fleet, effect cost savings and add new long-range routes," Air-India Chairman V. Thulasidas said at the joint news conference.
The Indian cabinet in December approved Air-India's plans to buy up to 68 aircraft from Boeing, subject to final talks on price. The proposal was referred to a ministerial group to work out details, including a price reduction.
The aircraft are valued at more than $11 billion in total at list price, according to a statement from Boeing. When Air-India's board approved the purchase of 50 aircraft last April, the deal was valued at $6.9 billion.
The final value of the deal was not disclosed on Wednesday, but Thulasidas said the $1.9 billion worth of goods and services that Boeing will buy represented about 30 percent of the value of the order.
By Reuters' calculations, that puts the plane order at about $6.3 billion.
Boeing said it would also look at India's participation in design and manufacture of aircraft parts in the long term.
"We have done a deal with HCL Technologies for software for the 787, and we will be doing more such deals," Alan Mulally, chief executive, Boeing Commercial Airplanes, told the news conference.
Boeing has an existing deal with Hindustan Aeronautics Ltd., a research deal with the Indian Institute of Science, and software services agreements with Tata Consultancy Services Ltd. and Wipro Ltd..
The Boeing order comprises 23 777s — including eight long-range and 15 extended range aircraft — and 27 of the widebody Dreamliner, due to enter service in 2008. Air-India Express, the budget airline, will receive 18 737-800s.
Delivery of the aircraft will begin in November 2006.
Boeing, whose commercial plane orders more than tripled to a record 1,002 in 2005 on demand from Asia and the Middle East, has said it expects India to buy 490 aircraft over the next two decades as cheaper fares and growing traffic fuel demand.
India's domestic air travel market is forecast to grow more than 20 percent a year over the next five years as incomes rise in Asia's third-biggest economy and fares fall as new discount carriers launch in an increasingly crowded space.
Airlines flew an estimated 19 million domestic passengers in India in the year to March 2005.
Air-India, which has not bought aircraft since 1996, has faced intense competition from domestic private carriers that can now fly overseas routes and from international airlines that have stepped up their services to and from India.
Air-India and the domestic state carrier, Indian Airlines, are scheduled to make an initial public offering later this year.