UNTOLD MATH OF THE BIGGEST DEAL IN AVIATION HISTORY

GREAT GAME 2.0 The economic implications of Air India's agreements with Boeing and Airbus that the popular press didn't tell you about
Who will Air India’s deals with Boeing and Airbus actually benefit? (Photo: Pixabay)

COLUMN/ THE HOT POTATO

Nadim Siraj

February 16, 2023: Whenever a major transnational business deal is struck, notice how popular media outlets cover the event. Like robots programmed to parrot each other, they cover it from a very narrow and shallow perspective that’s typical of mainstream business journalism.

Take, for example, Air India’s historic twin deals with western defence and aerospace giants, Boeing and Airbus. What did the popular press tell us about the two deals? They fed us surface-level details, such as: how much the deals are worth; what’s in it for the three companies; what’s in it for their immediate workforce; what’s in it in terms of additional services to be offered; and what’s in it for the companies’ customers.

The whole episode was essentially reported as a couple of important but isolated corporate-level transactions that don’t have much to do with the domestic economies of India, the US, and France, and with the general public in these three countries.

But the real story of what these deals actually mean starts where the bland mainstream business journalism ends. Contrary to popular belief, the Air India-Boeing and Air India-Airbus agreements are of enormous significance for each of the three economies.

Before we deep-dive into it, let’s run a quick recap of the value of the twin deals.

Air India will pay Virginia-based Boeing Company a total amount of Rs 2.81 trillion ($34 billion) for the promised delivery of 220 civilian aeroplanes in the months to come. The set of 220 planes includes 190 737 MAX jets, 20 787 Dreamliners, and 10 mini-jumbo 777X airplanes.

In the other deal inked simultaneously, Air India will pay Toulouse-based Airbus a combined amount of Rs 3.82 trillion ($46 billion) for the promised delivery of 250 civilian aeroplanes. The purchase order comprises 210 A320neo narrowbody aircraft, and 40 A350 airplanes.

Together, the two deals are worth Rs 6.64 trillion or $80 billion for the delivery of 470 airplanes. In terms of the number of aircraft ordered, it’s the biggest ever combined deal in aviation history.

At the corporate level, while Boeing and Airbus are over the moon, there are other winners as well, such as Boston-based conglomerate General Electric and Paris-based manufacturing company Safran, which together bagged the lucrative engine deals. British aero-engine maker Rolls-Royce, too, is set to make a windfall from Air India’s purchase of 40 Airbus A350s.

The megabucks deals were preceded by multiple rounds of secret talks that reportedly took place near Britain’s Buckingham Palace. The deals’ epicentre was St. James’ Court – a high-end hotel near the palace in London.

WHAT IT ACTUALLY MEANS

The most realistic way of looking at this episode is to understand that Rs 6.64 trillion, which is an absolutely phenomenal amount of money, will effectively leave India’s financial ecosystem and get airdropped into the financial ecosystems of the US, where Boeing is headquartered, and France, from where Airbus operates.

In a nutshell, the entire sum of money belongs to Tata Group-owned Air India, but after all, it’s part of India’s financial resources. So, the outflow of the money westwards will be a direct financial loss for the Indian economy. Correspondingly, although the money that Boeing and Airbus will receive from Air India will technically belong to them, the inflow of that money into the US and France will be a direct financial gain for the two domestic economies.

Let’s simplify this even further, so that you can get a granular picture of who actually wins and who actually loses – something the corporate press and mainstream economists won’t or can’t tell you.

A total amount of Rs 6.64 trillion ($80 billion) will leave Indian shores forever – India will become poorer by that sum of money. After that, Rs 2.81 trillion ($34 billion) will get parked into Boeing’s bank account in the US. Over there, it would eventually get reinvested into America’s domestic economy, helping the US develop and become richer. Similarly, Rs 3.82 trillion ($46 billion) will get deposited into Airbus’s bank account in France, where it will eventually get reinvested into the French economy, resulting in France becoming richer.

The bottom-line is this – India will become poorer by Rs 6.64 trillion, and the US and France together will grow richer by that amount, as a result of the deals.

If this sounds like an exaggeration, or if it seems like this is an overreaction to a one-off business dealing, then you’re mistaken. To get a sense of how significant this gigantic wealth transfer is, pay attention to the words of Joe Biden, the current CEO of the American empire.

ONE MILLION NEW JOBS!

The US president welcomed the Boeing deal by proclaiming it will generate a million jobs across 44 states in his country. Try to understand this – the financial wealth transfer from India, via Air India, to the US, via Boeing, will be so enormous that it can create 1,000,000 jobs out of thin air. “I am proud to announce today the purchase of over 200 American-made aircraft through a historic agreement between Air India and Boeing,” Biden said, making no effort to hide his joy over the wealth transfer from India to the US.

Emmanuel Macron, the CEO of the French empire, also hailed the moment, excitedly saying India and France should explore further to deepen their ties. Unlike Biden, Macron stopped short of openly telling the world how his country’s economy and the job market will benefit from the Airbus deal.

Well, it’s only natural for the CEOs of these two powerful governments to get a kick out of the Air India deals. After all, the massive wealth injection into their countries’ economies all the way from India will eventually help uplift their own politically dented images.

The point here is not to look down upon the dealings of corporate juggernauts; neither is it to belittle the three stalwart companies of the aviation industry. Large companies that straddle multiple countries know no boundaries. They have to routinely strike transnational deals to conduct business across continents. That’s how they work. That’s the essential nature of big businesses.

Instead, the point here is to focus on the gigantic wealth leak that the Indian economy is facing as a consequence of the country or the society not being equipped to manufacture those 470 airplanes domestically.

PRODUCE VS. IMPORT

Imagine a parallel world where India-based aircraft makers are producing those 470 planes locally, and Air India is buying them up at cheaper rates. Now try to imagine the win-win scenario. Air India gets what it wants, and at the same time, the entire payment that Air India makes for the aircraft doesn’t leave the country at all. It just gets transferred to the India-based airplane manufacturers, and thus, gets reinvested back into the Indian economy, helping the country’s precious financial wealth remain intact.

Alas! If only India had its own fleet of plane makers!

In fact, the historic Air India deals have gone on to show that they are not a one-off event, but a continuation of a trend of perpetual outflow of India’s financial resources across industries, spanning the past few decades.

Empire Diaries recently reported that in July last year, India’s overall trade deficit had skyrocketed to a record-high $30 billion, according to data released by the commerce ministry.

We also came out with another disturbing report in which we disclosed that India’s trade deficit with China ballooned to a record-high Rs 8.23 trillion ($101.02 billion) during 2022. It’s the first time ever that India’s trade deficit with its neighbour shot past the $100 billion mark.

To call a spade a spade, it can be said that the Indian economy has in recent times been leaking financial wealth outwards like a sieve, with incalculable sums of money flowing out to various countries via regular trade, high-profile corporate deals, and FDI. Unless India starts producing enormously costly stuff such as planes right at home, it will unsuspectingly continue to leak money and help rich countries become richer.

REPUBLISHING TERMS:
All rights to this content are reserved. If you want to republish this content in any form, in part or in full, please contact us at writetoempirediaries@gmail.com.

Share

Related Posts

More Related news

COMMENTS & DISCUSSION

0 0 votes
Article Rating
Subscribe
Notify of
guest
1 Comment
Newest
Oldest Most Voted
Inline Feedbacks
View all comments
Eric
1 year ago

Reblogged this on Calculus of Decay .

Support Our Journalism

Why is our journalism unique? It’s because we don’t take a single rupee as ad money from foreign companies, domestic monopolies, governments, political parties, and NGOs. The only support we need and take is from critical-thinking readers like you. Because when you pay us, it doesn’t come with any hidden agenda. So, make a donation, and help our journalism survive.

Join Our Email Subscription List

For news that the mainstream media is hiding from you

Share

GET UNCENSORED NEWS!

Email is still the best way to bypass censorship. Enter your email ID below, and get our latest reports – uncensored!

WhatsApp Update

Also, WhatsApp ‘Get updates’ to 9821045739, and get links to our work on your phone.