Taural India plans to increase turnover to 1000 crore rupees through exports and localization of production

According to a senior executive, the Air India group plans to receive between 50 and 60 new aircraft over the next eighteen months, continuing its transformation program despite challenges related to supply chains and the geopolitical situation.

Transformation Program and Challenges

Following the acquisition of the loss-making Air India by the Tata group in January 2022, the airline is implementing an ambitious transformation plan. Nipun Aggarwal, Commercial Director of Air India and Chairman of Air India Express, noted that 'tons of lessons' have been learned over the past years, and that the project is complex and not easy.

He emphasized that the industry has faced a number of difficulties, including multiple 'black swan' events that could not have been foreseen at the beginning of the transformation journey. These problems include issues with supply chains, airspace, oil price volatility, and geopolitical factors.

Fleet Status and Modernization

Air India has encountered various obstacles, including the fatal crash of its Dreamliner last June, which resulted in 260 fatalities. The airline has embarked on a five-year large-scale transformation plan, and Aggarwal reported that most of the planned activities, including fleet renewal and investments in MRO (Maintenance, Repair, and Overhaul), are being implemented.

Nevertheless, there are delays in aircraft deliveries and retrofitting. Despite external circumstances that have significantly impacted the company, Aggarwal expressed optimism, stating that they remain on track to achieve their goals.

Supply and Renewal Prospects

The Air India group has an order for nearly 600 aircraft, and less than ten percent of them have been delivered so far. This order will be valid until the middle of the next decade. Aggarwal forecasts that between 50 and 60 aircraft will be added annually over the next seven to eight years. He specified that deliveries will begin to accelerate at the end of the current year, and then in the following year, ensuring a steady flow of both wide-body and narrow-body models—approximately 10-15 wide-body and 45-50 narrow-body per year.

Approximately 50-60 aircraft are expected to be received in the next 18 months. Regarding modernization, Air India Express plans to complete the retrofitting of its entire fleet into a single harmonized fleet by March of next year, while Air India's wide-body aircraft will be modernized over two to three years. Retrofitting the Dreamliner or Boeing 787 is expected by mid-next year, whereas the Boeing 777 will require more time.

Technology and Network Recovery

Aggarwal also mentioned that deliveries of Boeing MAX 8 are already arriving, and the company will be one of the first customers to receive the MAX 10 after certification, which is expected to begin early next year. Previously, Air India faced operational issues with older wide-body aircraft, but this period, according to the Commercial Director, is behind them, and modernization is gaining momentum.

Due to high oil prices and the Middle East conflict, Air India has reduced some services. However, Aggarwal reported that network recovery is underway since the second half of this year. In the Middle East region, a 90 percent level has already been reached, and most reductions in Europe and the US, made in August-September, have already resumed. He predicts that within a couple of months, the airline will return to the level it was before the war began.

Furthermore, Air India is investing in improving the customer experience at all touchpoints, focusing on new standards for crew and airport staff service, as he believes that hardware will not bring significant benefit without good software for equipment operation.

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The escalation of the conflict in the Persian Gulf and the rise in global oil prices have prompted economists to warn that the South African Reserve Bank (SARB) may raise interest rates again this week to curb inflationary risks.

Pressure on Monetary Policy

The increase in oil prices, driven by the worsening situation in the Persian Gulf, has increased the likelihood that SARB will raise interest rates again. The Monetary Policy Committee (MPC) is scheduled to announce its next rate decision on Thursday, July 23, just one day after the release of June consumer inflation data from Statistics South Africa (StatsSA).

Experts note that the renewed conflict around the Strait of Hormuz has significantly altered the inflation forecast. Previously, markets expected falling oil prices and a strengthening of the South African rand following the announcement of a ceasefire earlier this year.

Economists' Views

The Reserve Bank previously raised the repo rate by 25 basis points in May, bringing the prime lending rate to 10.5%. Frank Blackmore, lead economist at KPMG, stated that expectations favored maintaining the current rate until the resumption of military action. He noted that before the new escalation, it was anticipated that oil prices would fall and the rand would strengthen, which would help reduce inflation.

However, according to Blackmore, the start of the war forces the bank to assess whether prolonged impact warrants an additional rate hike. He expressed the view that the MPC might implement another 25 basis point increase in the repo rate at its next meeting.

Risks for the South African Economy

Andreas Tindlund, a fixed income specialist at Abax Investments, emphasized that rising oil prices are already affecting global financial markets and intensifying inflationary risks for South Africa. He explained that higher oil prices lead to increased global bond yields and a stronger US dollar, which weakens the rand and increases imported inflation.

This creates pressure on South African bonds and interest-rate sensitive sectors such as real estate and retail, although commodity sectors related to energy and gold may provide support. Tindlund believes that the key issue for the Reserve Bank remains inflation expectations, which now exceed SARB's target of 3% and are approaching 4% according to recent surveys.

Forecasts and Recommendations

Abax Investments forecasts another 25 basis point rate hike at the upcoming MPC meeting, while warning of the possibility of further policy tightening later this year. Tindlund added that the combination of high rates and rising cost of living will place additional financial pressure on households, leading to a double blow for South Africans: higher living expenses and increased bond payments.

He advised investors to monitor three key indicators: oil prices as the most obvious indicator of geopolitical risk; the rand exchange rate, as currency weakening will intensify imported inflation; and central bank communications, which will be closely analyzed by the markets.

Tindlund concluded that the development in the Strait of Hormuz will remain the main factor determining market expectations, as events there can very quickly change oil prices, the rand exchange rate, and rate expectations.