The Boeing deal

A computer-generated image of the Dreamliner B787. India has ordered 27 of these, besides eight B777-200 and 15 B777-300 aircraft to replenish the Air-India fleet. - AP

Air-India's decision to go in for Boeing aircraft causes much heartburning in some European governments, which complain that Airbus was not given a fair chance by the Indian authorities.

THE Indian government's decision to purchase 50 Boeing aircraft to replenish Air-India's fleet has not gone down well in many European capitals, especially Paris and Brussels. The European consortium Airbus Industrie was hoping for a slice of the lucrative Air-India contract. The Indian carrier will now buy eight B777-200 LR, 15 B777-300 ER and 27 B787 Dreamliner medium-capacity, long-range aircraft. The deal is worth around $7 billion. In the same week, the Chinese government also came to Boeing's rescue by placing a substantial order for its South China Airways. The new contracts Boeing has bagged have provided a boost for the mid-size "Dreamliner", which is pitted against the Airbus' A380 super jumbo. Both aircraft will be ready for commercial operations only in three to four years.

The new deals may also help Boeing to regain the top slot in the commercial aviation business. The Americans and the Europeans have been engaged in cutthroat competition since the 1980s. In recent years, Airbus Industrie had stolen a march over Boeing. The American company had become virtually dependent on orders from the booming aviation sector in China for survival. Beijing doled out orders to both Boeing and Airbus, managing to keep both Washington and Brussels happy.

The European anger may have been compounded by the fact that India's decision to opt for Boeing was announced immediately after Airbus had successfully test-flown its new super jumbo, the A-380, in the last week of April. Before the Boeing deal was clinched, there was hectic lobbying by American and European officials with their Indian counterparts. According to one report, United States President George W. Bush had a telephonic conversation with Prime Minister Manmohan Singh requesting India to consider the offer from Boeing sympathetically.

U.S. Secretary of State Condoleezza Rice is said to have also lobbied strongly for Boeing as she did for Lockheed Martin, the manufacturers of F-16s. Both Boeing and Lockheed Martin are pillars of the U.S. military-industrial complex. U.S. Secretary for Transportation Norman Mineta was in New Delhi in early April to lobby for Boeing. A day before Air-India announced the decision to go with Boeing, French Transport Minister Giles de Robien had a meeting with Civil Aviation Minister Praful Patel to push the case for Airbus Industrie. Thomas Pickering, who was a former U.S. Ambassador to India, had come to New Delhi two years ago to lobby for Boeing when the Bharatiya Janata Party-led government was in power. Following his visit, the government at that time gave strong indications that Air-India would opt predominantly for a Boeing fleet. The other state-owned company, Indian Airlines, was given the green signal to go in for new Airbus planes. Many of the private carriers that have come up in recent years have also signed deals for the purchase of short-range Airbus aircraft.

The Congress-led United Progressive Alliance government has opted for continuity in aviation deals as it has done in the case of defence deals. There is also talk that the Boeing deal was expedited in the hope that the U.S. would support India's candidature for the United Nations Security Council. Bush administration officials have been complaining for some time that India is not doing enough for the U.S. despite the surge of Indian Information Technology exports to the U.S. The Indian trade surplus with the U.S. has almost trebled over the past decade, reaching $15.6 billion. The imports from the U.S. amount to $6.1 billion.

According to European diplomats, India signed the Boeing deal without getting anything concrete in return from the U.S. They say that one of the factors that could have swung the Air-India deal the Boeing way was the paltry promise of more U.S. work visas for Indians. They also think that the Indian establishment is inherently pro-U.S., given the fact that close relatives of many top officials and politicians are working, residing or studying in the U.S. "In the long-standing battle in the Indian government between those who feel repulsion at Washington and those who feel attraction to it, attraction is winning out," The Financial Times quoted a French diplomat resident in New Delhi.

Senior Congress party office-bearers, however, say that there were no political or other considerations involved in the deal with Boeing. The deal, according to them, was done after a careful study of Air-India's requirements. They say that the Air-India fleet predominantly consists of planes from the Boeing stable. That Air-India's engineers and technicians are trained to handle Boeing planes is another argument making the rounds. Anyway, they say, Airbus had no reason to complain, as it has been awarded the contract to upgrade the Indian Airlines fleet. Praful Patel has said that the decision was not based on geopolitical considerations. He also insisted that his Ministry had not influenced the Air-India Board. He said in the Lok Sabha that the Airbus allegations "are baseless and not based on facts". He went on to add: "[E]qual opportunities were given to both aircraft manufacturers for submitting competitive bids."

However, according to Airbus Industrie vice-president Nigel Harwood, the company was not given "fair and equal treatment". While expressing "astonishment" at the Indian government's decision, the Airbus official pointed out that the B787 short-listed by Air-India, was still on the drawing board. Harwood told the media in New Delhi that his company was not given a chance to make a presentation on the A380 while Boeing made its case on the B787. The B787 Dreamliner is not expected to fly before 2007. Harwood called for an inquiry by the Central Vigilance Commission (CVC).

"We are questioning how the evaluation was done. We feel that it was not fair and are astonished at the decision. It is a massive blow to us," said Harwood. A technical committee of the Air-India Board had recommended in 2002 both Boeing and Airbus planes. The BJP-led government delayed the procurement after being subjected to intense lobbying from the U.S. However, as recently as November 2004, the Air-India Board broadly endorsed the Technical Committee's recommendations and announced that it was proposing the purchase of 10 Airbus-340 long-haul aircraft and 18-Boeing 737-800 medium-range planes.

The government reacted strongly to the reported comments of the French Ambassador, Dominique Girard, about the unfairness of the deal. The diplomat was quoted as saying that "factors other than commercial" seemed to have clinched the deal. The Press Trust of India had reported that the French Ambassador feared that the proposed defence deal involving the purchase of 126 fighter jets would meet a similar fate. There is hectic lobbying going on by the Americans, the French and the Russians for the sale of fighter jets. F-16s and Mirage-2000s are the current front-runners. The Russians have offered to set up an assembly line in India for the co-production of MiG-29s.

The U.S. has a propensity to impose sanctions on countries. Iran has to buy spare parts for its Boeing in the international grey market to keep Iran Air's planes flying. The late Shah of Iran had opted for Boeing planes. The French Ambassador was quoted as saying that the Europeans are reliable suppliers of spare parts and adhere to contracts, even if serious political differences arise. According to observers of the diplomatic scene, it would have been inconceivable for the U.S. Ambassador in New Delhi to keep quiet if Air-India had opted for Airbus planes instead of Boeing aircraft. The stakes are exceedingly high. The American Ambassador recently told the Indian media that Washington was not happy with the proposed Iran-Pakistan-India gas pipeline as the U.S. had imposed economic sanctions against Iran. There was no official reaction from the government in response to the U.S. diplomat's statement. The Ambassador has been treated by the Indian government for some time as the primus inter pares in the diplomatic community in New Delhi.