Singapore Airlines has chosen Airbus's A320 to launch its new Indian joint venture with Tata Sons, scoring a victory over rival Boeing as the airline market in Asia's third biggest economy shows signs of a revival.
Sources familiar with the decision said a project team picked the European plane in preference to Boeing's 737 - the aircraft ordered by low-cost operator SpiceJet to expand its fleet in a deal reported by Reuters on Tuesday.
The demise of Kingfisher Airlines in 2012 marked an end to the bitter competition that led to low ticket prices for Indian consumers and high levels of losses for its airlines.
The subsequent drop in aircraft capacity gave the airlines some breathing space, allowing them to raise fares and return to profitability. Two years later, despite a slowing economy, international and passenger demand has continued to grow.
That, and a liberalisation of Indian regulations that now allow foreign airlines to invest in local ventures, means that two new carriers will begin operations in 2014.
TATA SIA Airlines will start flying in the full service segment in the second half of 2014, as will an AirAsia-Tata joint venture in the low-cost market.
"The fundamentals of the Indian market should eventually improve, but patience and initial losses may have to be withstood," the Centre for Aviation, a consultancy, said in a report in September.
Sources said that the SIA-Tata joint venture will get up to 20 A320s worth $1.83 billion at list prices. The planes will be sourced from leasing companies, rather than purchased direct from Airbus.
A Singapore Airlines spokesman referred queries to TATA-SIA Airlines' office in India, while an Airbus spokesman in Singapore said: "We do not comment on commercial discussions with existing or potential customers."
The new airline has begun recruiting pilots and is close to confirming its top executives, including a Singapore Airlines executive as its chief executive officer.
It will initially operate out of New Delhi on domestic services and compete with full service carriers Air India and Jet Airways, which are the only players left in the full-service market after the collapse of Kingfisher.
Jet, in which Abu Dhabi-based Etihad has a 24 percent stake, and Air India are also expected to open tenders to replace some of their older narrowbody and widebody aircraft in the coming year.
Airbus has been promoting its Airbus A350 variants strongly in the country, while Boeing expects to sell more of its 787s and get orders for