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Jyotiraditya Scindia said conditions were ripe for a “leap of faith” by both jetmakers as India’s fast-growing aeronautical industry reaches an “inflection point” – highlighted by plans to assemble Airbus C295 military transport planes locally in India.

Asked whether Airbus and Boeing should now consider setting up jetliner assembly in India, Scindia said, “Absolutely, and with a capital A, and the reason why I said capital A is because Airbus has already made that huge landmark step: the C295.”

Airbus and Boeing have both highlighted the scale and technology of existing investments in India, playing down the significance of final passenger jet assembly.

An Airbus-Tata consortium plans to assemble 40 C295 planes in Gujarat, the home state of Prime Minister Narendra Modi who wants aerospace and defence to become a key engine for his “Make In India” drive to expand the world’s fifth-largest economy.

Tata-controlled Air India last month agreed record orders for 470 jetliners from Airbus and Boeing and sources have said India’s largest airline, IndiGo, is in talks for another 500.

“The market is there, the volume is there, the engineering talent is there. And then you take that leap of faith. So the time has come now,” Scindia said in an interview, adding such decisions would not necessarily be tied to specific jet orders.

“Now is the time for these companies to look at planting their feet on the ground in India,” he said.

India has been lobbying quietly for jet assembly for several years but ratcheted up pressure behind the scenes during the past 12 months, two people familiar with the matter said.

The push comes at a time when the two global plane giants are juggling the need for capacity to meet soaring demand with pressure on global supply chains and geopolitical instability.

Their strategies differ, with Boeing keeping benchmark 737 production in the Seattle area, while Airbus runs four sets of competing A320 lines in Europe, the United States and China.

EXISTING INVESTMENTS

For now, both appear to have resisted India’s calls for civil final assembly lines (FAL), while playing up existing investments in engineering, supply chain and maintenance. Boeing said it buys $1 billion a year in parts and services from India, while Airbus said it buys $700 million.

Local assembly is restricted to defence projects, where the cost of meeting national security concerns can be built in.

“There’s a desire in every country to have as much manufacturing as possible … and final assembly is a desire that you see all around the world,” Salil Gupte, president of Boeing India, told Reuters.

“The volumes that you would require for final assembly on the commercial part of the business are just far, far greater,” he said.

A final decision comes down to the business case, and Boeing is always looking at opportunities to do more in India, he added.

Boeing this month announced a Hyderabad plant to convert 737 passenger planes into dedicated freighters and both planemakers have engineering plants and thousands of employees in India.

“Even without the C295 FAL, the Airbus industrial footprint in India already generates more foreign exchange value and jobs for the country than any modern assembly activity would,” said Remi Maillard, president of Airbus India & South Asia, by email.

Still, Scindia said such an ecosystem would give planemakers “the confidence in the years to come that they need to put a plant here, because everything is working for it”.

Aerospace analysts say assembly represents just 5% to 7% of a plane’s value, yet is often seen as a political win.

“The reason is it puts you on the map; it shows that you are the up-and-coming economy in Asia and the world,” said Jerrold Lundquist, managing director of The Lundquist Group.

Airbus opened an A320 line in northern China in 2008 in return for an agreed volume of planes for local airlines at a time when its share of the Chinese market was only about 30%.

But while Chinese authorities must approve airplane orders, analysts say the New Delhi government has little formal leverage over ordering by its cost-conscious private-sector airlines.

Boeing has never put a commercial assembly line outside the United States, though McDonnell Douglas assembled a handful of jets in China before being acquired by Boeing in 1997. In 2018, it opened a 737 cabin-completion centre in Zhoushan, China.

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The government will keep 51% equity with an Indian company, while asking the foreign partner to do technology transfer, the people said, asking not to be identified as the deliberations are at an early stage. The jets, which typically seat less than 100 people, are likely to be produced in Prime Minister Narendra Modi’s home state of Gujarat, they said.

The world’s fastest-growing aviation market is trying to ramp up its small-plane fleet as airports with limited capacity and short runways are not equipped to handle narrow-body planes of Airbus SE and Boeing Co. that dominate the Indian skies. This will help the government bolster tourism and facilitate faster access to remote areas in the South Asian giant of 1.4 billion, which recently has been seen to surpass China in population.

India mandates airlines operate at least 10% of their capacity on remote routes, including Kashmir and the Northeast bordering China, which means smaller planes could be more efficient for airlines as they can fill a larger share of total seats.

Airbus SE estimates India will need 2,210 aircrafts by 2040 and 80% of them will be smaller jets. The country has piqued global turboprop makers’ interest, with De Havilland Aircraft planning to seize 80% of its market for smaller planes of less than 20 passengers.

Regional Workhorse

India has completed preliminary discussions with Embraer, while Sukhoi has expressed interest in manufacturing regional jets locally, the people said. In addition, the country has also approached ATR, a joint venture between Airbus and Leonardo SpA of Italy, to make in India, they added.

Embraer said India has “significant opportunities” for regional jets and the manufacturer “continuously looks for ways to collaborate with India to find win-win solutions”. Representatives for Sukhoi, ATR and the aviation ministry didn’t respond to emails seeking comments.

ATR small planes are the workhorse of regional routes in India with the nation’s top carrier, IndiGo, operating 39 of them. Rival De Havilland’s Dash-8 Q400 turboprops, which seat between 78 and 90 people, are operated by SpiceJet Ltd. State-owned Hindustan Aeronautics Ltd. is already manufacturing the 19-seater Dornier 228 aircraft used by the armed forces and Alliance Air.

The plan is vital to Modi’s push to promote manufacturing and boost economic productivity while creating jobs. The government is strengthening last-mile connectivity by giving subsidies to airlines to make air travel more economical. As part of a regional connectivity program, India has allocated 45 billion rupees ($545 million) to develop 100 inadequately-served airports, heliports and water aerodromes, besides opening 1,000 new routes by next year.

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Interestingly there has always been Seven foreign aircraft manufacturers in the MRFA tender that includes American firms Boeing and Lockheed Martin, Russia’s Mig corporation and Sukhoi bureau, French Dassault Aviation, Swedish SAAB group and the Eurofighter which could mean that there is a new entry in the MRFA tender or it was simply a slip off to mind he also confirmed that the Indian Air Force prefers to take.

Some sources says that there will be a new entrants and that may be a stealth fighter. Speculations are circulating that this will be either American F-35 or Russian Su-75 single engine or Su-57E twin engine stealth fighters.

Air Chief Marshall confirmed that the Indian Air Force (IAF) would prefer to take the “˜Buy Global Make Indian” route over the strategic partnership policy model to produce the planes within the country just like the C-295 deal with Airbus will be executed with the Tata Systems in India.

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The cost of the procurement is expected to be in the range of Rs 18,000 to Rs 20,000 crore. This is the first project of its kind in which a military aircraft will be manufactured in India by a private company. A large number of detail parts, sub-assemblies and major component assemblies of aero structure are scheduled to be manufactured in India. All 56 aircraft will be installed with indigenous electronic warfare suite.

The project will give a boost to the aerospace ecosystem in India wherein several MSMEs spread over the country will be involved in the manufacturing of parts of the aircraft. The programme will act as a catalyst in employment generation in the aerospace ecosystem of the country and is expected to generate 600 highly skilled jobs directly, over 3000 indirect jobs and an additional 3000 medium skill employment opportunities with more than 42.5 lakh man-hours of work within the aerospace and defence sector.

Road to Acquisition

The IAF got approvals for its requirement to replace the existing fleet of Avros with a modern cargo aircraft in 2012. After tendering, in 2014, the project got stuck due to a single-vendor situation, a no-go under the then Defence Procurement Procedure, as only Airbus had responded in partnership with the Tata Group, offering its C-295.

Several global aviation companies such as the American Lockheed Martin, Ukraninan Ilyushin, Brazilian Embraer, Italian Alenia Aeronautica and Swedish Saab AB reportedly did not respond.

The defence ministry cleared the single-vendor offer in 2015 during a Defence Acquisition Council meeting, as no other viable proposal were coming for building the required aircraft of 5-tonne to 10-tonne category, following which negotiations for the contract began between the Airbus-Tata consortium and the ministry-air force officials.

The IAF has been pressing for years for the acquisition of medium transport aircraft (5-10-tonne lift capacity) to replace its 56 ageing Avro HS-748. The IAF already operates a large fleet of transport aircraft. These include over 100 AN-32s (being upgraded), ageing Russian IL-76s, and two new US aircraft – C-130J Super Hercules and C-17 Globemaster III. However, the IAF believes it requires additional utility and transport aircraft, for tactical use and for disaster relief and emergencies.

The reactivation of advanced landing grounds (ALGs) along the Sino-Indian border would create a requirement of rugged aircraft like the C-295 to operate off them, including for the UDAN programme.

About the C-295

The C-295MW aircraft is a transport plane of 5-10 tonne capacity powered by two Pratt & Whitney Canada PW127G turboprop engines that are part of the PW100 family, that will replace the ageing Avro aircraft of IAF.

The C-295 is a transporter that performs almost like a fighter. It requires just 700 metres of runway to lift off and climbs rapidly to mission altitude. It has multiple mission capability: transporting 71 persons, lifting 7.25 tonnes of cargo or monitoring the sea for 11 hours non-stop, using sophisticated radar and infra-red scanners. It requires just 350 metres to land.

The C-295 has a rear ramp door for quick loading and unloading and for para dropping of troops and cargo.

Comments

Airbus has waited on the sidelines for nearly 60 years for at least one defence contract to be in its kitty, even as India had selected the company’s products as the lowest bidder in more than two tenders that got scrapped. These failed bids for Airbus include the light utility helicopters to replace the Chetaks and Cheetahs and for the midair refuellers to enhance the endurance of several IAF aircraft.

During the process of manufacturing in India, it is expected that all the suppliers of TATA Consortium who will be involved in special processes will gain and maintain globally recognized National Aerospace and Defence Contractors Accreditation Program (NADCAP) accreditation.

The programme will provide a major boost to the ‘Atmanirbhar Bharat Abhiyan’ (self-reliant India initiative) as it offers a unique opportunity for the Indian private sector to enter into technology-intensive and highly competitive aviation Industry. The project will augment domestic aviation manufacturing resulting in reduced import dependence and expected increase in exports.

Before completion of the deliveries, a servicing facility for C-295MW aircraft is scheduled to be set up in India. It is expected that this facility will act as a regional MRO (maintenance, repair, and overhaul) hub for various variants of C-295 aircraft.

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The Ministry of Defence (MoD) in its annual report has also said that the ICG is planning to procure 14 Twin-Engine Heavy Helicopters (TEHH), the contract for which is expected to be inked by next March. Once the contract is finalised, these helicopters are going to be delivered by 2025-26 and will be deployed from shore-based stations. For the procurement of these helicopters, AoN was given by the DAC in January 2020 and the RfP has been issued to four global vendors last summer.

These helicopters after taking off the ICG ships will be able to undertake Maritime Surveillance, SAR, medical evacuation and Pollution Response missions’ up to 200 Nm from the coastline.

More about ALH Mk-III

These helicopters are going to be used for undertaking shore and shipborne operations, in accordance with the charter of ICG. The Areas of Responsibility (AoR) include Maritime Surveillance, SAR, Medical Evacuation, Casualty Evacuation, Logistics support to ships as well as Pollution Response sorties.

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These helicopters will come fitted with state of the art maritime sensors and systems. These include Automatic Identification System (AIS), High-Intensity Search Light (HISL), Integrated Architecture Display System (IADS), Surveillance Radar, Electro-Optic Infra-Red (EO-IR) system, and 12.7 mm Cabin Mounted Gun, etc.

The contract for 16 ALH Mk-III helicopters was signed with M/s HAL, Bangalore in March 2017.

C-295 Transport Aircraft

The annual report of the MoD talks finalising the procurement of the Airbus’ C-295 transport aircraft through the `Make in India’ process, as well as the deal for the Tejas Mk 1-A. These two deals have been pending for a while. The government also plans to finalise the plans for the indigenous Light Combat Helicopter and upgraded Heron drones from Israel.

Since the focus is on `Atmanirbhar Bharat’ in defence, the deal for 83 Light Combat Aircraft (LCA) Mk 1A from HAL for the Indian Air Force (IAF) is waiting to get approval by the Cabinet Committee on Security (CCS). Once the approval comes from CCS, the contract will be inked.

More about C-295 from Airbus

According to the annual report, out of the 56 C-295 aircraft, around 40 of these will be `Made in India’ with the participation of an Indian Production Agency. This is at CFA approval stage and the contract is most expected to be signed later. The report which has not mentioned any date or year for the contract to be signed has stated that this is going to be a first-of-its-kind deal which is planning to have the private companies participate in the production.

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These C-295 Transport Aircraft which are going to be manufactured in India will be replacing the ageing Avros transport aircraft of the IAF and the deal when inked is going to be for approximately USD 3 billion.

The deal will be between the MoD, Tata Advanced Systems Limited & Airbus, and 16 aircraft will be manufactured at the Airbus facility and the rest here in India through Transfer of Technology by Airbus. Once the production starts at the Tata facility in India, it will open doors for domestic suppliers which will be feeding the production line.

In 2013, the RFP for the replacement of Avros was issued to the global players and the approval by the DAC was given in 2015. Only Airbus & Tata were the sole bidders which had pitched the C-295 aircraft.

Around 50 Indian suppliers from both public and private sector are embedded in Airbus’ their global chain. Companies including HAL, Indian Space Research Organisation (ISRO), HCL, Wipro, Aequs and others are part of this chain.

Heron Drones & LCH

The contracts for the upgrade of Israeli drones Heron and the procurement of Light Combat Helicopter from HAL are likely to be inked in the first quarter of 2021, and most probably at the forthcoming Aero-India 2021.

Why now?

In view of the ongoing standoff between India and China along the Line of Actual Control (LAC) in eastern Ladakh, and in an effort to further ramp up its surveillance capabilities combined with firepower, the government has been focusing on upgrades as well as new procurements.

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