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August 2007

August 2007. Prepared by Jaimie Rogers Aerospace Sector Special Advisor UK Trade & Investment. UKTI Aerospace Sector - India 4th Monthly report - August 07. Contents. Page Contents 02 Achievements 03 Actions In the Next Month 05

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August 2007

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  1. August 2007 Prepared by Jaimie Rogers Aerospace Sector Special Advisor UK Trade & Investment UKTI Aerospace Sector - India4th Monthly report - August 07

  2. Contents Page Contents 02 Achievements 03 Actions In the Next Month 05 The Indian Civil Aviation Industry 06 Aim 07 Economic Background 07 The Indian Civil Aviation Industry 09 Governing Bodies 11 Changing Industry 13 The Indian Airlines 14 The other Sectors in the Aviation Sector 17 Infrastructure to Support the Industry 22 Opportunities for UK Companies 32 Table of Airlines and their Aircraft Fleets 39 References and Sources of Data 41 The Indian Public Sector Aerospace Industry 43 The Indian Armed Forces 44 Offset 44 Public Sector Units 45 Research Establishments 51 Opportunities for UK Companies 55 Appendices of Military Aircraft and Missiles 58 Composite Manufacture 65 Avionics Design & Manufacture 67 Shows & Conferences 70 Consultants & Agents 72 Special Economic Zones 74

  3. Achievements • 33 visits undertaken in Hyderabad and Bangalore • Focus for these visits has been on: • Civil Aviation • Avionics Manufacture • Composites manufacture • Research Organisations • Public Sector Companies • Presented at The Engineering Design.In Conference & Expo to be held in Bangalore 9-11 August • Key note speaker - provided an overview of UKAI and feedback to the Indian Engineering Services Sector • Lead the UKTI Stand • A good opportunity to give the UKTI sector teams a more technical appreciation of the aerospace sector • A good spin off has been that I have circulated the presentation to the UKTI Aerospace team in India which gives them a good overview of what is happening in the UKAI today • Update to the Genser Report Completed • Active marketing to the Indian aerospace engineering service providers for inward investment in the UK • A letter and background information sent to the top 10 companies highlighting the need for them to set up European technical integration centres and why these should be based in the UK. A follow up meeting held with TCS to discuss issues and best locations for offices • Opportunities on MRO and R&D communicated to UKAI on the following Companies: • Hamco • Paramount Airways • NAL • IISc • Support and advice given to a number of UK Companies • Such as Marilake Instruments Ltd, Aerologistics, Action Aviation and Consensus.

  4. Achievements Companies and Organisations met in the last month: (These are only companies where I have had an extended meeting with the representatives) Hyderabad Visits: ASIA - Consortium of Aeropsace Compnaies in Hyderabad Anath Technologies Ltd - Subba Pavuluri - Managing Director Zetatek Industries Ltd - Siva Kumar - Managing Director MTAR - Ravindra Reddy – Company Director SKM Technologies Ltd - Krishna Rao - Managing Director Hamco - Uday Naidu - Chairman & CEO Astra Microwave Products Ltd - G J Prabhakar - Inter. Marketing Manager Sigma Microsystems Pvt Ltd - Narasimha Reddy - CEO Pet Aviation - Prabhat Singhee - Exec Director Jaisara Tooling Ltd - Manohar Vangoori - Managing Director Bangalore Visits: Action Aviation ComAvia Systems Tech. Ltd- Thomas Varughese -CEO ProSim - Dr Shamasundar - Mang Dir. Digiprotek - Srini Iyer - CEO EADS, Astrium - Katkuri Venkata Ramu - Liaison Officer Institute of Engineers (India) - Dr L V Muralikrishna Reddy - Hon Secretary ATR - Marian Mailhes, Sales Director India Airbus Pvt Ltd - Alan Roland, IT Manager & Joelle Willaume, Head of Engineering Tata Advanced Materials - Hemanth Achaya - COO Larsen & Toubro Ltd - Simha - VP Strategic Electronics Centre Quest Machining & Manuf Ltd - Aravind Melligeri - CEO Quest Bharat Electronics Ltd - V K Sharma - General Manager International Marketing National Aerospace Laboratories - Dr Upadhya - Director David Marshall - President of the Royal Aeronautical Society The Aeronautical Society of India Hindustan Aeronautics Ltd - Ashok Baweja - Chairman; Aircraft Division and Engine Division Taneja Aerospace & Aviation Ltd - Kmaeswaran Managing Director & Nicholas Belbin - CEO Aerostructures Indian Institute of Science - Department of Aerospace - Prof Raghunandan and his team Hightemp Furnaces Ltd - Gopal - managing Director Tata Consultancy Services - Suresh Babu - Director Aerospace Practice

  5. Actions in the next Month • Attend the International Astronautical Congress in Hyderabad, 27 Sept • Meet UK Companies attending • Meet some of the key Indian Companies • Made welcome speech on behalf of UKTI at UK Reception • Return to the UK, 30 Sept • Make a series of presentations on my findings in India to UKAI via the UK Aerospace Associations: • Tues 16 Oct - Presentation at NWAA • Wed 17 Oct - Presentation at MAA • Thur 18 Oct - Presentation at WEAF • Fri 19 Oct - Presentation at FAC • Mon 22 Oct - Presentation at SBAC • Wed 24 Oct - Presentation at SDI • Thurs 25 Oct - Presentation at Invest Northern Ireland

  6. The Indian Civil Aviation Industry

  7. The Indian Civil Aviation Industry There is estimated to be $110 B to invested in the Indian Civil Aviation industry by 2020 - $80B on Aircraft and $30B on Infrastructure’ Aim In this short document I have not been able to go into great depth on such a large sector. The intention is to give some background information, highlight the key players and look at the trends: past, present and future. I have tried to clearly identify the opportunities and then provide further sources of information. I have included a number of the latest statistics and exerts from the Indian media. My health warning is that any forecast out to 2020 needs to be taken with a pinch of salt! Economic Background When IT companies such as TCS, Wipro, HCL and Infosys were set up in the 1970s to service the US markets and when Texas Instruments set up their semiconductor design centre facility in Bangalore in 1985 no one imagined where it would lead and the huge impact the IT sector would have on the Indian economy. The fledging IT sector flourished in the late 90s and grew exponentially when the fears of the millennium bug hit the global IT industry. India became the global outsourcing capital for all the reprogramming work that was required. This gave India two major advantages: A huge boost to its economy and its ‘Process Revolution’. i.e. the ability to resolve any complex problem by breaking it down into very small, simple pieces. This has lead to great development of other industries in India: Telecomms, all forms of engineering, and other technology and science led industries. India’s GDP is $615.5 Billion (2006). India is one of the fastest growing economies in the World, second only to China. India’s GDP growth about 7% -8% per annum. In 20 years India is expected to become the third largest economy only behind China and the USA. On the ground, this means today’s generation of Indians have significantly more money in their pockets than their parents and also different expectations. They are looking at the West as a role model and now expect to be able to fly around India and to travel abroad on vacations and not spend days sitting on over crowded trains. There is now a significant number of 2 income families, which a decade a go would have been unheard of The Indian middle class is estimated at about 300 million people of a total population of 1.1 billion. Half the total population is aged between 18 & 24 years old. The other factor is the growth in not only national tourism in India but international tourism. India is now being seen as a new destination for lots of western holidaymakers. Goa is now seen as the Costa Del Sol of India. These factors have lead to large growth in the number of tourist/

  8. The Indian Civil Aviation Industry leisure/ pleasure flights. With the boom in business and industry there has been a significant growth in business travel, domestically and internationally. The graph below shows The Indian Domestic Market, Forecast of Business Vs Leisure Passengers until 2010. Graph courtesy for Centre of Asia Pacific Aviation, (CAPA)

  9. The Indian Civil Aviation Industry • The Indian Civil Aviation Industry • Until the early nineties Air Indian and Indian Air, the state owned airlines, were India’s only national carriers. In 1991 the Indian Government created the ‘Open Sky’ policy. Its aim was to open the skies to private sector. This was fairly ineffective because the civil aviation environment then was not conducive for sustaining a high quality competitive level. The new airlines could only be called air taxies and were not allowed to publish schedules. The aim was to get these companies to fly to the secondary cities and not compete directly with the state owned carriers. A number of the private airlines went under and only Jet Airways and Sahara Airlines survived. By the end of 2004 new reforms were introduced to make flying more affordable. This allowed the Low Cost Carriers (LCCs) to enter the market. • Today the regulations that control the sector are still under constant review. Slowly the bureaucracy is being lifted which is now allowing Indian airlines to compete against the international competition. These reforms along with the boom in the Indian Economy have lead to the high level of grow we are seeing in the industry today: • In the 6 months ended 30 September 2006, domestic traffic has increased by 44% year-on-year. • India’s airports handled 51.0 million domestic passengers in 2005/06, posting growth of 28% year-on-year, and 22.4 million international passengers, up 15.1%. • The Centre for Asia Pacific Aviation (CAPA) projects domestic traffic in India will grow 25-30% p.a., and international by 15% p.a. until 2010 • CAPA research projects that domestic passenger traffic will reach 150-180 million by 2020, with international traffic in excess of 50 million. • Current estimates are that the Airline industry in India is growing at twice the speed of the Indian GDP growth. In May 2005 the national fleet comprised 170 aircraft, today it is now almost twice that with 312 units. This number will rise further to approximately 370 by the end of 2007. CAPA estimates that India’s fleet will reach 500-550 aircraft by the end of 2010. • In the next 20 years it is estimated that India will be the fastest growing civil aviation industry in the world • The Indian Ministry of Civil Aviation (MOCA) estimates that by 2020 there will be 1000 aircraft in service in India (conservative estimate) • Why is the industry so bullish? It is only now just stating to tap into the Indian domestic market: • Only 1% of the Indian population has flown in a commercial aircraft. • Jet Airways claim that 40% of their passengers are first time flyers • There are 5 billion passengers on the Indian railways a year. The LCCs are targeting their fares at these 1st and 2nd class passengers. Today the total number of domestic air travellers is only 1% of this. This percentage will grow.

  10. Indian Annual Growth, Passenger Numbers The Indian Civil Aviation Industry • Graph courtesy for Centre of Asia Pacific Aviation, (CAPA)

  11. Indian Passenger Traffic Growth 1999-2006 The Indian Civil Aviation Industry Table courtesy for Centre of Asia Pacific Aviation, (CAPA) Governing Bodies The Indian Civil Aviation Industry is under the control of the Government of India, under the remit of the Ministry of Civil Aviation (MOCA). This Ministry is responsible for the formulation of national policies and programmes for development and regulation of Civil Aviation and for devising and implementing schemes for growth and expansion of civil air transport. It also oversees the provision of airport facilities, air traffic services and the carriage of passengers and freight. Both Air India and Indian Airlines come under the wing of the MOCA.

  12. The Indian Civil Aviation Industry • Two important organisations within the MOCA are: • Airports Authority of India (AAI) who own and manage over 60 operational airports in India. The AAI operate most aspects of the airport (including air traffic control) and procure most of their equipment directly. • Directorate General of Civil Aviation (DGCA) is responsible for regulation of air services to/from/within India and for formulation, enforcement of civil air regulations, air safety and air worthiness standards. These regulations are not inline with FAA or CAA regulations currently. The DGCA does recognise it will have to align its regulations with international standards in the near future. • Some of the important regulations are currently being reviewed are: • 49 % equity participation by foreign airlines. This may increase further. Currently a foreign airline cannot invest directly in an Indian airline, it can only be one of the foreign airline promoters • 49% Foreign Direct Investment (FDI) limits on Air Cargo, Helicopters, MRO and Sea-planes to be raised to 74 percent. • Indian government to ratify the Cape Town Convention regarding an international legal regime for high-value mobile items, such as aircraft and space equipment. If ratified, this will benefit airlines by making aircraft purchase and leasing cheaper. • Minimum equity to start a new airline will be raised from £ 3.7 million and £ 6.2 million • Director-General of Foreign Trade (DGFT) functions will expand to include enforcement of legislative obligations. • Upper age limit for aircraft has been stipulated as 8 years, reducing it from the current 15 years. • Bureau of Civil Aviation Security gets more teeth and special provisions to tackle aviation offences. • A proposed Aviation Economic Regulatory Act (AERA) to formulate guidelines for large mergers, such as Jet and Sahara and in future Air India-Indian Airlines. • The maximum age of pilots – to be raised for 50 to 60 or 65 • Currently an airline must operate domestically for 5 years before it flies internationally. This might be reduced to 3 years • Allow aircraft to be piloted by 2 overseas pilots. Currently there must be one Indian pilot • Other important regulations: • FDI on green field airport projects are allowed 100 percent foreign participation

  13. The Indian Civil Aviation Industry • Changing Industry • The MOCA and especially the Minister himself, Praful Patel, is getting a great deal of praise for the development and grow the industry. Both the AAI and the DGCA are trying to support and development whilst retaining regulations and standards. There are also the voices of the airlines themselves that are trying to influence him: • Federation of India Airlines (FIA) – Was founded at the start of 2007. It is the representative of all the airlines in India. Its aim is look at issues that are affecting all the airlines, under take research and produce reports and papers to lobby the Government and support them in making informed decisions. It’s the biggest issues effecting the airlines today are: • Today none of the airlines are making a profit. CAPA estimates that airlines in India posted a combined loss of $500 million in the year ended March 2007. Taxation on Aviation Turbine Fuel (ATF) is the biggest influence on this. ATF is estimated to be 65% higher than the global average. They account for 35-40% of operating cost, as against global average of 20-25%. • Airport Congestion – Work is already underway on a number of new metro airports and upgrade programmes. This work is just not happening fast enough to support current growth levels. • The other very influential voice is Dr Vijay Mallya. A Member of Parliament and Chairman of United Breweries, who own Kingfisher Airlines. He is very influential with the MOCA and is using this to benefit his airline. This, I believe, is currently benefiting the whole industry. He is getting updates to regulations pushed through in days and weeks not months or years.

  14. The Indian Civil Aviation Industry The Indian Airlines From about 2002 there have been a number of new airlines enter the sector. At the start of 2007 there were 12 Airlines in India: 2 state owned: • Air India – (Full Service Carrier, FSC) and Air Indian Express (Low Cost Carrier, LCC) - (international flights) • Indian (FSC and regional flights). 10 privately owned: • Jet Airways (FSC) - (currently does international flights) • Air Sahara (LCC) – (currently does international flights) • Air Deccan (LCC & Regional Airline) • Kingfisher (FSC) • Spice Jet (LCC) • Jagson – (Air taxi operator) • Paramount Airways – (Regional Airline) • Go Air – (LCC) • Indigo. (LCC) Further new airlines are looking to enter the market. There is now a period of consolidation going on. We are seeing a number of airlines joining forces. There are a number of reasons for this: • The formation of aircraft fleets that will allow these Indian airlines to challenge other major airlines in the rest of Asia • The ability to cover the entire market with both FSC & LCC services

  15. The Indian Civil Aviation Industry • Access to more flight slots – e.g. Kingfisher can use Air Deccan’s 450 flight slots. It can also switch the standard of service offered: low cost or premium depending on the market being targeted for each slot. • Access to aircraft parking bays- e.g. Kingfisher can use Air Deccan’s 45 parking spaces around India, currently it has none. • Reducing duplication of support services, such as a engineering – although this is very minor as engineering services are very poor throughout the sector • By end 2007 a number of these will have occurred: • The two State-owned airlines will have merged. • Jet Airways will have acquired Air Sahara. Sahara is now Jetlite • Kingfisher will have a 51% stake in Air Deccan. • There is also talk that Paramount will buy Indigo or Indigo will join forces with Spice. Jet Airways may acquire Go Air. • Looking to the future of the Indian Civil Aviation Industry there will be 2 or 3 FSCs, national carriers; 3 or 4 LLCs and a small number of regional Airlines. The view today is these are the mostly likely contenders: • India Air (FSC & LCC) • Jet Airways & Jetlite - (FSC & LCC) • Kingfisher & Air Deccan (FSC, LCC & Regional Carrier) • Indigo (LCC) – Have some serious backing, CEO is COO of US Airways • Paramount (Regional Carrier) • Items of News on the Indian Airlines: • Jet Airways is looking to set up a European hub in Brussels • Air India is also looking at setting up a major hub in Europe. This will probably be in Germany. • Ryan Air is doing a due diligence of Spice Jet. Spice Jet is trying to raise US $40 million to fund its fleet expansion from 11 to 18 aircraft. It is also looking at flying abroad.

  16. The Indian Civil Aviation Industry Graph courtesy for Centre of Asia Pacific Aviation, (CAPA)

  17. The Indian Civil Aviation Industry • The other Sectors in the Indian Civil Aviation Sector • Currently all the headlines are about the national passenger carriers. There are 4 other sectors that are also growing and although being overshadowed by the ‘sexy’ airline stories we are going to see large levels of growth: Cargo, Regional Airlines, General Aviation and Helicopters. • Cargo • In 2004-05 export tonnage increased by 13%, an increase of 45,000 Tonnes compared with 2003-04 and Import tonnage increased by 26%, an increase of 51,000 Tonnes through the same time period. This is fuelled by the fast growing economy and by a strong industrial base. Future forecasts remain high. • Freight carriage in India currently around 4200 tons per day • It is forecast that the Indian logistics industry is set to be a US $ 125 billion market by 2010 and is set to grow by 25 per cent in next 5 years. • Express logistics business is over US$ 1.55 billion in 2007 and is growing at a compounded annual growth rate of 11 per cent per annum and this is expected to continue until 2011 • A recent Airbus report had predicted that India would order in access of 165 cargo aircraft by 2025 • These levels of growth are supported by the levels of growth we have seen since 2000, see table on the next page. • To support the growth in the cargo sectorThe MOCA is proposing exclusive cargo airports, which may well be privately owned. The MOCA has also raised FDI from 49% to 74% in the cargo sector to facilitate building of cargo airports at various business centres across the country. It is expect shortly that the Government will grant Nagpur as a major cargo hub. Nagpur is one of India’s secondary cities, located in the centre of India. • Currently there is only one main player in the market that is Blue Dart, which is based in Chennai and is 81% owned by DHL Express. It currently has a fleet of 7 aircraft: 5 x B737 and B757 aircraft. In the next year there will be 3 or 4 new entrants:

  18. The Indian Civil Aviation Industry • Reliance Retail - who have an fleet estimated at 40 aircraft • Jet Airways - in partnership with Lufthansa plan to launch a dedicated cargo airline by the end of 2007 and is aiming to increase cargo revenues from 6% to 10% of their total revenues. • Air India Cargo - will be converting six Airbus A-310 aircraft into freighters at an estimated cost of $ 6 million each. It is also planning to convert a few of its Boeing 747-300 combi aircraft into freighters. It has just taken receipt of a new 777-200 ER. Operations commenced July 07. • Flyington Freighters – based in Hyderabad. Are starting operations with 4 leased A300-600F and has placed orders for 6 A330-200Fs, delivery 2009 and will order a number of B777-200Fs in 2009 • Looking slightly further ahead in the next 5 years we will see one or two of the other airlines entering such as Go Air and also some participants from the retail sector such as Bharti/Wal Mart and some of the other international freight carriers. There will also be room for some regional freight carriers.

  19. The Indian Civil Aviation Industry Table courtesy for Centre of Asia Pacific Aviation, (CAPA)

  20. The Indian Civil Aviation Industry • Regional Aviation • The current focus for the Indian Civil Aviation Industry is to get the infrastructure in place to allow passengers to travel between major cities and internationally, i.e. mobilise the national carrier fleets. The next step is to link the secondary cities to these major Metro hubs. With the poor country infrastructure the aim is to do this by developing a number of regional airports. 35 non-metro airports are starting to be commissioned. The MOCA is trying to encourage this sector by offering breaks such as a reduction in the sales tax on ATF for aircraft with less than 80 seats. • Currently within the existing fleets there are 47 RJs (see table of Indian Airlines: Existing Fleets and New Orders). There are new orders for 80 RJ. By far the most successful manufacturer is ATR with 30 aircraft already in service and 65 on order. Bombardier and Embraer are also in India. India has only become a market for regional aircraft since 2002. • The 3 biggest regional operators are: • Air Deccan - currently 14 aircraft and a further 30 on order • Kingfisher – with 35 ATRs on order • Paramount – currently with 5 Embraers and 15 more on order • The Kingfisher/ Air Deccan Airline will potential dominant this sector • General Aviation • With the up surge in Indian business, the poor country infrastructure and changes in expectations the demand of smaller aircraft for both business and recreation is on the rise. This is not only from a practical point of view i.e. the ability to travel more quickly around the country but also from a status viewpoint. It seems that the wealth Indians like to be able to demonstrate their wealth and do use their aircraft to woo clients and decision-makers. • The business aviation market in India grew by 100% from 50 aircraft in 2005 to 100 aircraft in 2006. • Today in India there are 170 registered non-scheduled aircraft, compared with at least 150,000 in USA.

  21. The Indian Civil Aviation Industry • Of these 170 aircraft 40% are over 20 years old. There is a likely to be a market for up to 500 general aviation aircraft by 2020, including fleet renewal, with an estimated investment of $2 billion. • The business aviation industry in India is expected to grow by 30 – 40 % over the next 5 years. • There are 200 General Aviation aircraft import applications pending with the Government of India. • 100 applications for charters cleared between June – December 2006. • Cessna have about 60% of the corporate jet market in India. • Club One Air - based in New Delhi is the only operator that offers private jet services. It works on a fractional ownership basis. • Ran Air – have 10 small aircraft and currently offer services. Looking to purchase a further 10 small aircraft • Airworks India - based in New Delhi undertake the majority of the MRO for the general aviation market. They are looking to expand and set up centres throughout India. • Helicopters • For all the same reasons as with general aviation the number of helicopters in the Indian skies is growing and will continue to do so. Congestion and infrastructure problems are most apparent in India’s cities. These cities hold huge numbers of people, New Delhi 10 million, Bangalore 7 million but where the road infrastructure is always playing catch up. Helipads are becoming more common. With all the new building going on these are being included in the specifications. There is suggestion that regulations will make helipads mandatory for new buildings over a certain height. • Estimate that there are around 200 helicopters in Indian currently. There is a requirement for there to be 1000 in 5 years • Bell Helicopters, Eurocopter, Augusta Westlands and Swycorsky all have sales campaigns in India currently. Their targets are Corporations for their executives, the Indian Government and the 27 State Governments for ministerial travel. There is also a market to support the offshore oil exploration

  22. The Indian Civil Aviation Industry industry and the emergency services: police, lifeguard, mountain rescue and ambulance. The main interest in India is on the 5 tonne or less craft. Some larger craft are being sold for the offshore market and VVIPs. As in the regional jet sector none of the OEMs provide MRO support. They will only supply spares and support. Global Vectra Helicorp – based in Mumbai is India’s largest helicopter operator with 18 Bell 412s and 2 Eurocopter EC155. It plans to expand its fleet in the next two years with 6 more Bell 412s and 3 EC155B1s. Pawan Hans Helicopters – Government run operator. Mainly supports the oil sector. Airworks India - based in New Delhi undertake the majority of the MRO for helicopters. Being based in Delhi they are close to the centre of Indian Government and a large number of Corporations headquarters. Infrastructure to Support the Indian Civil Aviation Industry It is estimated there will be $110 B invested in the Indian Civil Aviation industry by 2020 - $80B on Aircraft and $30B on Infrastructure The Indian Airline Industry has grown ‘Aspirationally’ i.e. the airlines have seen the potential in the market and have placed orders for aircraft to support these numbers. At Paris 2007 half the orders for new aircraft were Indian. This has created a huge vacuum in terms of the infrastructure to support this increase in passengers and increased numbers of aircraft and flights. This approach has been very successful in making the entire industry move quickly – ‘necessity being the mother of invention’. Without this pull we would not see the rapid development of the required infrastructure, which may have taken a further 5 years. The infrastructure can be broken into the following areas: Airports & Airport facilities Air Traffic Management (ATM)

  23. The Indian Civil Aviation Industry Maintenance, Repair and Overhaul (MRO) and other Engineering Facilities Skilled & Qualified Personnel Airports There are currently 450 airports and airstrips in India. 128 are under the Indian Airport Authority control. Only 74 are used commercially. 12 are designated as international airports and of those 6 are metro airports. Indian Government has announced a national airport upgrade and modernisation plan which will see an investment of approximately US$9 billion by 2010 in the upgrade and redevelopment of the metro airports. Much of the funding is expected to come from the domestic and international private sectors. This is a summary of the latest information on the airport developments: New Delhi & Mumbai - Joint venture companies with 74% private sector participation were appointed in January 2006 to modernise and upgrade New Delhi and Mumbai Airports. Stage I completion scheduled for 2009/10. Mumbai Airport - Currently handles 18 million pax and 400,000 tonnes cargo. Expected to increase capacity to 40 million pax and 1 million tonnes cargo after the current modernisation phase. Planned investment of $1.6 billion by 2020, of which $1.3 billion will take place by 2014. Delhi Airport - Currently handles 13 million passengers. Expected to increased capacity to 35 million by 2010. Plans include a new 4 million sq. ft terminal building in the first phase. Development includes an additional parallel runway (to be completed by March 2008) and connectivity by metro rail. Planned investment of $764 million by 2014 and $1.7 billion by 2020. Chennai & Kolkata Airports - Both airports are likely to be developed using a joint venture model. Chennai is likely to have a green field airport due to a shortage of land at the current site. Kolkata could be modernised by the AAI, but there is also a possibility of green field airport. The AAI is spending

  24. The Indian Civil Aviation Industry $27 million to construct a new warehouse and integrated cargo building, with planned investment of $140 million for the construction of a new domestic terminal and aerolink. The AAI is investing $24 million to extend the second runway, construct 21 parking bays, extend the domestic security hold and install 3 aerobridges. $53 million is to be spent on the international terminal. Bangalore & Hyderabad Airports - New green field airports in both cities are under construction and scheduled to open by April 2008. Bangalore Airport involves an investment of $500 million and will have a capacity of 11 million pax by 2010. Hyderabad International Airport is being constructed at a cost of $400 million and phase will see capacity of 7 million pax (increasing to 50 million in phase 2) and 100,000 tonnes of cargo. Secondary Airports – There is already consideration be given for second airports at Mumbai and Delhi 35 Non-Metro Airports - Development of 35 non-metro airports will proceed at an estimated cost of $1.2 billion. 24 of these will have city side development through Public Private Partnership (PPP) route. The city side development would include construction of hotels, convention centres, food courts, flight kitchens, petrol pumps, hospitals, shopping malls, hyper marts, golf courses and cargo warehouses etc. This will require a further $350 million. This modernisation process should be complete by 2009. Feasibility studies have been approved for 10 airport such as Ahmedabad, Amritsar, Goa, Guwahati, Jaipur, Lucknow, Madurai, Managlore, Trivandrum and Udaipur. A further 15 airport approvals are expected shortly and urgent operational requirements are being addressed at a further 10 non-metro airports. 3 green field airport projects are being considered in the Northeast region of India with capability to handle up to ATR-72 sized aircraft. Proposals have been submitted by other state governments for development of 7 other green field airports. The government also plans to develop around 300 unused airstrips across India. This would assist in regional connectivity and will be a boom for the emerging regional jet market in the country. The Indian government is also considering private airports for cargo.

  25. The Indian Civil Aviation Industry India’s Metro & International Airports Amritsar Delhi India Guwahati Ahmedabad Kolkata (Calcutta) Nagpur Mumbai (Bombay) Hyderabad Metro & International Airport Panaji, Goa International Airport Nagpur: Is to become a large hub for MRO and Cargo Bangalore Chennai (Madras) Cochin Thiruvananthapuram

  26. The Indian Civil Aviation Industry • Nagpur will become a major centre for aviation in India due to its located in the centre of Indian and is equidistant from a number of the metros: Delhi, Hyderabad, Bangalore, Chennai and Kolkata. Currently as a secondary city land prices in Nagpur are cheap compared to the larger metro cities. Boeing is already looking at setting up a MRO facility there. It will become a centre for MRO, Cargo and potential training. • Air Traffic Management • The Government of India is spending $25 million per annum on upgrading the Civil Navigation System (CNS) and Air Traffic Management (ATM) infrastructure. A further $180 million investment is expected over the next 3-4 years on modernisation projects. Large investment is also required in communications, navigation and surveillance. • The issue today is easing congestion at the current airports. The AAI are looking at equipment such as, navigational aids, night landing equipment and GPS equipment that may help this. The AAI are looking at plans for SATCOM based Air Traffic Management. By 2010 they hope to have launched GAGAN, or the satellite-aided geo-augmented navigation project being jointly implemented with ISRO. The aim is that it should improve management of the skies and reduce flying times, allowing more flights to take off and land at airports. • Planning, procurement and commissioning of all Communication, Navigation & Surveillance (CNS) facilities and support systems for air navigation is managed by CNS Planning Department. • Modernisation of Air Traffic Control services at Delhi & Mumbai has almost been completed at a cost of more than $100 million. This will provide Air Route Surveillance Radar (ARSR), Monopulse Secondary Surveillance Radar (MSSR), Airport Surveillance Radar (ASR), Airport Surface Detection Equipment (ASDE), Radar Data Processing Systems, Flight Data Processing Systems, Automatic Message Switching Systems (AMSS), Automatic Self Briefing Systems ASBS), 12 VORs/DVORs with Remote Monitoring & Maintenance facility co-located with High Power DMEs for unidirectional airways etc. • As well as the modernisation at Delhi and Mumbai six more ASRs/MSSRs have been installed one each at Kolkata, Chennai, Thiruvananthapuram, Hyderabad, Guwahati & Ahmedabad and four more MSSRs are planned to be installed in next two years to cover all the major air-routes in India by Secondary Radar coverage.

  27. The Indian Civil Aviation Industry • The number of instrument landing systems has grown from 5 to 34. • By the end of September 2007 the Airports Authority of India (AAI) and Indian Air Force will have launched a pilot scheme to see if they can manage air traffic together. • Maintenance, Repair and Overhaul (MRO) and other Engineering Facilities • There are no large MRO centres currently in India. MRO and the engineering services are struggling today to cope with the current fleet of aircraft. Large investments are required to ensure the growing fleets can be serviced and maintained. Today all heavy maintenance – D checks are done overseas mainly in Dubai or Singapore. HAL is the only organisation that can undertake D Checks, which is does for the state owned carriers. • This will change shortly as a number of the airlines, OEMs and investment groups set up facilities over the next 5 years. Both Boeing and EADS are using MRO and training to fulfil their offset commitments on the aircraft they have sold to the state owned airlines. They do not see MRO as one of the key competencies and will withdraw from this once their offset obligation is complete. The MRO facilities in India, once established, will look to offer their services to the international market due to their low labour costs and their competitive rates. • Of the main Indian airlines there are 3 or 4 who will invest in JVs with other companies and set up their own MRO facilities, e.g. Kingfisher, India Air and Go Air. The other airlines will look to streamline their activities and sub contract out the MRO work to the independent operators, e.g. Jet, Jetlite and Indigo. Their primary focus being on passenger services. • Listed below are the major MRO facilities to be set up. Much of this is still to be decided so there is conflicting information circulating at the moment: • EADS has signed a MoU with Jupiter Aviation (part of the Jupiter Capital Group, a US infrastructure investment company) for MRO and support of commercial aircraft in India. It will be a $100 million JV with Kingfisher-Air Deccan, based in Bangalore. The venture will look to attract international customers and will also offer training.

  28. The Indian Civil Aviation Industry • Indian Airlines have also signed a JV with Jupiter Aviation to set up an MRO facility. EADS will help the joint venture find a third partner who will carry out the maintenance and repair work. The facility, which will be set up with an investment of up to $ 60 million and will cater for around 300 aircraft per annum. The facility will be in one of three cities: Delhi, Mumbai and Hyderabad. The engine repair facility will be in Delhi. The facility will undertake airframe maintenance and repair of Airbus aircraft of Indian to begin with. Later, it will extend the facility of Airbus aircraft of other airlines and also to aircraft other than the Airbus family. The facility should be ready in the next 1-2 years and will also cater to markets of Bhutan, Sri Lanka, Pakistan and Bangladesh. • Boeing plans to invest $185million in a joint venture with Air India as part of a deal for the sale of 68 aircraft. The proposed JV will offer MRO facilities for 777 and 787 aircraft to third parties. The Boeing investment will comprise of $100million for setting up the unit, $75million for training and $10million for general purposes. The plan is to set up the facility in an Special Economic Zone (SEZ) in Nagpur. Boeing and Air India are still to select a third partner who would run the MRO unit. This will not be operational until 2009/10 when the first of the 68 new Boeing aircraft is delivered. Development of the site is due to commencing by the end of 2007. • Lufthansa Technik has signed an agreement with GMR Hyderabad International Airport to set up an MRO facility at then new Hyderabad Airport. From there it will support its existing customers. Jet Airways is very interested in using this facility because Lufthansa currently support their fleet. • GMR Hyderabad International Airport has also signed a lease agreement with Indian Airlines to set up a MRO facility. • Go Air is considering plans to launch an MRO in joint venture with Singapore Airlines Engineering Company (SAEC) for line maintenance and heavy maintenance of aircraft. An investment of over US $30 million was be required. While line maintenance would be carried out at major airports by this JV company, the location for the heavy maintenance MRO is being selected. • Hamco, part of Satyam, is looking to open its MRO facility at the new Hyderabad Airport in 2008. They are looking to offer MRO and aircraft maintenance engineer training. They currently have contracts from 3 airlines for their services. Hamco are looking for companies with technical capability to carry maintenance and servicing in a number of areas, see details further on.

  29. The Indian Civil Aviation Industry • General Electric are investing $20 million in an engineering shop as part of Air India/ Boeing aircraft offset commitment • Paramount Airways and Embraer are looking to set up an MRO and pilot training facilities in Chennai. They are looking for a strategic partner to support this venture • Airworks India currently undertake most of the MRO on general aviation and helicopters in India. They have just signed a deal with Global Tech (USA) to expand their business to have a centre at each Indian Airport. They will also do airline maintenance engineering training. • Bombardier is also planning a MRO facility at Mumbai or Hyderabad. • Skilled and Qualified Personnel • Right across the sector there is a severe lack of skilled and qualified personnel, even at today’s air traffic levels. This will only be exacerbated by the growth in the industry: • Pilots – Currently there are 3000 pilots in India, which is 200 short of that required. By 2010 5000 additional pilots will be required. • Aircraft Licensed Engineers (AME) – Hamco predicts that over 20,000 licensed engineers will be required by 2020, today there are currently less than 1000. • Air Traffic Controllers (ATC) – Airports authority Indian estimates it will need an additional 400 ATC in the next 2 years. • Cabin Crew and all the different skilled staff that are required on the ground to manage passengers, baggage, cargo in the terminals as well as air side.

  30. The Indian Civil Aviation Industry • There are currently 26 operational flying training schools in India which provide training for various licences like Private Pilot Licence and Commercial Pilot Licence. 14 of these are run by various State Governments. The remaining 11 are run by private entrepreneurs. These currently produce about 150 commercial pilots a year. • The Directorate General of Civil Aviation (DGCA) has received 37 proposals to set up new flying training institutes around India. All the institutes have to conform to the requirements laid down by DGCA. • As you will see from the section above many of the companies opening MRO facilities will also offer training of pilots and engineers. • As part of their plans Jupiter Aviation and Kingfisher Airlines are setting up a new independent crew-training centre in Bangalore for both Airbus and Boeing aircraft. Thales has won the contract to supply the flight simulators. Lower level training devices will also be required. Jupiter has also signed a collaboration agreement with France-based ESMA and EADS Services for setting up aviation training schools in four places in the country. The first one is likely to be established at Hassan. • At the Airbus centre in Bangalore they have just started a course where pilots can undertake their Airbus type training, which will train around a 1000 pilots a year • Boeing are to invest $75million in training for Air India • Lufthansa Technik are in partnership with Flytech Aviation Academy to offer full pilot training, AME and cabin crew training • The Airport Authority of India (AAI) and Canadian Aviation Electronics (CAE) of Canada have signed an MoU to form a Joint Venture to establish the National Flying Training Institute (NFTI) Maharashtra. As per the MoU, the JV will have 49 percent equity of AAI and 51 percent of CAE. The Flying Training Institute is estimated to come up at a cost of $23 million. The Institute is expected to produce 200 pilots a year. • The Bird Group, an aviation consultant is now all set to open an institute for training pilots. The group has an annual turnover of $ 40 millon, and plans to commence operations by the end of 2007. It will take around 120 students into its first batch.

  31. The Indian Civil Aviation Industry • Skyblue Aviation Academy, a start-up training institute launched operations mid 2007 is in the process of setting up flying schools in Andhra Pradesh and Perth in Australia at a cost of $20 million. The institute is also planning to open 10 extended campuses in the country by August 2008. At present, Skyblue is functioning through a 6,000-sft facility in Hyderabad, which includes a cabin mock-up for training cabin crew. • Spice jet has announced a strategic tie up with Oman Air to provide Spice with pilots • The departing US Air Attaché in India is looking at setting up a flying school in Florida to train pilots for the Indian Civil Aviation Industry. His intention is to take on 20 students a month. This is a service he will offer to the airlines. In the long run he expects to open a school in India • Many more are in the offing such as Deccan Aviation's venture with ATR • Air Traffic Management Training • The Airports Authority of India has four training institutes: • National Institute of Aviation Management & Research (NIAMAR), New Delhi • Civil Aviation Training College, (CATC), Allahabad – undertakes ATM and CNS training • Fire Training Centre, (FTC), New Delhi • Fire Services Training Centre, (FSTC), Kolkata • These Institutes meet all requirements for resource development and manpower training for AAI in terminal management, Air Space Management, Air Cargo, Airport Fire & Safety Services, Airport Commercial aspects. The CATC and the NIAMAR are approved ICAO. Many courses at FSTC, Kolkata & FTC, Delhi are on the approved ICAO training schedule. • Currently AAI is aware that they cannot deliver enough qualified air traffic controllers to meet the demands of the industry, i.e. 200 ATCs in the next two years.

  32. The Indian Civil Aviation Industry • Pet Aviation, a private company based in Hyderabad supports the AAI ATC training by providing lectures from experienced ATCs on ATM in India. • The UK’s NATS, National Air Traffic Services, has signed a Memorandum of Co-operation with AAI to help them deal with the shortage of air traffic controllers in India. • Opportunities for UK Companies • Airlines: There is an opportunity for an experienced regional airline operator to tie up with an Indian partner and run a Regional Airline. We will see 2 or 3 enter the market in the next 5 years. • Aircraft: India will buy a large number of aircraft in the next 10 to 15 years. For aircraft sales the focus should be on the regional aircraft and below (rather obvious I know!): • Indian operators and companies are interested in pre-owned aircraft as well as new. • Regional Aircraft: The ATR is the most successful RJ in India and is in high demand. Pre-owned ATRs will sell very well in India. The regional operators should be approached directly. • General Aviation and helicopters: Target customers should include: • The Large Companies, many are headquartered in Delhi, Mumbai and Bangalore • The Indian Government and Indian State Governments • The regional operators and smaller operators • Flying training schools • Emergency Services • Oil Exploration Industry

  33. The Indian Civil Aviation Industry • 5 Tonne or less is the main size of helicopters selling in India • Aircraft Components, Parts and replaceable Items: The table -Indian Airlines: Existing Fleet and New Orders identify the airline and regional aircraft in service currently in India. Cessna has about 60% of new sales on smaller aircraft. These will all need parts during MRO. Customers to be targeted are: • The airlines and operators • The MRO providers • A route into the market may well be by ‘piggybacking‘ in with the OEM. i.e. who has an OEM sold their aircraft to that uses a UK company’s equipment. • Taking Advantage of the Development of the Indian Civil Aviation Infrastructure – The UK needs to generate a strategic Plan: Infrastructure is recognised as the major bottleneck holding back the Indian Aviation Industry. It is, however, such a ‘green field’ that it is very hard for individual UK companies to enter: • Who to talk to? • Who to work with? • Will the AAI deal with individual companies? • This is where the UK Aviation Industry needs to generate a strategic plan on how to approach the Indian market. One of the first activities would be for a group of representatives from the UK Aviation Industry to present the capabilities of the UK Industry to the Indian Government, States’ Governments, MOCA & AAI. The group should be lead by the UK Government (UKTI or Berr) and consist of representatives from the likes of BAA, BAG, SBAC, NATS and some UK 1st tier suppliers. This will allow the various organisations to start direct talks with the Indian counterparts, i.e. BAA to AAI, to discuss the priority issues and then identify UK companies that could support. This in turn would allow UK companies to enter the fray. In Summary:

  34. The Indian Civil Aviation Industry • UK Government talks to Indian Government • (May involve Organisations such as BAA and BAG) • Allows • UK Organisations to talk to Indian Organisations • (e.g. BAA to AAI) • Allows • UK Companies to talk to Indian Companies and Organisations • The news article below demonstrates that the United States are certainly thinking along these lines: • ‘India and the United States have signed a Memorandum of Understanding (MoU) to establish an Aviation Co-operation Programme for modernisation of the civil aviation sector. The agreement was signed between Civil Aviation Minister Praful Patel and Secretary, US Transportation Department, Mary Peters in Washington. As per the MoU, the United States Trade and Development Agency (USTDA), Civil Aviation Ministry, the Federal Aviation Administration (FAA) and public sector entities of both countries will co-operate to identify infrastructural lapses and support modernisation of the Indian civil aviation sector. The programme covers issues like infrastructure, safety, enhancing air service quality, operational efficiency, flight security, air-space management and system capacity. The USTDA would provide funds for training and technical assistance programmes, while the FAA and US aviation companies would facilitate in-kind support’. (22 June 2007) • I would suggest the above is the preferred approach. This should not stop UK Companies entering the Indian Market independently. • The opportunities in infrastructure can be broken into a number of areas: • Airports: Construction and Airport Infrastructure • Air Traffic Management • Maintenance, Repair and Overhaul (MRO) and other Engineering Facilities • Training of Personnel

  35. The Indian Civil Aviation Industry • Airport Construction: The opportunity now is all non-metro airports where the developments are still in the very early stages. Developers who are interested in investing in infrastructure in India will be well received. The Indian Government is looking for a great deal of capital from the private sector. Malaysia is investing heavily in the Indian airports. Astonfield Management Co, US based infrastructure project management company plans to invest $500 million will be in Indian Airports. • This will include all aspects i.e. the major constructions, but also all interiors and retail facilities. • The AAI and the private developers should be approached. • Airport Infrastructure: The equipment needed in the airports to support the industry: • There is a requirement for all the equipment and systems for the Airports: • (The areas in bold are high priority items) • Banking facilities • Baggage handling equipment • Check-in desk services • Child / disabled / elderly handling services • Cargo and logistics equipment • Duty free shops • Fog dispersal systems • Ground support equipment and services • Networking and communication systems • Passenger handling • Retail outlets • Refuelers and refueling • Rescue and emergency systems

  36. The Indian Civil Aviation Industry • Runway, Hangar, Apron Services • Security and surveillance • Service technology systems • Ticketing Systems • The AAI operate most aspects of the airport and procure most of their equipment directly. This may be delegated to the State Governments for the regional Airports. The AAI and private developers should be the first port of call when selling this equipment in India. • Air Traffic Management:: • Training of Air Traffic Controllers – see ‘Training of Personnel’ section • Equipment: • Air traffic control systems • Navigational aids • Night landing equipment • GPS equipment • The AAI are looking at plans for a satellite based Air Traffic Management System • Radar systems • Upgrading of aircraft navigational systems • Procurement and commissioning of all Communication, Navigation & Surveillance (CNS) facilities and support systems for air navigation is managed by CNS Planning Department, part of the AAI. • Maintenance, Repair and Overhaul (MRO) and other Engineering Facilities: • The main areas that there are opportunities for UK companies are:

  37. The Indian Civil Aviation Industry • Services – Companies with the ability to undertake maintenance work. There are some big players entering the market but they will focus on the main activities. All the support services and work still need to be sourced. • I have also concluded that there are a number of companies getting involved in MRO with very little experience and capability, Airlines, OEMs and investment companies. All should be approached, e.g. Paramount Airways and Embraer are looking for a third party to run their MRO facility. • Equipment used in MRO – jigs, tools and equipment. • Spares, Line replaceable items for Aircraft flying in India • Specific Opportunities Identified: • Hamco are looking for companies with experience in maintenance of: • Wheels & brakes overhaul • Heat exchanger cleaning • Air conditioning system component servicing • Life raft servicing • Avionics test/ servicing • Fire extinguishers • Hydrostatic testing of oxygen • Fire extinguisher bottles • Periodic calibration of the tools and gauges. • TAAL is looking for a JV to do MRO on ATRs and A320. They will provide hangar space and Indian know-how but no technical input. • Jet Airways is looking for a company that can do media loading for Skyline systems which is compatible with Panasonic entertainment systems • Training of Personnel: • Right across all the sectors of the Civil Aviation Industry there is a large gap in skilled and qualified staff:

  38. The Indian Civil Aviation Industry • Pilots – Services should be offered to Airlines and training schools • Aircraft Licensed Engineers (AME) – Airlines and companies setting up MRO facilities e.g. GMR should be approached • Air Traffic Controllers (ATC) – AAI currently undertake all training for ATCs but know they can not meet demand • Cabin Crew and all the different skilled staff that are required on the ground to manage passengers, baggage, cargo in the terminals as well as air side. Airlines, Cargo Operators and AAI should be approached • As with MRO there are a number of companies setting up training schools but who currently few or no qualified staff to undertake training and no training equipment or material. Therefore the UK could provide: • Training for Pilots, ATCs and AMEs • Qualified lecturers in all areas • Institutions to train and qualify lecturers in all areas • Flight simulators • Cabin simulators • Maintenance simulators • ATM simulators and equipment to train on • Lower level training devices for pilots, ATCs and AMEs • Equipment to train on: • Training Aircraft • Engineering tools and equipment used in MRO • Training material • Consultancy on international standards • NB: For any organisation to carry out education in India them must get approval from The All India Council for Technical Education, AICTE. This is not easy, the Indian Government is very bureaucratic at the best of times but are wary about foreign involvement in the Indian education system. The best route is to partner with or supply services to an approved Indian establishment.

  39. The Indian Civil Aviation Industry • Specific Opportunities Identified: • Max Aeropsace based in Hyderabad offer a range of services including manufacture of cabin simulators and training aids for airlines. The standard of finish on their products may not be what we might expect in the UK but are acceptable to Indian customers and they seem to be winning orders in India. This could be a good company to tie up with. A UK company might manufacture the more technical parts and products of the simulator as part of a joint bid for work. • Latest news: • The Indian Government is currently drawing up an aviation sector manpower plan for the next 20 years to face the human resource challenges of the sector. A detailed study of the industry’s manpower requirements, including a road map for creating a pool of technical and management professionals to cater to domestic and international demand, is expected to be completed by October this year. The Confederation of Indian Industry is working closely with the Federation of Indian Airlines and will soon appoint a consultancy firm to undertake this study. • Website Addresses for Calls for tender : • www.airindia.co.in/aimmd/tenders.jsp – Air India • www.indian-airlines.nic.in/scripts/tenders.aspx – Indian Airlines • www.jetairways.com/Cultures/en-US/About+Us/Tenders – Jet Airways • www.civilaviation.nic.in/moca/tender.htm – Indian Ministry of Civil Aviation • www.aai.aero/ServletController?action=tenderslink – Airport Authorities India

  40. The Indian Civil Aviation Industry

  41. The Indian Civil Aviation Industry References and Sources of Data: India Civil Airlines: Fact Sheets by Andrew Dinsley, 1st Secretary UKTI. Available on the UKTI Website Sector Report: Aerospace (Civil) India by Andrew Dinsley, 1st Secretary UKTI. Available on the UKTI Website http://www.civilaviationweek.com/ind-news.html – summary of the major news headlines in the last 3 months – gives a good view of what is going on in the industry http://www.ficci.com/media-room/speeches-presentations/2007/speeches-2007.htm#feb8 – Presentations from Aero India 2007 Conference http://news.indianaerodef.com/ - Touch Base with Indian A&D Industry Genser Report – available from UKTI Update to the Genser Report - – available from UKTI Centre For Asia Pacific Aviation (CAPA) – www.centreforaviation.com Individuals and Companies I have interviewed: Aajay Mehra – Airbus, Managing Director South Asia Stephan Billep- EADS, Head of India Liaison office Sanjay Bahadur- Kingfisher Airlines, CCO Amitabh Khosia - Federation of Indian Airlines, Executive Director Srinivas Duvvuri – Bombardier, VP & Rep India Mr K Gohain - Head of Director General for Civil Aviation (DGCA) R K Singh- Ministry of Civil Aviation (1st report to Minister) KV Kunhikrishnan – Augusta Westlands, General Manager India Sanjay Kumar – Indigo Airline, COO Kapil Kaul – Centre of Asia Pacific Aviation, CEO (CAPA) Mike Armstrong - BAE Systems Brig. Manjeet Singh Rana, Thales, VP Sales & Marketing Yves Guillaume - EADS India, CEO Bijoy Kumar - Open Sky Magazine, Editor Capt R Singh - Spice Jet, Tech. & Develop. Pilot Charles Carneiro - Bird Group, Head of Corp Marketing & Comms Shirish Keskar - Jet Airways, General Manager Tech. Services Ravi Menon - Airworks India Engineering, Director Bharat Malkani - Max Aerospace and Aviation, Chairman Marian Mailhes – ATR, Sales Director India Air Deccan - Shaun Downey - Rolls Royce Rep

  42. The Indian Public Sector Aerospace Industry

  43. The Indian Public Sector Aerospace Industry

  44. The Indian Public Sector Aerospace Industry Introduction In this report the focus is on the Indian Government and the public sector from an aerospace perspective. I will cover the main ministries and departments, the armed forces and the government owned companies and research establishments. Indian is the largest democracy in the World. It is a federal state with a central government and 29 states. The political system is stable and the main parties are fairly progressive and are encouraging development and change in the country but there is still a great deal of bureaucracy and corruption in the system. Indian Armed Forces The Indian Air Force (IAF) and the Indian Navy are the 4th largest in the World. Currently the Air Force has around 1400 aircraft in service. The Indian Army with 2.5 million servicemen is the second largest in the World. Outside the West, India is the largest defence equipment customer and 12th largest in the World. Appendices I, II, III give break downs of their fleets of aircraft and missiles. With many ageing aircraft, such as the MIG-21 India is now looking to procure new fleets of aircraft. It is not only aircraft but much of the armed forces equipment is now seen as obsolete. Cobham have set up an office in Bangalore to tap into this market. All the IAF's aircraft are serviced by Hindustan Aeronautics Ltd. (HAL). The IAF have a requirement that HAL have the ability to service and repair all components on their aircraft. It is not that clear if this is purely to have fully independent Armed Forces; to keep costs to a minimum or if it is a mechanism to 'pull' technology in to India. Going on previous orders and looking forward, all large orders for new military aircraft will require much of the manufacture of the aircraft to be undertaken in India, by HAL. BAe Systems are currently supporting HAL set up the assembly line for the Hawk Advanced Trainer at their Aircraft Division in Bangalore. 42 of the 66 aircraft orders will be manufactured by HAL. India has also recently introduced offset requirements into it defence procurement policy. Offset Offset requirements for both defence and civil acquisitions by the Government of Indian are very new. It is currently very difficult to get clarity on the facts and figures, even DESO are unsure. This next section is a summary of what I believe is the status today:

  45. The Indian Public Sector Aerospace Industry Defence offset requirement is on orders over $60 million. This has not been enforced on any order yet. The BAe Hawk order had no official offset requirements. The offset figure that has been expected is about 30% the value of the contract. However the call for tender for 126 Multi Role Combat Aircraft had an offset clause of 50%, in this case that would be $5 billion of work would need to be undertaken in India. Currently I think all the original equipment manufacturers (OEMs) bidding would struggle to get this amount of work completed in India, especially if they do not wish to pass on too much 'new technology' and not have serious issues with their vendors' IPRs. I think the 50% will eventually be reduced. On future calls for tender a target percentage will be set and then negotiated on a case by case basis. What work can used to fulfil offset obligations? On defence contracts this seems to be limited to licensed production and maintenance of the purchased aircraft. Training of Indian staff to carry out this is probably included otherwise the aircraft could not be manufactured. On civil purchases, ie airline aircraft sold to Air India/ Indian Airlines the requirements are even less well defined. The figure is probably about 30%. The restrictions of the kind of work are much less stringent. As well as manufacture and maintenance, training of staff e.g. pilots is allowed. MRO is another area that can be used by OEMs to fulfil their offset obligations. Both Boeing and Airbus are supporting MRO facilities to fulfil their obligations. DOFU - Defence Offset Facilitation Agency has been set up under the Ministry of Defence. Its role is 'to facilitate implementation of the offset policy of the Ministry of Defence. DOFA will assist potential vendors in interfacing with the Indian defence industry for identifying potential offset products/projects as well as provide requisite data and information for this purpose'. At the moment all defence aerospace production work will go to HAL. This is changing. One of DOFU's roles is to assess private Indian companies to determine if they are suitable to take on offset work. Currently there are 14 companies approved but many more have applied. For these 'official' 1st tier suppliers it means they can now bid directly for offset work rather than get any packages that HAL wish to offload to their supply chain. In reality HAL will still get the majority of the work but as most international OEMs do not want to work with HAL this will change. Public Sector Units (PSUs) As you will see from the organisation chart on the opening page there are a number of Government owned and run organisations. In the UK these would be the nationalised industries. The three main PSUs involved in aerospace manufacturing are:

  46. The Indian Public Sector Aerospace Industry • Hindustan Aeronautics Limited, HAL • Bharat Electronics Limited, BEL • Indian Space Research Organisation, ISRO • Air India and Indian Airlines are also PSUs. Please see report on the Indian Civil Aviation Industry. • These government owned and run organisations are known to be very bureaucratic. Most would seem very old fashioned compared to a similar establishment in the UK. They are very hierarchical and decisions take a long time to be made. HAL for example is often compared to BAe Systems or Roll Royce 40 years ago. HAL still provide schools, hospitals and accommodation for staff. Employment of staff is seen as one of their performance indicators. So profit and efficiency may not be seen as paramount. There is corruption in the system. During visits it is evident that the organisations are looking for the advantage for themselves, the individual and the company. Partnering how we would see may not be a win-win relationship. There is a drive to indigenise everything, whether it is to reduce cost or to learn more about new technology. Dealing with these PSUs there may well be intellectual property rights issues for UK companies. HAL for example on the new Hawks want to know how to service all the LRUs. Some of the original equipment suppliers are not willing to pass on the IPRs. • ISRO is the exception to this and has been very successful in the field of Space. Manufacturing their own satellites and launch vehicles and undertaking their own satellite launch missions. EADS are working with ISRO to provide satellites and launch vehicles to international customers. • Hindustan Aeronautics Limited, HAL • HAL is a large company, 32000 employees based in 18 production centres and 9 R & D centres around India. Their turnover in 2006 was $ 1.6 billion. Their major focus is on licensed manufacture and production of indigenously designed aircraft. When procuring large orders of new aircraft the Indian Government ensures the majority of the order is manufactured in India. The production line for the new Hawk Trainer has just been set up. • They have R & D centres but this is more for support to manufacture and productionisation of products. The real research and design work is done by some of the other government run organisations: NAL, DRDO, GTRE.

  47. The Indian Public Sector Aerospace Industry • HAL also undertake the maintenance and overhaul work for the Indian Armed Forces fleets of aircraft. • They break their activities down into 5 main areas. All have R&D and manufacturing element: • Aircraft & Aerospace group • Helicopter Group • Engine Group • Accessories & Avionics Group • Materials & Services Group • HAL have capabilities to do all manufacturing processes required to manufacture and assemble a full Aircraft, structure (metallic and composites), systems, aero-engines, avionics etc. It is, however, limited to 4 - 4.5 generation technology. This will be an issue with the new order of multi role combat fighters. • To date they have manufactured 3500 Aircraft. 1/3 of which are indigenous designs, the rest are manufactured under license for international OEMs. They have manufactured 3700 engines, all under licensed manufacture and overhauled some 8000 aircraft and 27000 engines. • Below are listed the indigenous products HAL manufacture: • ALH, Advanced Light helicopter (Dhruv) in production with HAL - 30 ordered by Indian Armed Forces • Lancer - Light Attack Helicopter in production with HAL • LCA, Light Combat Aircraft (Tejas) being developed by DRDO is in limited production • Kaveri Engine, the engine developed for the LCA developed by GTRE. Still in test phase, test engines manufactured by HAL • IJT, Intermediate Jet Trainer still in development, prototypes manufactured by HAL • LTA, Light Transport Aircraft (Saras) a 14 seater commercial regional aircraft in development with by NAL. Once in full production this will be done by HAL. • Lakshya - pilotless drone produced by HAL

  48. The Indian Public Sector Aerospace Industry • Below are listed the products HAL manufacture under license: • Jaguar Deep Penetration Strike Aircraft for BAE Systems • Adour Mk-811 Engine (Jaguar Engine) for Roll Royce • Hawk - new work for BAE Systems - production just started • Adour Mk 871-07 Engine (Hawk Engine) for Rolls Royce - production just started • Dornier DO 228, a light transport A/C for Dornier Luftfahrt, Germany • Garrett TPE 331-5 Engine (DO 228 Engine) for Garrett Engine Division (Honeywell) • Sukhoi - 30 Mk 1 for Russian Government - since 2004 • AL-31 FP Engine (SU-30 Mk 1 Engine) for Russian Government • Chetak helicopter for Aerospatiale • Cheetah helicopter for Aerospatiale • Artouste 111 B Engine (Chetak, Cheetah Engine) for Turbomeca, France • They also do MRO for the state owned airlines: Air India and Indian Airlines and some large component manufacture for ISRO on their satellite launch vehicles. HAL do licensed manufacture on a small number of export parts, such as the Airbus A320 passenger door and the Boeing 737 Cargo door conversion kits. HAL also have a small JV with BAE Systems, BAe-HAL, for the development of software. HAL do work with international vendors, e.g. Smiths, Now GE Aviation, APPH, Chelton, Messier Dowty, Honeywell, Lucas Aerospace and Goodrich. • HAL talk about moving up the supply chain and offloading the tier 3 & 4 work to the supply chain in India. Currently this is still only a small amount of work going to the private sector. This will change as HAL gets more work and the private companies are allowed to compete directly with HAL for offset work. • For more information see the website: www.hal-india.com

  49. The Indian Public Sector Aerospace Industry • Bharat Electronics Limited, BEL • Another large organisation with about 12500 employees. Their annual turnover in 2006 was approx. $ 900 million. • 60% of their business is design and manufacture of electronic systems, hardware and software for the Aerospace and defence industries. They strive to manufacture all the components in their products and will only outsource high volume parts. They undertake MRO of their avionics products. • Their target is to work with international OEMs and tier 1 suppliers. I would describe BEL as being 'very self centred'. They will try and maximise the a partnership or relationship and get as much technology out of it as possible. May be an issue of IPRs again. • Below are listed some of their main products: • The avionics on the Light Combat Aircraft • Radar Systems • Sonar • Communication Systems • Optics • Electronic Warfare Systems • Antenna • Avionics • For more information see the website: www.bel-india.com • Indian Space Research Organisation, ISRO • ISRO is part of the Indian Government's Department of Space. It has approximately 20000 employees based in 17 facilities including three launch sites and their headquarters in Bangalore. Its 2006 budget was $ 815 million which is very similar to Russia's space budget and only less than the US, Europe, Japan and China. It is successful and India is counted amongst the six major space powers in the World. It seems to be the most forward thinking aerospace PSUs. This is partially due to the Indian drive to demonstrate national capability and that ISRO have to compete against international OEMs.

  50. The Indian Public Sector Aerospace Industry • Its uses its launch vehicles for Indian satellites and also now offers launch services to the lucrative international market. It currently launches satellites using the Polar Satellite Launch Vehicle, PSLV and Geostationary Satellite Launch Vehicle, GSLV. • ISRO core capabilities cover the entire range of activities from research, design and manufacture of satellites and launch vehicles to launches and full mission management. • Satellites • The IRS (Indian Remote Sensing) satellite series, • The INSAT (Indian National Satellite) series (in Geo-Stationary orbit) • The GSAT series (launched using GSLV) • METSAT 1 (launched by PSLV) • So far ISRO have built 45 satellites. • Current Launch Vehicles: • Polar Satellite Launch Vehicle (PSLV) - a four-stage rocket with liquid and solid stages. The PSLV can place 1600 kg into polar sun synchronous orbit. ISRO has had 2 PSLV launches this year • Geosynchronous Satellite Launch Vehicle Mark I/II (GSLV-I/II) - a three-stage rocket with solid, liquid and cryo stages. The GSLV can place 2200 kg into geostationary transfer orbit. ISRO had the 4th successful launch of its GSLV-F04 in August 07 and placed an Indian INSAT-4CR satellite in Geosynchronous Transfer Orbit. • Plans for Future Launch Vehicles: • Geosynchronous Satellite Launch Vehicle Mark III (GSLV-III) - a three-stage rocket with solid, liquid and cryo stages. The GSLV will place 4000-6000 kg into geostationary transfer orbit. • Reusable Launch Vehicle (RLV) - a small remote-piloted scramjet vehicle called AVATAR. The RLV will place small satellites into LEO and can be reused for at least 100 launches reducing the cost of launching satellites.

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