Aerospace manufacturing gaining heights in India

While Make in India has made investments attractive, India is coming up as a vast market for both civil and defence aviation; Global OEMs are making a beeline for India to set up manufacturing operations

December 22, 2018

According to some industry estimates, India’s aerospace sector is likely to see an investment of US$100 billion in consolidation of manufacturing capabilities over the next decade

The Make-in-India programme has given a big push to private manufacturers of defence and civilian equipment, leading to several investments targeting beyond Indian market

India’s civil aviation market is expected to become the world’s third largest in terms of passenger traffic by displacing the UK very soon, thus attracting rising foreign partnerships

Investments in the next five years into the aviation sector are expected to go up to US$15.5 billion with the thrust being on modernisation of airports to new asset acquisitions

A growing market, availability of skilled manpower, scientific and technological services, research and development capabilities coupled with a policy push have made India a fertile ground for aerospace manufacturing. Global aerospace OEMs (original equipment manufacturer) are tapping into the advantages that India offers as part of their strategy to de-risk and diversify. They are seeking to reduce their dependence on the US and EU, currently the dominant geographies in the sector. According to some industry estimates, the sector is likely to see an investment of US$100 billion in consolidation of manufacturing capabilities over the next decade.

A report by the Confederation of Indian Industry (CII) on India as an aerospace hub mentions the following pointers which indicate the extent of opportunities:

  • Global commercial aircraft fleet is expected to grow at a CAGR of around 4 per cent till 2035.
  • An average 42 per cent of the demand will be for replacement of existing aircraft and 58 per cent for incremental growth.
  • Single-aisle airplanes will dominate new deliveries till 2035, with India, China, South East Asia and the West Asia being key markets.
  • The policy push under Make in India will make it even more attractive for global OEMs to come to India.

Joint ventures on the rise

Take the example of the joint venture between the global leader Boeing and Tata Advanced Systems. Taking advantage of the new norms for foreign direct investment (FDI), the two giants set up the Tata Boeing Aerospace at the Aerospace Park in the Hyderabad, the capital of the newly formed Telangana state. With 350 skilled workers, the joint venture has made the facility the sole producer of fuselages for AH-Apache helicopters delivered by Boeing to its global clients, which includes the US Army.

In a separate initiative, Tata Advanced Systems and Lockheed Martin recently opened a metal-to-metal bonding facility, also in Hyderabad. The facility, set up under Tata Lockheed Martin Aerostructures Limited (TLMAL), is expected to indigenise complex aerostructure manufacturing technology. TLMAL has also transitioned the production of around 2,000 Lockheed c-130 empennage parts to Tata Sikorsky Aerospace (TSAL), another Tata-Lockheed Martin venture. These were earlier made outside India.

At the other Aerospace Park in Bengaluru, the country’s base for development of aeronautics, space and software, Magellan Aerospace has invested US$20.5 million in a big facility, wanting to become one of the largest suppliers of India-manufactured commercial aircraft components. With its Indian venture partners, API Surface Treatments and Triveni Aeronautics, Magellan Aerospace is producing larger work packages for major structural assemblies, fabrications and machined components for the global market.

Like the Canadian company Magellan, Eaton Industrial Products, a part of the US$20 billion US-based power management company, has chosen the Bangalore Aerospace Park to set up its aerospace division with an investment of over US$7 million. The unit is expected to manufacture hoses and couplings for its aerospace operations. Eaton’s decision followed aerospace major Boeing’s move to set up a new engineering and product development facility in the same park.

The company proposes to invest US$160 million in what is being touted as its second largest facility outside Seattle. While Boeing wants to fulfil its offset requirements for both aerospace and commercial requirements from India to more than US$2 billion, Airbus has plans to increase its sourcing from India to the extent of US$2 billion by 2020. Other global majors like UTC, Rolls Royce and Moog have also set up manufacturing facilities in India to meet their global requirements.

Strong R&D ecosystem

The location of the Aerospace Park, close to the international airport in Bengaluru, is not without reason. Bengaluru has been the base of Hindustan Aeronautics Limited (HAL) which was set up way back in 1940. From the time it became a state-owned enterprise in 1964, HAL has become synonymous with defence aviation in India. It has designed, manufactured and overhauled fighter planes as well as helicopters, transport aircraft, engines, avionics and met system requirements of the Indian Air Force. It has also been a major partner for the space programme of the Indian Space Research Programme (ISRO), manufacturing structures and assemblies for the launch vehicles and satellites at its aerospace division.

In fact, apart from HAL there are nearly two dozen major aviation enterprises in India, including the state-owned Bharat Electronics and Electronics Corporation of India (ECIL). The global names which are already in India include Boeing International Corporation, Raytheon, Lockheed Martin, Honeywell Aerospace, BAE Systems and GE Aviation. Some of others are spread over other cities like Pune, Mumbai, Nagpur, Chennai and Gurugram. However, Bengaluru and Hyderabad remain destinations of choice as they are home to world-class scientific institutions like the Indian Institute of Science (IISc) in Bengaluru. 

Growing defence needs

Until the turn of the century, the defence aerospace sector was exclusively reserved for the government and defence public sector enterprises. Subsequently, the sector was opened up to private manufacturers. In recent times, the Make-in-India programme has given a big push to the private manufacturers of defence and civilian equipment. The single window system of clearance has made domestic and foreign players look at India differently.

It is worth noting here that India’s defence expenditure has increased to US$38.3 billion within a couple of years of the current government coming to power. The cumulative capital budget for the Indian Air Force (IAF) is projected to be US$218 billion by 2027. Out of this, almost 69 per cent will be for acquisition of aircraft and aero engines. The IAF is expected to spend US$150 billion on aircraft and aero engines in the next decade and a half and is expected to grow 10-15 per cent every year, indicating a large pipeline of orders in the military aircraft segment.

Opportunities are, however, not confined to defence requirements alone. India’s civil aviation sector market is expected to be the 3rd largest worldwide in terms of passengers by displacing the UK very soon. It will take a decade or more to become the largest domestic civil aviation market in the world. It is expected to cater to 478 million passengers by 2036.

Not surprisingly, investments in the next five years into the aviation sector are expected to go up to US$15.5 billion with the thrust being on modernisation of airports, communications, navigation and surveillance systems for air traffic management, radars and facilities for the Manufacture, Repair and Overhaul (MRO) of aircraft and sub-systems. The MRO sector alone is estimated to reach approximately US$196 million by 2020.