The aerospace industry in India is now on an upswing. India is expected to be the fastest growing country for air travel in the next decade. The international traffic would grow by 8.8 per cent during the next decade and domestic traffic by 10 per cent as against the global average of 7.7 per cent. To have room for the growth driven by the growing middle class and urbanization, deregulation of the industry, aggressive plans of low cost carriers, and large investment proposed in civil aviation infrastructure is required.
We need as many as 1020 new aircrafts apart from the existing fleet of more than 327 aircrafts. There are huge opportunities in the area of commercial private jets as well and industry estimates project the number of new jets during 2012-21 at 1363 at an estimated 40 billion USD. Aerospace major Boeing expects a demand of between 900 to 1000 commercial aircrafts with a value over 100 billion USD in the next two decades.
These vast opportunities in military and civil aerospace present a rare gift to India Inc. Indian aero industries are already strong with components, subcomponents, IT, and other service wherein we serve HAL, DRDO, ISRO, and other public sector undertakings in defence sector. These domestic capabilities are getting a fillip with extensive tie-ups, joint ventures, and technology transfers. The 30 per cent offset obligation in defence procurement policy extends further impetus to this growth momentum in Indian aerospace sector.
Now, however, when we scan through the Indian map, South India is clearly in the spotlight as far as aviation industry is concerned. It would be banal to say that Chennai is one of the major industrial and commercial cities in South India. It is traditionally called the Detroit of India for its zestful automobile industry.
Chennai as an aerospace hub
Chennai houses DRDO labs and academicia from IIT Madras, IIT Madras Research Park, and Anna University can offer support. Needless to say, the factories in Avadi and CSIR laboratories are an added advantage. Earlier this year, a delegation from the American aircraft manufacturer Boeing met the TN government and stated that it would recommend some of its suppliers to set up their operations in the state. If one looks at the region closely one can’t ignore several other advantages. Chief among them being: availability of a large land bank, strong work ethic, presence of a cosmopolitan culture, perfect ecosystem comprising of academic centers of excellence, R&D units, modern airports and defense establishments, besides support from the local government.
The scenario is ideal to work towards setting up an aerospace cluster in South India. A range of operations like MRO (Maintenance, Repair, and Overhaul) activities, components supply, and pilot training (apart from training for other staff members) are not a struggle in the region – there is enough preparedness.
Aero firm eyes TN and sets off plans
Recently, an official of giant aerospace firm, BrahMos said earlier this year at the fifth edition of the Tamil Nadu Manufacturing Summit, that Tamil Nadu can create manufacturing clusters for aerospace and defence sectors and also set up a titanium sponge and finished products manufacturing unit catering to the defence sector.
The firm proposes to set up defence and aerospace clusters in Dharmapuri and in the Madurai-Tuticurin corridor; an armament cluster in Trichy-Thanjavur; electronics and software cluster in Coimbatore; and, a naval cluster in North of Chennai, in Ennore-Kattupalli area.But then, why do we need an Industry Cluster at all?
One has to look no further than Silicon Valley to know that something special happens when firms in the same industry are located close to one another.
In the United States, Seattle tends to focus on large aircraft assembly; Dallas-Ft. Worth produces state-of-the-art fighters; Wichita is known for corporate and general aviation aircraft; while Cincinnati produces some of the world’s finest jet engines. Due to the enormous human and financial capital invested in clusters, they tend to be long-term in nature. Hence, once a major manufacturing plant is established, sub-tier suppliers tend to locate in close proximity to the plant increasing the density and efficiency of the overall cluster. These clusters also spawned academic institutes of global standards that attracted best of talents from across the globe. Alongside grew global IT majors and component suppliers in adjacent technologies.
According to Harvard professor Michael Porter, clusters are important because they make firms more competitive – where the geographic proximity of competitors, customers, and suppliers promotes efficiencies, specialization, product improvements and innovation.
A perfect example to take after would be aero-cluster Toulouse in France. All these aero-clusters significantly transformed the country’s economy.
Where does Hyderabad stand?
In fact, these are exciting times in Hyderabad for the aerospace industry. As the dust settles after a long drawn struggle for separate statehood, the city and its surrounding region is witnessing renewed activity in high-end technology and manufacturing sectors. Among these, the aerospace industry is slowly emerging as a key industry that can transform the economic landscape of the city and as a result, the region. Hyderabad, which has been traditionally known for its thriving IT and pharmaceutical industry, is now attracting investments from global majors in the aerospace sector, owing to a combination of factors.
The impetus for growth of aerospace industry came with Tata Sons’ initial plans to set up a helicopter cabin manufacturing facility in the 250-acre aerospace and precision engineering special economic zone (SEZ) in Adibatla on the outskirts of Hyderabad.
Tata Advance System Ltd (TASL), a wholly owned subsidiary of Tata Sons, is working on first India-made S92 chopper cabins in a joint venture with US-based Sikorsky Aircraft Corporation. As the anchor client of the Adibatla aerospace cluster, TASL’s decision has boosted the state government’s plan to project Hyderabad as an aviation hub.
Brand Hyderabad got another boost, with aerospace engine manufacturers Pratt and Whitney (P&Y) setting up India’s first customer training centre. The facility spread over two acres and located close to the GMR International Airport at Shamshabad, will be operational by mid-2015. According to Bruce Hall, GM (Customer Training), Pratt & Whitney, UTC India, “About 40 per cent of the world’s training of our engines will happen here.”
Overall Market Outlook for India and the Following Demand
An aircraft broadly consists of components sourced from different regions. Though building an aircraft as an Original Equipment Manufacturer (OEM) is a distant dream, the Indian industry has developed critical capabilities in offering services / components to complement the offset commitment of foreign suppliers.
This would help the domestic industry carve out a niche export market for itself. The services can include:
- Aircraft structures design and manufacturing
- Embedded systems and avionics
- End-to-end component engineering and manufacturing
- Aircraft interiors
- Manufacturing repair and overhaul (MRO)
To capitalize this demand, Karnataka, Maharashtra, Andhra Pradesh, and Telangana have initiated policies and have made lump sum investment.
So, the stage is set because….
This proposed Indian giant aero-cluster can well manage absorption and generation of new technologies through multiple joint ventures and technology transfers. This will foster the induction of private enterprise and private capital to be economically sustainable and competitive in the long term. Besides national missions, this cluster shall be a platform for transnational anchor programs to emerge as a breeding ground for talent, skills and capital aggregation.
Besides, the industry has already set up aerospace parks in Gujarat, Karnataka, and Andhra Pradesh. Why sabotage the fast-mover advantage.