India becomes the third largest aviation market of the world.
Aviation is one of the sectors in particular that has recently been on a growth trajectory in terms of passenger numbers, aircrafts in demand and functional airports. Discussions on feasibility of commercial aircraft manufacturing ecosystem in India is natural to happen.
From time to time, government policies and the industry’s aim have also been to make India a global aviation manufacturing and MRO (maintenance, repair and operation) hub.
However, it’s a tall order for a capital-intensive sector with long gestation periods, coupled with other high-risk elements. Besides, it also requires an ecosystem of design expertise, manufacturing acumen, a component supply base and regulatory system.
BABY STEPS
The possibility of assembling a civilian passenger aircraft in the country appeared within striking distance when Airbus inked an agreement with the Tata Group to manufacture H125 helicopters from its civilian range with a significant “indigenous and localisation component”. This facility will have the final assembly line for the world’s bestselling single engine helicopter for the Indian as well as export markets. The first ‘Make in India’ H125 helicopters is expected to be ready by 2026.
The above two companies had earlier decided to build C-295 military transport aircraft, which entails purchasing a certain number of aircraft in a flyaway condition and the rest to be assembled at a Final Assembly Line (FAL) in Vadodara, Gujarat. The production of components of these aircraft has already started in the Main Constituent Assembly (MCA) facility in Hyderabad. These parts will be shipped to the Vadodara FAL, which is expected to be operational by November 2024. The first of 40 ‘Make in India’ C295s is expected to roll out of the Vadodara FAL in September 2026 with the final aircraft delivered to the IAF by August 2031.
HAL (Hindustan Aeronautics Limited), the state-owned aerospace and defence company, also recently entered the civil aviation space with a 19-seater Hindustan-228, the design of which was transferred by Dornier GmbH and it can be operated even in semi-prepared and unpaved airstrips.
The government has also been contemplating on a 90-seater regional transport aircraft to be designed and developed by sole research and development entity for civil aircraft, National Aerospace Laboratories (NAL), part of Council of Scientific and Industrial Research, under Department of Scientific and Industrial Research as well as HAL.
Significant progress has been made in SARAS Mk II, a 19-seater indigenous aircraft programme. This collaboration of HAL and NAL is set to take to the skies with its maiden flight in 2026 and its success will pave the way for further advancements in indigenous aircraft development.
A Bengaluru-based engineering company recently unveiled India’s first-ever domestically manufactured aircraft passenger seat at the Wings India 2024 event, marking a departure from the industry norm, where 100 per cent of aircraft seats used by India’s registered air travel companies are imported.
Many Indian companies, including Aequs, Quest Global, Wipro, and the public sector HAL have become major players in the value chain for large global OEMs, supplying critical hardware and software services.
India’s Maintenance, Repair, and Overhaul (MRO) sector has attracted several local and a few prominent international players over the years, to cater to the increasing demand for these services in the country, where the fleet size is expected to quadruple by 2038 amid the projected growth of commuter aircraft.
India, which is aspiring to be the leader of Industry Revolution 4.0, has also set the target of being a major global hub for drones by 2030, courtesy incredible innovation and growing list of drone applications.
SOARING HIGH
The aviation sector is being driven by factors such as burgeoning middle class, healthy competition among low-cost carriers, expanding infrastructure at leading airports and supportive government policies. Indian commercial aviation industry is expected to grow by more than 7.3 per cent annually until 2035, making it the fastest-growing market in the world. The MRO industry is looking for annual expansion of more than 12.2 per cent during this period.
The operational airports are projected to grow to 230-240 from the current 148 as air travel expands to Tier-2 and Tier-3 cities. The government has also earmarked around USD 11 billion to build new airports and refurbish existing ones.
India is the world’s third largest aircraft purchaser, after the US and China. Indian carriers are expected to have an order book for 2,000 planes by March next year, with long-term rapid growth for both domestic and international air traffic, according to a recent CAPA India report.
It also boasts of the largest order-book for 470 aircraft, at a whopping USD 70 billion over the next decade.
The Indian government has introduced several measures like NCAP 2016, the RCS UDAN, The Drone Policy, NABH Nirman Aircraft Leasing under the IFSC, and a helicopter policy in the recent past for the sector to thrive. The report, however, noted that Indian aviation will need further structural and institutional reforms to support this once-in-a-generation growth, and the eventual induction of this expanding order book.
The projected upsurge has further ignited the demand for MRO services. The Indian Civil Aviation MRO market, at present, stands at around USD 900 million and is anticipated to grow to USD 4.33 Billion by 2025 increasing at a CAGR of about 14-15 per cent. To capture this growth potential, several local and global OEMs have entered the country’s MRO market.
The Indian drone industry is expected to have a total turnover of up to USD 1.8 Bn by 2026. NITI Aayog estimates that India’s UAV/drone market (including services) will reach USD 50 Bn over the next 15 years as drones are projected to substitute 80 per cent of operations presently carried out by manned aircraft. An EY-FICCI report also sheds light on the immense manufacturing potential of drones and their components within India, suggesting a prospective market worth of approximately USD 23 billion by 2030.
Around 2,50,000 people were directly employed in India’s aviation and aeronautical manufacturing sector in 2023, according to data from the Civil Aviation Ministry. This number is expected to grow to 3,50,000 by the end of 2024.
SWARM THE SKY
The FICCI-KPMG report ‘Vision 2040 for the Civil Aviation industry in India’ has hinted at major changes in tax structure, fleet size, privatisation, number of airports, automation and indigenous aircraft manufacturing capacity in this flight for transforming the country into one of the top aviation hubs.
“With conducive policies and a large fleet of commercial and military aircraft, India will build its indigenous aircraft manufacturing industry in collaboration with global OEMs. By 2040, India will assemble nearly 70 per cent of its commercial aircraft demand and also export to other countries.”
Besides, its aircraft leasing industry may handle a sizeable number of aircrafts being ordered in India by 2040.
It further noted that a significant course correction in policies, taxation and customs procedures will enable growth of India as a global MRO hub by 2040, handling nearly 90 per cent of the MRO requirements of large Indian carriers.
To achieve this dream, India will have to invest between USD 200 billion and USD 300 billion over 15-20 years to develop a full-fledged commercial aircraft and an ecosystem around it, according to a CII-PwC report published over a decade ago.
Operating a commercial aircraft manufacturing facility would also require substantial capital investment, cutting-edge technology, robust infrastructure, and recurring operational costs. There will also be a need for a network of thousands of small and big subcontractors.
The development of Boeing 787 Dreamliner was expected to cost around USD 5.5 billion. Due to its composite design and several delays, it took nine years for Boeing to get the aircraft to the market with the total cost soaring to USD 22 billion, despite its decades-old operations and robust ecosystems of vendors across several countries.
(NAUTICAL) MILES TO GO!
Although India’s aerospace endeavour predates China’s by six decades as HAL started off in 1940 as the privately promoted Hindustan Aircraft Ltd, the latter’s first indigenously built passenger aircraft C919 successfully completed its first commercial flight on May 28, 2023. The state-backed Commercial Aviation Corp of China (COMAC) began developing the jet 15 years ago.
China’s journey began in 2002 with the ARJ21, a regional jet, followed by the C919, a larger narrow-body aircraft. Although the ARJ21 faced delays and is considered a partial achievement at best, the C919, with over one thousand orders, stands as a notable success. Both programmes heavily rely on foreign technologies from global OEMs, emphasising the importance of collaborations and making it attractive for foreign companies to operate domestically.
With its technology absorption capabilities, it is estimated that India can also build significant capabilities in aircraft manufacturing in the next 10 to 15 years. However, the entry into this arena demands significant financial resources and a strategic overhaul of its aerospace policy and infrastructure. Its limited experience in commercial aircraft manufacturing can prove to be an impediment when it comes to design, scale, and production.
India has to rapidly advance its technological capabilities in materials science, propulsion systems, and aerodynamics. Besides massive capital investment and advanced technological capabilities, it also needs high-quality aerospace-grade materials and parts suppliers and developing a supply chain for commercial aircraft manufacturing is no mean task.
Although low cost of labour is an advantage, high material costs, import duties, and production inefficiencies can push up the total manufacturing costs.
The other challenges include overcoming entry barriers since the market is dominated by global giants like Boeing and Airbus through decades of consolidated growth, technological innovation, and established supply chains. Apart from deep technological capabilities, they have extensive customer bases.
India also has to bridge the skill gap in advanced manufacturing techniques necessary for commercial aircraft.
INTEGRATED & STRATEGIC ROADMAP
Institutionalised framework and productivity-linked incentives and subsidies can prove to be the wind under the wings of India’s aviation growth story.
The FDI policy allows for foreign investment up to 49 per cent through automatic route and 100 per cent through government route if it aids access to modern technology. Indian enterprises can tie up with global OMEs for the transfer of technology and domestic manufacturing infrastructure. Data from the Ministry of Micro, Small and Medium Enterprises shows that while there are over 20,000 MSMEs in the aviation sector, only 642 are directly involved in manufacturing aircraft components. Others deal with categories like airport ground handling equipment, and maintenance, repair and overhaul services.
Industries body have called for bolstering India’s MRO capabilities, especially in components and engines, by implementing a minimum GST rate on them, to support the growing aviation sector, create jobs, and enhance technological prowess. It has also suggested zero rated supplies in GST to encourage foreign carriers to choose India for MRO services. A zero per cent customs duty and expedited customs processing for these critical components can also help MRO providers to compete with foreign vendors.
