Aerospace industry: Flying high
Landmark deals mark india's aerospace and defence sector as more OEMs announce plans to set up manufacturing operations in India
For some time now, the Indian government has been inviting international aerospace companies to set up manufacturing operations in India. The recently held Aero India show in Bengaluru helped that cause. In her inaugural remarks at the 12th edition of Aero India 2019, defence minister Nirmala Sitharaman invited investors to capitalise on the ecosystem in aerospace and other sectors in India that offered a big market for defence manufacturing. Sitharaman made a strong pitch for 'Make in India" and referred to a slew of initiatives taken by the government, including permitting 100% FDI in defence manufacturing.
Since then there have been a slew of announcements from international OEMs expressing their interest in manufacturing in India. Magellan Aerospace Corp. is opening a manufacturing and assembly facility in India. The new 100,000-ft Magellan Aerospace (India) facility, constructed on seven acres in Hitech Defence and Aerospace Park (Aerospace SEZ Sector) in Devanahalli, near the Bangalore International Airport, was completed at the end of 2018 and the process of installing and commissioning the high-speed machining centres is underway. Magellan's new cellular machining and assembly plant will specialise in high-speed milling and turning of aerostructure and aeroengine components produced from both aluminium and hard metal materials. Magellan established a presence in India's aerospace sector more than a decade ago. The plant will create up to 120 high technology and support positions and will be equipped with a comprehensive range of high-speed 4- and 5-axis machining centres, selected to optimise manufacturing, competitiveness, and efficiency.
Rajeev Kaul, CFO and MD, Aequs Aerospace, says, “Emerging markets will drive the growth of the aviation industry in the coming decade. India is poised to become the third largest aviation market in the world by 2025 (based on IATA report). What we are witnessing today is an unprecedented move by OEMs and Tier 1 suppliers into nascent markets like India due to the slowing down of economic growth in mature markets. Forecasts suggest that India will have a demand for 2,100 aircrafts over the next two decades amounting to over $290 billion in sales. In this context, there exists enormous potential for collaboration between international and Indian players in this sector for establishing facilities for manufacturing civil and military aircraft and aircraft parts, along with maintenance, repair and overhaul. India has a remarkable competitive advantage when it comes to the manufacturing industry due to its large labour pool, a favourable policy environment and increasing receptiveness to foreign investments. It is also a resource-rich country making it ready to meet the needs of growing industry.”
Right from the outset, Aequs knew it had to develop an exclusive, highly-skilled talent pool that could contribute to the building of a world-class manufacturing ecosystem catering to the demands of global OEM supply chains. "We hired engineers, technicians and operators and provided them on-the-job training by employing the best trainers from the industry. Our customers supported us in this initiative that further boosted our efforts," says Kaul.
Today, the company operates a full-fledged Aerospace Knowledge Centre (AKC) in-house to address the deficit in specialised skills required in aerospace manufacturing – especially in critical operations like forging, turning and milling, special processing and quality inspection. The primary objective of AKC is to build a bridge between the new entrants and the industry so that they understand the industry norms and applications to perform better. Each batch of AKC trainees goes through three levels of training that takes 30 months to conclude. While Level 1 comprises the basic training, the qualified candidates receive their advanced training in Level 2. Once they clear both levels, they reach Level 3 which is function-based training. Such a systematic training programme ensures suitable grooming for the industry and help close the skill gaps for companies catering to aerospace, aviation and defense sectors.
Making it work
It is not tough for OEMs to find joint venture partners in India so that production could be scaled up and they could have a captive market and could export from India. For instance, American aerospace and defence major Lockheed Martin has proposed a ‘game-changing’ partnership with India that will benefit multiple stakeholders not only in the country but also in the US and beyond. “We believe our proposed partnerships with India fighter aircraft - for new fighter aircraft, helicopters and other platforms — are ideally suited to not just meet, but exceed India's capability and defence-industrial needs in the near-term and well into the future,” said Vivek Lall, VP, aeronautics strategy and business development, Lockheed Martin.
Commenting on Lockheed Martin’s proposed partnership with Tata to produce its fighter jet, F-16 exclusively in India for the Indian Air Force and other export consumers, Lall said, “This landmark 'Make in India' partnership is a natural next step that builds on our successful partnerships with Tata on the C-130J airlifter and other premier defence and aerospace platforms.”
Similarly, Israel Aerospace Industries has entered into agreements worth $93 million for providing naval medium range surface-to-air missile systems to India. The contracts for the air defence system were entered with the Indian Navy and the Cochin Shipyard. Under the contracts, IAI will provide complementary systems for the air defence system.
More Indian state governments are paving the way for foreign OEMs to establish a manufacturing base in India. Tamil Nadu chief minister Edappadi K Palaniswami laid foundation stones for 12 projects costing Rs 14,071 crore for which MoUs were signed at a recently held meet. Lakshmi Machine Works (LMW) in Coimbatore will expand its textile machinery capacity and defence and aerospace component unit, besides solar power project and construction of warehouse at Rs 600 crore.
Saab, a global products, services and solutions firm with a footprint extending from military defence to civil security, has taken another step forward to expand its presence in India by signing MoUs with three aerospace manufacturers. The MoUs with CIM Tools and Sansera are to expand the existing working relationships with Saab on commercial aero-structures for the Gripen fighter and other defence-related products in the Saab portfolio. The MoU with Dynamatic is a starting point to explore future joint opportunities in commercial and defence-related aerostructures work, including Gripen.
With collaboration and knowledge-sharing being key to building a successful indigenous aerospace ecosystem, the new MoUs will enable Saab to work with Indian companies to establish an indigenous, efficient, tailor-made manufacturing system that will develop, deliver and support state-of-the-art Gripen fighters in India for the Indian Air Force.
A stiff market
The aerospace and defence industry continues to be characterised by increasing competition and cost pressures as well as high cost of energy and raw materials. To face these challenges, aerospace OEMs and Tier-1 suppliers have turned to globalisation of the supply chain. All of this has resulted in partnerships and joint ventures between established aerospace players and non-traditional suppliers. "Aerospace manufacturers are progressively utilising their investments to open up new markets, India being among the top contenders. The country can leverage the changing face of the aerospace sector by creating manufacturing hubs that can offer integrated manufacturing facilities to speed up time to market as well as reduce logistics costs. Aequs SEZ is a fully integrated, self-sustained manufacturing ecosystem that efficiently meets the wide-ranging demands of the customers around the world. From raw materials to equipment and processes, the company maintains internationally recognised standards substantiated by industry certifications," says Kaul.
Aerospace sector operates on highest quality standards and strict certification policies owing to the criticality of every component that goes into the making of performance-critical parts of the aircraft. Certificates like AS9100 are pre-requisites for procuring orders from customers for the manufacturing of aerospace parts. Companies pitching for manufacturing contracts need to follow the necessary compliance procedures and standardised in-house processes to become certified as well as attain customer approvals for various manufacturing and testing processes.
Between 2014-15 and October 2018, as many as 150 contracts worth about Rs 1,27,500 crore had been signed with Indian vendors for procurement of defence equipment for armed forces. India has a robust supply chain with 10,000 micro, small and medium entrepreneurs who make 80% of the components, aggregates and assemblies of complex weapon system and aircraft.
Our home-grown Bharat Electronics Limited (BEL) has been very aggressive in the Indian and international market. Last month, the company said it has received export orders valued at about $33 million from Elbit Systems Electro-Optics Elop Ltd (ELOP), a subsidiary of Elbit Systems Ltd, Israel. The export order for the manufacture and supply of state-of-the-art next generation EOIR payloads (CoMPASS Rev III, Trade Mark of ELOP) and another variant of EOIR payload (CoMPASS III, Trade Mark of ELOP) for airborne applications was received last month. BEL had already entered into Technical Collaboration Agreement (TCA) with ELOP for the transfer of technology for the manufacture of these EOIR payloads and for providing lifetime maintenance support at its manufacturing facility at Chennai.
Indeed, the aerospace and defence sector is indeed set to grow.