Can ibsa countries cooperate in civil aviation manufacturing managing ambition with reality
1 / 23

Can IBSA Countries Cooperate In Civil Aviation Manufacturing? Managing Ambition with Reality - PowerPoint PPT Presentation

  • Uploaded on

Can IBSA Countries Cooperate In Civil Aviation Manufacturing? Managing Ambition with Reality. By CUTS Centre for International Trade, Economics & Environment CUTS International Jaipur E-mail: IBSA Initiative: Aerospace Cooperation. The Genesis

I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
Download Presentation

PowerPoint Slideshow about 'Can IBSA Countries Cooperate In Civil Aviation Manufacturing? Managing Ambition with Reality' - PamelaLan

An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.

- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
Can ibsa countries cooperate in civil aviation manufacturing managing ambition with reality l.jpg

Can IBSA Countries Cooperate In Civil Aviation Manufacturing?Managing Ambition with Reality


CUTS Centre for International Trade, Economics & Environment

CUTS International



Ibsa initiative aerospace cooperation l.jpg
IBSA Initiative: Aerospace Cooperation Manufacturing?

The Genesis

  • Para 40 of the Cape Town Ministerial Communique – Cooperation on scientific research and development

  • Para 54 – Cooperation on transport via trilateral civil aviation and maritime transport agreement

  • Mutual recognition of strength in aviation sector

    • India – Military airplane and space technology

    • Brazil – Passenger planes

    • South Africa – Electronics expertise

Ibsa initiative why aerospace not trade l.jpg
IBSA Initiative: Why Aerospace not Trade? Manufacturing?

Poor Logistic

  • High freight costs

  • High cost of business facilitation – courier charges, travel costs, telephone costs etc.

  • Poor access to information

  • Language barrier

  • Elevated risk perceptions

  • High corruption level

  • Visa and administrative hurdles

Benefits of cooperation in aerospace sector l.jpg
Benefits of Cooperation in Aerospace Sector Manufacturing?

  • Provide cheaper airplanes to other developing countries

  • Saving and earning of foreign exchange

  • Help in checking brain drain – a large proportion of aerospace professionals from India go to Northern countries

  • Better and high paid job could be created

  • Technological spillovers – spur new innovations in other sectors

Scope of the india paper l.jpg
Scope of the India Paper Manufacturing?

  • Restricted to exploring the scope of IBSA cooperation in regional jets – civil airplane

  • Also provides information regarding the aerospace industry as a whole

  • Not much coverage of defence manufacturing

  • Not much about space technology as it falls exclusively within the mandate of govts.

  • The paper has two objectives:

    • To assess the capability and future direction of Indian civil airplane manufacturing sector

    • To explore the possibility of cooperation among IBSA

Global civil aviation manufacturing industry l.jpg
Global Civil Aviation Manufacturing Industry Manufacturing?

  • Civil aviation mfg. is the most important component of aerospace industry

  • Boeing and Airbus dominate the global large civil airplane mfg.

  • Global production of regional jets is dominated by Bombardier (Canada) and Embraer (Brazil)

  • Regional jets are gaining popularity all over the world – for exp. its share in domestic fleet operation in US has increased to 30%

  • 3 companies dominate the mfg. of airplane engines – Pratt & Whitney, General Electric (both US), Rolls Royce (UK)

The brazilian aerospace industry l.jpg
The Brazilian Aerospace Industry Manufacturing?

  • Embraer is the world’s leading manufacturer of commercial jets up to 110 seats

  • Embraer is trying to break into a new market of airplane with a seating of 70-100

  • Embraer is not exactly what one would call an indigenous establishment – 95% of Embraer’s suppliers are located abroad

  • Brazil is also an imp. player in maintenance, repair and overhaul market

  • Embraer’s strength lies in assembling components and not in manufacturing

South african aerospace industry l.jpg
South African Aerospace Industry Manufacturing?

  • Six research, development and manufacturing companies, Aerosud, Altech Defence Systems (ADS), ATE, Denel, Grintek, and Reunert dominate the South African aerospace defense industry

  • Africa’s largest single manufactured foreign exchange earner is that of defense, electronics and aerospace systems and components

  • South Africa has established itself as the only Accredited Maintenance Organisation (AMO) and MRO hub for southern Africa

Indian civil aviation manufacturing sector l.jpg
Indian Civil Aviation Manufacturing Sector Manufacturing?

  • In 2005 the industry was valued at US$150mn. Expected to grow to about US$1bn in 3-4 years

  • Dominated by public sector

  • Aeronautical Development Agency (ADA), Hindustan Aeronautics Limited (HAL), Indian Space Research Organisation (ISRO), National Aerospace Laboratories (NAL) and Defense Research and Development Organisation (DRDO), all public sector enterprises, form the core of the sector.

Indian civil aviation manufacturing l.jpg
Indian Civil Aviation Manufacturing Manufacturing?

Leading Organisations Involved in Aerospace in India

Indian civil aviation manufacturing11 l.jpg
Indian Civil Aviation Manufacturing Manufacturing?

  • HAL is without doubt, India’s leading aeronautics manufacturer

  • The transport airplane division of HAL was set up in 1960 to manufacture the HS-748, a medium haul turbo-prop passenger transport airplane.

  • Over the years, it has vastly developed its infrastructure and capabilities and undertaken the manufacture of 15-19 seater multi role utility airplane (Dornier DO - 228), agriculture airplane (HA-31), basic trainer airplane (HPT - 32).

  • Variety of aerospace structural assemblies and components for both domestic and international market.

Indian civil aviation manufacturing role of private sector l.jpg
Indian Civil Aviation Manufacturing Manufacturing?Role of Private Sector

  • Engaged in seeking outsourced work from Tier I companies, and have few exports.

  • Public sector is supported by over 300 small and medium and very few large enterprises with small aerospace activities.

  • In the private sector, Taneja Aerospace and Aviation Limited (TAAL) is the only company to have forayed into the manufacture of commercial airplanes, an activity outsourced from Partenavia of Italy, though currently discontinued.

  • In components mfg., Larsen & Toubro, the US$1.7bn engineering company, is emerging as a player in the air defense equipment manufacturing business.

Indian civil aviation industry the structural issues l.jpg
Indian Civil Aviation Industry: The Structural Issues Manufacturing?

Demand Side

  • The growth rate in the Indian domestic passenger traffic is about 15 percent and will gallop to 100 million by 2010.

  • Over US$ 25 billion of airplane purchases are lined up in the next 5-7 years.

  • The dominance of the public sector is slowly being balanced by growing role of the private sector.

  • This imbalance (between Civil and Defence, and Private and State) is changing.

  • The Indian Defence sector is estimated to be worth over US$12bn, in 2004 the Indian civil aviation sector accounts for US$22.5bn worth of foreign exchange transactions annually.

Indian civil aviation industry the structural issues14 l.jpg
Indian Civil Aviation Industry: The Structural Issues Manufacturing?

Supply Side Constraints

  • Infrastructure is the key factor; good mfg facilities, uninterrupted comm. systems, public utility services etc., a few areas where the govt needs to strive.

  • There are no near profits, and a company has to invest human and financial resources for a long time before breaking even.

  • Certification is the key to market access. A large number of tests relating to tensile strength, temperature, tension etc are required, which involves heavy expenditure.

  • Do not have a track record in the civil airplane segment.

Indian civil aviation industry the structural issues15 l.jpg
Indian Civil Aviation Industry: The Structural Issues Manufacturing?

Other Crucial Impediments

  • Low salaries and brain drain

  • Intent deficit in promoting private sector

  • Bureaucracy and Access control

  • Lack of a development model

Indian civil aviation industry international collaboration l.jpg
Indian Civil Aviation Industry: International Collaboration Manufacturing?

  • Boeing chose HCL Tech. as a software development partner for the 787 Dreamliner. 

  • Boeing is also working with the Indian Institute of Science (IISc), Bangalore, in a strategic alliance to conduct research in aerospace materials, structures and manufacturing technologies.

  • The focus of the Boeing-IISc strategic alliance spans the range from nanotechnology, structural alloys, composites, smart materials and structures, process modeling and simulation, manufacturing technologies and prototyping through substructure fabrication and testing.

Indian civil aviation industry international collaboration17 l.jpg
Indian Civil Aviation Industry: International Collaboration Manufacturing?

  • HAL is presently supplying A320 doors to Airbus of the value of US$80mn. It is likely to gain an estimated $540mn of business from Airbus as part of a 30 percent ‘offset’ obligation, which the airplane maker has to fulfil, while selling planes to India.

  • Airbus is likely to source about half of its components from suppliers outside Europe, double the current level, as a way to boost its global reach (market access) and cut costs. This represents newer opportunities for India’s aerospace sector.

  • Airbus has industrial relationships with Infosys, HCL Technologies, Midhani, Computervision and Videocon in India. Infosys worked on the design and development of the top and bottom skin extensions within the inner fixed trailing edge for the A380.

  • HAL, based on a successful A320 engagement, is involved in talks with Airbus to develop components for the A380.

    [1] Economic Times, 14 December 2004, (Visited on 22 August 2005)

    [2] ‘Airbus to outsource more work outside Europe’ Reuters, Tokyo, 26 October 2005

    [3] ‘Airbus betting big on Indian IT skill’, Silicon India, 22 June 2005, based on press briefing with Airbus Regional Press Manager David Velupillai.

Ibsa cooperation exploring complementarities l.jpg
IBSA Cooperation: Exploring Complementarities Manufacturing?

Cooperation on Regional/Feeder Jets

Ibsa cooperation exploring complementarities19 l.jpg
IBSA Cooperation: Exploring Complementarities Manufacturing?

Problems in Cooperation

  • Poor trade relationship

  • Lack of traditional relationship – IBSA countries are not traditional defence and aerospace partners

  • The China factor – Embraer has already entered into a joint venture with China Aviation Industry Corporation

  • Distances will increase cost – close proximity is of crucial importance

  • Dominance of South-North relationship – industrialised countries accounts for nearly all the aerospace collaborations of India

Areas of cooperation indian industry perception l.jpg
Areas of Cooperation: Indian Industry Perception Manufacturing?

  • In short term, India poses a strong competition to S. Africa in MRO and component mfg.

  • In long term, its ambitions to develop a regional jet may result in competing with Embraer

  • IBSA countries can cooperate in the civil aerospace, but not necessarily in civil airplanes

  • India has advanced in space technologies, can help Brazil and S. Africa in this field

Areas of cooperation indian industry perception21 l.jpg
Areas of Cooperation: Indian Industry Perception Manufacturing?

Civil Airplane

HAL expressed interest in the following areas of cooperation with Embraer

  • Outsourcing of manufacturing

  • Regional service centre for Embraer in Asia

  • Marketing of Embraer’s transport airplane in Asia

    SIATI stated that future aerospace cooperation, if envisaged within the IBSA initiative should

  • Involve shared research and development,

  • Joint marketing arrangements and technological exchanges.

Areas of cooperation indian industry perception22 l.jpg
Areas of Cooperation: Indian Industry Perception Manufacturing?

Maintenance, Repair and Overhaul

  • MRO is a labour intensive activity. Maintenance shops charge $35 per man hour in El Salvador (South America), $45 per man hour by independent maintenance providers in US and $65 per man hour for in-house maintenance by US airline companies

  • If India is in a position to beat these numbers, it can explore the MRO market more seriously, particularly for Embraer in the Asian market.

  • S. Africa may not gain from MRO activities in India, firstly because it is an MRO leader in Africa, and secondly because it does not have a manufacturing base that requires MRO services.

  • Brazil may require to set-up MRO operations in India, as the number of Embraer clients grow in India.

Key messages of the survey l.jpg
Key Messages of the Survey Manufacturing?

  • Competing with Boeing and Airbus through a South-South cooperation should not be the aim of the IBSA Initiative on aerospace

  • IBSA countries may not be able to collaborate on a smaller feeder airplane due to conflict of interests

  • IBSA countries should engage in rational cooperation relating to component manufacture, joint research and development and MRO activities

  • India can play an important role in the space sector, which is an emerging area of competence. These include satellites, launch pads and collaboration on space and communication programs.