August 2012
Sanctions just a sideshow to main event
Reva Bhalla
Addressing the costs of stability
David Watts
A new era of 'might is right' geo-politics?
Andrew Small
Iran and Israel: a toxic proxy war
G Parthasarathy
Home grown, homemade: the face of UK terror today
Shyam Bhatia
Exploiting Pakistan's political vacuum
Ben West and Kamran Bokhari
A Soldier's General: celebration to launch Gen J.J. Singh's autobiography
A prickly partnership for India and US
Inder Malhotra
Renewed supply routes pave way for both respite and rage
Rahimullah Yusufzai
Pakistan's four faces on terrorism
David Watts
Is violence in decline?
Robert Kaplan
Air India could be flying higher
Tom Deegan
Keeping an eye on the tiger
Kuldip Nayar
NATO strategy intact, despite rough road ahead
Subhash Chopra
Former UN official Brigadier Anthony Cleland Welch, OBE, considers the West's possible reactions to the crisis in Syria
Shyam Bhatia

August 2012

Indian economy

Air India could be flying higher

July's Farnborough International Air Show provided excellent opportunities for countries to show off their flying credentials. Tom Deegan asks why India's national airline wasn't more visible and considers the highs and lows of its aviation industry.

By Tom Deegan

ASIA FLAVOUR OF MONTH: Asian aircraft, like this Malaysia Airlines Airbus A380, dominated the show
India figured strongly at this year's Farnborough Air Show for those looking for the evidence, but the nation missed some opportunities to make a more public splash.

The good news on the aerospace and defence front is that India is more than making itself felt: in the eleven years since the turn of the century, India came second in attracting manufacturing investments by aerospace and defence companies with fifteen new projects, on a par with the United States, according to a survey by Price waterhouseCoopers.  China was the global winner in attracting such projects. But for research and development projects over the same period India topped the charts, followed by the US, Russia and Britain.

The main message from the survey, which sought the opinions of industry executives worldwide, was the increased pressure on firms to deliver ever more complex work at a time when technological advance is so fast that the next five to seven years will see advances that would previously have taken 40 years, according to General Electric Aviation. 

And exports will increasingly be the name of the game according to the French defence firm DCNS. The company said that while a decade ago exports accounted for some 15 per cent of its output, they now accounted for 35 per cent, a figure that would rise to 70 per cent in the next ten years.

If those vital facts for Indian industry were not headline grabbing they were none the less important but India did miss vital chances to be more visible at the bi-annual extravaganza which this year reported orders and commitments worth $72 billion covering a total of 758 aircraft, a 53 percent increase on the 2010 show but still somewhat down on the $88 billion of 2008.

The livery of Air India could have been flying daily over the airfield on the graceful outline of the star of this year's show, the Boeing 787 Dreamliner passenger airliner, a matchless opportunity for publicity and kudos for the nation and its national carrier.

The airline should have been the first non-Japanese carrier to take delivery of this revolutionary composite construction machine but the opportunity to show it off fell to Qatar Airways, whose silver and maroon aircraft flew every day at the show along with an Airbus A380 of Malaysia Airlines, part of the Asian flavour which was the dominant element of the whole show.

Three of Air India's 787s, which have a combined list price of $580m, are parked at an airport in South Carolina in the United States while the Indian bureaucracy and Indian airline pilots slug it out in a multi-faceted dispute over their future. Meanwhile they should be helping the airline to fly out of its current raft of financial problems.

The first was ready for delivery at the end of May when the airline and the manufacturer were involved in a dispute over compensation for their late delivery. That dispute has now apparently been resolved but the Indian bureaucracy has yet to sign off on the deal and release the money.

The Dreamliners are part of $6 billion worth of orders made by Air India in 2005 which stretched already constrained finances and resulted in the airline needing a $5.8 billion government bailout. But even when they arrive there is turmoil at the airline and the right to fly them was recently at the heart of a 58-day strike by a group of about 500 pilots, which was only ended by the courts ordering the pilots back to work. But the dispute rumbles on, with the pilots demanding that their colleagues from the former Indian Airlines — the domestic state-run carrier that recently merged with Air India — should not be trained to fly them because that would interfere with their career prospects.

The strike came with the country's domestic airlines in a parlous state, with Kingfisher, the number two in the domestic market, having had to slash its aircraft fleet from 64 to 18 with a consequent reduction in routes, including those to Britain. Jet Airways has also dropped its Heathrow service. Kingfisher's staff have reportedly not been paid since January.
Also in evidence at the Farnborough show was the determination of the makers of the Typhoon jet fighter to get back into competition for the Indian Air Force order for 126 aircraft. At present Dassault has exclusive negotiating rights with its Rafale and it appears to have won, but the Eurofighter Consortium are initiating improvements in the Typhoon which will make it more competitive. They have issued a request for proposals to upgrade its radar to an actively electronically scanned array which should be ready for service in 2015, about the time the Indian order should be fulfilled. The aircraft will also be upgraded to accommodate the Meteor beyond visual range air-to-ground missile. Both these changes will put it on an operational par with Rafale, with the remaining field of contention being the price. The French are continuing to negotiate with the Indian government on the ultimate price of the Rafale package.

Meanwhile India, despite the travails of its domestic airlines, features strongly in predictions for robust growth in airliner production in the coming decades.

'Robust growth in China, India and other emerging markets is a major factor in the increased deliveries over the next 20 years,' said the Boeing Company, upgrading predictions of production numbers made only last year. Boeing's new 20-year market forecast now predicts demand for 34,000 new aircraft worth $4.5 trillion based on growth in emerging markets and airlines seeking more fuel efficient aircraft to counter rising fuel costs. The company said that airline traffic was forecast to grow at a 5 per cent annual rate over the next two decades with cargo growing at 5.2 per cent.

The Boeing predictions are predicated on the world fleet doubling: 'Low cost carriers, with their ability to stimulate traffic with low fares, are growing faster than the market as a whole,' said the company. It expects that most of the demand for wide-body aircraft such as the Dreamliner and the A380 will come from Asian airlines with orders for 7,950 twin-aisle aircraft, such as the Dreamliner,   worth $2:08 trillion and 790 large aircraft, such as the A380 and the Boeing 747, worth $280 billion over 20 years.

Meanwhile the show provided the opportunity to explore more tie-ups for India's first big-ticket domestic defence programme, the Tactical Communication System (TCS).

Expected to cost $2 billion and provide the Indian Army with modern communications, it is the first executed under the Make India banner in which only domestic companies are invited to participate in the design and development of defence projects.  Conceived in 2009 it got under way last month with the finalization of two development agencies that will compete for the programme. The two entities are the state-owned Bharat Electronics Ltd and a consortium of private firms. As well as agreements with firms in Germany and the US it is seeking links with BAE Systems of the UK.