AEROSPACE companies, including Indian aviation majors, are coming out with new business models as they seek high levels of design and production. Long-term contracts by offshoring and outsourcing work to private firms and SMEs in India is one among them.
Airbus, the world’s largest plane maker, for instance, is planning to offshore 20% of its overall engineering work, and a major chunk of it will go to India followed by Russia and China, Airbus Engineering Centre head Eugen Welte said at the Aerospace Supply Chain Symposium held at the Indian Institute of Management Bangalore (IIM-B), on Saturday. “As we are getting the right skills, we will grow engineering strength to 400 by the year 2012, which is quite aggressive by European standards,” Mr Welte said.
He said Airbus’ parent European Aeronautic Defence and Space Company (EADS) has started research and development in India, where it will form new partnerships with Indian institutes, laboratories and universities. Also, plans for a stateof-the-art EADS campus, frozen for some time now, are taking shape.
Airbus, which counts Quest Global, HCL and Infosys among its preferred vendors in India, has started projects such as flight management system and simulation here. “Now, we will be doing more high-end work dealing with aerodynamics, ” he said. Dr Roger Moser, faculty at IIM-Bangalore, said that the work offshored by companies such as Airbus may be worth a few million euros right now, but in coming years it would turn into a few hundred million euros.
Bejoy George, chief marketing officer at tech company Quest Global, said there is a need for a national aerospace policy in India to encourage this sector, as India can expect to win about 25% of offshore engineering spend, or about $50 billion, due to various advantages.
Not just western companies, but even Hindustan Aeronautics (HAL), India’s largest aerospace firm, is seeing the need to increase outsourcing to private companies. HAL, which currently outsources just 8% and does 92% work in-house, has plans to increase outsourcing to 25% and do 75% work in-house in the near future, according to KG Subramony, HAL general manager.
“The opportunity is huge as defence procurement is Rs 25,000 crore per annum,” he said.
HAL chairman Ashok Nayak said the process of transformation has begun in the aerospace industry and there is a need to get the support from the Indian private firms and SMEs. He said HAL wants toshed the military tag and enter into the civil market, where it can come up with innovative business models and products and develop risk-sharing relationship with private firms.
According to Jayant D Patil, vicepresident of Larsen & Toubro, in the next 15 years, one-third of the world’s aircraft will be bought in the Apac region, opening new opportunities of supply chain.