IndiGo aims to give wings to India, which has a great opportunity to produce aircraft
IndiGo's Chief Executive Officer (CEO) Pieter Elbers articulated the airline's dedication to empowering the nation while addressing the audience at CNBC TV18's Global Leadership Summit. He stressed the airline's ambitious vision of global expansion while simultaneously reinforcing its foundations in India.
Elbers pointed out the significant untapped potential for Indian airlines to fully leverage bilateral traffic rights across various international markets, indicating substantial growth opportunities in the years ahead.
The airline CEO remarked that India's aviation industry is strategically positioned to take on a more substantial role in global air travel, considering the country's advantageous location and the increasing demand for international connectivity. He articulated his desire for IndiGo to broaden its international presence by introducing additional flights to crucial destinations worldwide, a strategy he believes will strengthen IndiGo’s status as a frontrunner in the global low-cost airline sector.
“Our objective is to give wings to the nation,” Elbers declared, highlighting IndiGo’s mission to not only cater to domestic travelers but also to serve as an international link connecting India with the rest of the globe.
Elbers pointed out the significant untapped potential for Indian airlines to fully leverage bilateral traffic rights across various international markets, indicating substantial growth opportunities in the years ahead.
The airline CEO remarked that India's aviation industry is strategically positioned to take on a more substantial role in global air travel, considering the country's advantageous location and the increasing demand for international connectivity. He articulated his desire for IndiGo to broaden its international presence by introducing additional flights to crucial destinations worldwide, a strategy he believes will strengthen IndiGo’s status as a frontrunner in the global low-cost airline sector.
“Our objective is to give wings to the nation,” Elbers declared, highlighting IndiGo’s mission to not only cater to domestic travelers but also to serve as an international link connecting India with the rest of the globe.
India's enduring ambitions to manufacture aircraft
For years, the commercial aircraft manufacturing sector has been characterized by a robust duopoly, with Boeing and Airbus commanding nearly 90% of the market. The construction of a commercial aircraft is an intricately complex endeavor, rendering India’s aspiration to produce its own aircraft quite ambitious.
While Hindustan Aeronautics Ltd. (HAL) has already begun producing fighter jets and is in the process of developing a 19-seater civil aircraft, creating a full-scale commercial aircraft presents significantly greater challenges. For example, after many years of development, China only recently unveiled its first mainline commercial aircraft, the COMAC C919. Competing directly with the Airbus A320neo and Boeing 737 MAX 8 and forming a part of China’s strategy to penetrate the global passenger jet market, the C919 still encounters obstacles in obtaining international certifications and is dependent on Western technology.
India’s timing for embarking on domestic aircraft manufacturing is advantageous, with both demand and supply dynamics working in its favor.
With a population of 1.4 billion and aspirations to become a developed nation by 2047, India’s economy is on track to expand more rapidly than any other G20 member. A recent report from Airbus indicates that this economic growth, coupled with a rapidly growing middle class, will significantly boost demand for air travel. It is anticipated that passenger traffic in India will rise by 6.2% each year until 2040, far exceeding the global average of 3.9%, thus positioning it as the fastest-growing market among major economies. To cater to this increasing demand, India has already ordered over 1,200 aircraft, but will require an estimated 2,210 new aircraft in the next two decades.
Currently, India, similar to many other key economies, relies significantly on aircraft sourced from Boeing and Airbus, which maintain a near-duopoly in the sector.
Why it's the right time for India's aircraft manufacturing plans
India's initiative to manufacture commercial aircraft domestically arrives at a crucial moment when both demand and supply conditions favor such an endeavor.
Like many other significant economies, India heavily relies on acquiring aircraft from Boeing and Airbus, which dominate the industry. Nevertheless, the increasing demand for commercial aircraft in India and other regions, such as Latin America and the Gulf area, has resulted in supply not keeping up.
The Indian aviation sector is burdened by a lack of aircraft, exacerbated by delays in deliveries. Boeing has encountered supply chain issues and faced increased regulatory scrutiny following a mid-air door plug failure on a 737 MAX 9 jet in January. Presently, a strike among factory workers is disrupting its delivery timelines.
Airbus has adjusted its target to 770 deliveries for the entire year, down from an earlier goal of 800 jets in July, due to shortages of engines and other components as the aerospace sector's supply chain continues to struggle in recovering from the pandemic, as reported by Reuters.
Delivery delays from Airbus and Boeing are "incredibly frustrating" and have yet to improve, according to the head of IATA, the global airline association, who made these remarks nearly two weeks ago. A variety of leading airlines in Europe lamented the ensuing capacity limitations during a conference held in Brussels, with Ryanair stating it would need to lower its passenger traffic forecasts for next year due to these delays, as reported by Reuters. Given the surge in demand and the inability of supply to keep pace in a sector primarily governed by just two major manufacturers, it is an opportune moment for India to strategize its entry into the commercial aircraft manufacturing arena.
What is necessary for India to develop an indigenous commercial aircraft?
India's aviation manufacturing sector, which specializes in the production of parts and components, has begun to expand. Both Boeing and Airbus have established dedicated research, technology, and development facilities in India.
In January, Prime Minister Modi officially opened the Boeing India Engineering & Technology Center in Bengaluru. The Rs 1,600 crore, 43-acre facility, recognized as Boeing’s largest investment outside the United States, aims to “facilitate the development of next-generation products and services for the global aerospace and defense sector.”
While India initially focused on supplying aircraft components to companies such as Boeing and Airbus, the nation currently accounts for a mere 5% of the global supply chain and lacks the essential high-complexity parts and technology needed to fabricate a commercial aircraft from the ground up. “Although the idea of manufacturing your own aircraft from the ground up is appealing, and many have attempted it, I don’t perceive that as an immediate priority, even with robust government-to-government collaboration and substantial financial resources,” Anuj Jhunjhunwala, CEO of JJG Aero, had informed ET in June.
Jhunjhunwala highlighted that the Japanese halted their ambitions at producing business jets, numerous Western military aircraft manufacturers struggled to pivot to commercial aviation, and even the Chinese, who approached this goal with the Comac, have been engaged in this endeavor for almost twenty years and remain dependent on Western technology. Rather than attempting to construct an entire aircraft, the Indian ecosystem should prioritize capturing a larger portion of the components supply chain first, he advised.
The production of commercial aircraft necessitates a level of scale, complexity, and technological advancement that significantly exceeds what is required for military aircraft and even spacecraft, as Pragya Priyadarshini, Vice-President at Primus Partners, mentioned to ET. “This requires adherence to rigorous international certification standards, thorough testing, and the advancement of cutting-edge innovations across various disciplines.”
Maneck Behramkamdin, SVP & Business Head of Godrej Aerospace, had stated to ET that the necessary skills for aircraft design and production are dispersed among multiple entities — including the Defence Research and Development Organisation, Hindustan Aeronautics Limited, MSMEs, and startups. A nationwide initiative must first integrate these stakeholders, particularly since it is not a “one-industry initiative.” It is likely that the Special Purpose Vehicle (SPV) being proposed by the government will seek to achieve this integration first.
Behramkamdin stated that only a program funded by the government will yield results, as developing a new commercial aircraft necessitates an investment of tens of billions of dollars. Alternatively, a repayment mechanism must be established.
According to a PwC-CII report, the cost of establishing the industry line amounts to billions of dollars. For instance, in China, the development of the C919 received between $49 billion and $72 billion in government support from 2008 to 2020. In addition to substantial investment, India will also require partnerships with global leaders, as it is unfeasible to launch a completely indigenous aircraft built entirely from the ground up in India.
The Tata-Airbus facility, although primarily a defense transport initiative, could play a significant role in the Made-in-India civil aircraft project by enhancing the manufacturing ecosystem.
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