HAL, Snecma finalise joint venture

Harichandan A A / Bangalore February 09, 2005

Hindustan Aeronautics Limited (HAL) and French aerospace group Snecma, which already have several joint programmes going, are set to take their relationship a step forward.

From being mostly a buyer, HAL can move closer to becoming a partner in business with Turbomeca, a Snecma group company, as an agreement to form a joint venture between the two is “more or less finalised,” sources said.

The new venture can result in international business and exposure for the Indian public sector aircraft maker as the co-developer of the Ardiden helicopter engine.

When Turbomeca announced the Ardiden engine in 2001, it also said HAL’s advanced light helicopter (ALH) would be the first helicopter to fly with the more powerful, 1,200 shp engine. HAL calls the engine Shakti and will manufacture it for the Indian market.

“What the JV will do is give us the technology, the product and the international access that Snecma has. HAL could start with making some of the modules of Ardiden for other markets too, via the joint venture and in the process, we hope to make better profits,” the sources said.

After extended talks on business plans for the new company and on “who will hold how much stake” the two companies had come to an agreement. Sources said the JV would be a 50:50 partnership, but declined to comment on the investments in the new company.

Work on customising the Ardiden to HAL’s ALH requirements has been on both at HAL’s helicopter division and in Bordes, Snecma’s headquarters. Snecma’s website says the Ardiden is planned for certification this year. Sources said, the Shakti would “hit the test bed by September 2006”.

The Ardiden is built for five-six tonne helicopters flying in “hot and high” conditions. While it will initially power the Indian ALH, it is also said to be a candidate for Eurocopter’s Dauphin, and Agusta’s newer versions of the AB139.

Turbomeca is supplying its TM333-2B2 engines that will go on all initial versions of the twin-engine ALH that HAL has designed and is trying to export. “This engine will not be manufactured in India,” sources said, as HAL is contracted to buy up to 82 of them.

Once HAL had utilised all the 82 TM333 engines (for 41 twin-engine ALHs) it buys for ALH, future versions of the ALH will fly on the Ardiden. Turbomeca sees a worldwide market for up to 1,500 Ardidens and Shaktis over the next 15 years.

HAL’s efforts to export the ALH through its partnership with Israel Aircraft Industries are yet to yield results.

“Our first big thrust was in Chile, as part of our efforts to tap the Latin American market… We are in competition with other firms and the Chilean government hasn’t decided on who to place orders with yet. The Chilean air force chief is also visiting Aero India,” they said.

Last year HAL’s exports stood at some Rs 250 crore, “Because we are able to sell two ALH to Nepal, and one Dornier aircraft,” officials said. “We are making efforts to boost exports this year too.”

HAL is also trying to become a more profitable organisation by outsourcing some of its own requirements to private suppliers in the country, they said.

The company aimed to get 30 per cent of the value of its procurement from private vendors, but “we haven’t reached there yet”. Presently, the figure stood at 15 per cent, though some divisions may have outsourced more and others less. HAL aimed to end this year with a turnover of Rs 4,400 crore compared with Rs 3,800 crore for last year.

-Business standard

The Rediff Special/Air Commodore Jasjit Singh (retd)

February 09, 2005

The biannual Aero India 2005 exhibition and air show which began February 9 will probably go down in Indian aviation history as a landmark for a number of reasons.

Exhibition space is over-subscribed despite additional space having been created in anticipation.

American defence and aviation industry giants (who had declined to go to the prestigious Paris air show 18 months ago) will be showcasing their top-of-the-line aircraft and equipment like the F-15 multi-role combat aircraft that has proved itself in numerous wars.

Exactly 10 years ago, the United States and India signed the agreement to promote cooperation in defence industry and set up the institutions for this task. Unfortunately, there is little to show so far primarily because of lack of strategic vision on our side. We simply kept repeating the mantra of ‘frontier technology’ transfer despite knowing that no country easily gives such technologies to even their allies.

Strategic experts are getting around to the conclusion that global power is shifting from the West to East. One of the signs of this shift is the greater salience of defence exhibitions and aviation industry shows in Asia, from Singapore to Dubai and Islamabad. Bangalore stands out well into the sky, because there is a growing market for civil and military aviation systems in India.

All countries of Asia are focusing on force modernisation essentially in the areas of air power, space and combat support systems like aerial refuelling, electronic jamming, network-centric capabilities and surveillance systems ranging from AWACS to UAVs.

No wonder the US has already approved the export to India of systems like Boeing’s CH-47 Chinook transport helicopter, capable of delivering two tons of payload to our posts at 20,000 ft altitude in Siachen.

Companies like Boeing incidentally are extensively involved in designing and producing systems that go to provide network-centric warfare capabilities with tremendous opportunities for collaboration with India with its unmatched strength in information technology.

Similarly Northrop hopes to market its E-2C Hawkeye airborne early warning aircraft in India and the Indian Navy could vastly extend its early warning reach at a fraction of the costs of the aircraft carrier-MiG 29K system.

At the same time, our civil aviation sector is expanding rapidly. Passenger air traffic is expected to grow annually at 20-percent to reach 50 million by 2010.

Both private and public sector airlines are into aircraft acquisition with a vengeance and are likely to buy or lease nearly 300 airliners in the next 5 years, at an estimated cost of around $11 billion. At least $10 billion would be needed for infrastructure, which is already a weak spot.

In other words, investments in civil aviation would average around Rs 17,000 crores per year. A bulk of this would have to come from abroad with FDI in civil aviation having been raised to 49 percent. This would also open up a huge market for spares and product support for decades to come.

Our interests clearly demand that all this investment should include maximum manufacturing (as well as design and development) capacity being established in the country.

With only two aviation majors — Boeing and Airbus — in the business, our leverages are obviously enormous. Our approach has been to seek lowest quotations. But this must change to a criteria based on overall advantage to the country as the deciding parameter.

Offsets hold the key to that. This implies that the manufacturer (which inevitably has the support of the government) offers to set up joint ventures for manufacturing, sales and exports of subsystems and spares capacities in the country acquiring the systems, including buy-back.

Recent cases of offsets have gone to levels where direct offsets amount more in value than the cost of the contract itself. A recent US Commerce Department report indicates that during 1993-2002 a total of 434 US offset agreements with 36 countries, the offset value averaged 92.6 percent of export contract.

Offset criteria, therefore, should be the primary driver of aviation acquisition policy and the basis of advice to the private sector for its participation.

At the moment, the Indian Air Force needs nearly 150 combat aircraft (not to talk of modernisation in other areas) urgently in view of force levels already winding down because of modernisation having been kept on back-burner for years.

Costs have shot up for a variety of reasons and each new aircraft manufactured even in the country would cost nearly Rs. 200 crores to replace what had cost a couple of crores two decades ago.

Similarly the army and the navy require a lot of aviation assets to remain a modern fighting force. It would be short-sighted to simply seek technology transfer for production of the contracted number of aircraft and not press for off-sets production and export of sub-systems, components and assemblies.

The inevitable high costs of defence would then be partially ameliorated by boosting industrial growth in the country.

The problem is that we are dealing with the high-cost high-technology (civil and military) aviation landscape in India in fragmented and sectoral way.

Such a traditional approach, guided more by turf than a broader vision, with each owner of a segment unconscious of the total picture, unwilling or incapable of thinking of a coordinated and integrated ‘national’ approach, has to change.

This requires a holistic approach, and since it involves complex areas, high costs, and the involvement of more than 18 departments and agencies of the central government (besides state governments, the private and public sector, etc.) this task is best carried out under the NSC (National Security Council).

India Israel to jointly market light copter

In fact this sort of national policy planning is the core logic for an NSC system to coordinate the actions of various branches and the government and the private sector so that each part is synergised into a holistic national policy.

At the same time, the establishment of a national Aeronautics Commission is long overdue. The sheer scale of investments in the civil and military aviation and aeronautics demands that we set up at the earliest at least a national committee to synergise various aspects of needs, tasks and resources to leverage national aviation/aeronautics development at a faster rate in every aspect.

This in turn would also enhance opportunities for employment in the country, especially for an expanding professional workforce, with long-term benefits for development.

– Rediff.com

India pitches to become aerospace offshoring base

Wed February 9, 2005 5:04 PM GMT+05:30
By Narayanan Madhavan

BANGALORE (Reuters) – India’s state-run aerospace industry aims to take a page out of the IT sector’s book by promoting itself as a potential offshoring base for foreign companies, Defence Minister Pranab Mukherjee said on Wednesday.

Joint ventures that take advantage of India’s low-cost engineering and science skills can cut development and marketing costs, Mukherjee said at the inauguration of the bi-annual Aero India show in Bangalore.

“There is tremendous scope for outsourcing from India in areas where the companies are competitive,” he said. “We are keen to welcome international collaborations that are in conformity with our national goals.”

Before India’s aerospace industry opened up to foreign companies as part of broader economic reforms in 1991, state-owned Hindustan Aeronautics Ltd. (HAL) and other state agencies had focused for five decades on national defence.

HAL now makes aircraft doors for Airbus, part of Europe’s EADS, and is set to produce 44 of the 66 Hawk trainer jets New Delhi is buying from Britain’s BAE Systems Plc under a joint programme. BAE also has a software joint venture with HAL.

Mukherjee said India had the capability to make advanced alloys, process technologies and aircraft equipment, and the industry was considering diversifying into making civil aircraft.

While Bangalore is the centre for India’s $16 billion IT and business services outsourcing industry, it is also the main centre for aerospace.

U.S. PLANS

Since Indian and U.S. relations have improved in recent years, opportunities have opened up for U.S. companies in India.

Lockheed Martin Corp signed on Wednesday a technical agreement with HAL to share data on its P-3 Orion surveillance aircraft. India is considering buying F-16 fighter jets from Lockheed Martin.

“We are confident that integration of Indian industry such as HAL into our worldwide supplier base will enhance the attractiveness of our products to the government of India,” said Dennys Plessas, regional vice-president in Lockheed’s aeronautics unit.

On Tuesday, Boeing Co. signed up Indian software firm HCL Technologies Ltd. to develop a hosting platform for the flight test system for its new 787 Dreamliner aircraft.

France’s Snecma, set to be taken over by Sagem, said it planned a 50-50 joint venture with HAL to make engine parts, investing an initial 300 million rupees ($7 million).

“Snecma looks at India as a priority for strategic development,” the company said in a statement.

-Reuters.com

It is going to be a great challenge for HAL.