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BW Businessworld

Aviation: Ready For Take Off

Boeing sees India “as a core growth market for the future”, where it Makes in India and builds a 21st century aerospace ecosystem

Photo Credit : Shutterstock

On the eve of the Paris Air Show on June 16, Boeing gathered its top executives at Le Bourget. Alluding to the two recent crashes of the Boeing 737 Max in Ethiopia and Indonesia, Boeing Chairman and CEO, Dennis Muilenburg said, “This is a defining moment for Boeing. It’s given us pause. We are very reflective and we’re going to learn.” He reassured customers and suppliers who had flocked to the air show, of the future of the plane and that safety was the top priority of the company.

Boeing repeatedly emphasised that it was getting the Max re-certified. “Today more than 500 million people flew on the Boeing plane around the world. The recent Ethiopian airlines’ accident weighs heavily on us,” he said.  “It affects us personally and it effects our team and that something we will never forget,” he went on to say.

The Boeing chief announced that the company had completed the software tests and was in the process of working on certifications with regulators. “All the years, we focused on people safety at the work place, now we focus on the product safety,” he said, adding that the company was also trying to bring focus on safety in its global supply chain culture.

Discussions are now on with the US regulator, the Federal Aviation Administration and other global aviation regulators for full certification of Boeing’s 737 Max, after it has completed its software fixes. The Max is crucial to Boeing’s future. It is the newest version of Boeing’s best-selling plane and was launched in response to Airbus’ fuel-efficient A320neo.

It was the outcome of a technological breakthrough that equips the aircraft with highly advanced and fuel-efficient mechanisms.

In a hugely competitive market, the Max saves money for airlines and has lower emissions than market rivals, which should count in a world wary of destroying the environment. In step with the growing awareness of the need for sustainability, the theme of the Paris Air Show too was sustainable technology centred on innovations, like electric planes.

Still flying high
“You will hear at the Paris Air Show that we continue to operate in a very strong market place. As of now we see our market outlook update this week across commercial, defence, space and service sectors,” said Muilenburg.

“You will see the market grow at $8.7 trillion over the next ten years. Over the next 20 years, the world will need about 44,000 new commercial airplanes. So you will see growth on growth on our commercial sector,” he said confidently.

Among Boeing’s major global customers for the 737 Max 8 jets is the Indian carrier, SpiceJet. The airline already has 13 Max planes in its fleet and orders are pending with Boeing for 192 more to be supplied by 2025. SpiceJet made a debut into the aviation market in 2007, while the industry was still in its fledgling days. SpiceJet began operations with two leased Next-Generation 737-800s.
The airline is growing its fleet now to expand capacity in the world’s fastest-growing domestic aviation market. At the Paris Air Show in June 2017, Boeing and SpiceJet had signed a memorandum of understanding for 40 of the 737 Max airplanes.

In a conversation with BW Businessworld though, Muilenburg said, “Our plans are not connected to any individual airlines. We have not seen any individual airline actions that are changing our long term objective for Max. We continued to see very strong traffic term in India and broadly throughout Asia. India, we see as a core growth market for future.”

Dennis Muilenburg told BW Businessworld that Boeing was committed to investing in the Indian market. The company has a two-fold broad-based investment plan across defence, commercial and space services.

Make in India

“That (investment) is ongoing and robust and our investment in India has roughly quadrupled over the last five years,” said Muilenburg. “That includes technology investment, supply chain investment and production capacity,” he went on to say.

“Some of the work that we committed on Super Hornet opportunity in India includes that broad infrastructure investment in India. It is regardless of the ongoing competition.  If Super Hornet is selected for the (defence) forces in India, there will be additional investment on top of that,” he said, “So, that will be a two-fold investment. We have a sustained growth investment in India.”
Boeing has offered to build a 21st century aerospace ecosystem in India for co-developing the F/A-18 Super Hornet with its Indian partner, Mahindra. Speaking on the sidelines of the media conference organised by Boeing in Paris, Charlie Miller, the company’s Vice President, International Communications said, “The Make in India programme for the Super Hornet has been envisioned for aircraft made in India, for India.” The Boeing F/A-18 Super Hornet is a twin-engine, supersonic, all-weather, carrier-capable, multirole combat jet, designed as both a fighter and attack aircraft.

 Apart from building a next generation war fighter in India, the company is also building a 21st Century aerospace ecosystem with Hindustan Aeronautics Limited (HAL) and Mahindra, along with Boeing’s industry partners, namely, GE Aviation, GKN Aero, Northrop Grumman and Raytheon.

Boeing has one of the largest aerospace clusters in the world and its F/A-18 production involves 60,000 jobs and 800 suppliers in 44 states in the United States. Boeing officials say the pattern can be replicated in India. This partnership will create jobs and industrial capacity in India and also help Boeing stay globally competitive.

“Our commitment to India is well known and recognised today because we have been investing heavily in India for some years now,” Miller said emphatically. “We have 2,000 employees in India that’s going to grow to 5,000. We have major investments with for example, the Tata group,” Miller added.

In 2018 Boeing’s investment in India crossed $1 billion. “We are making in India today. So, our commitment is known,” Miller went on to say. “If the F-18 team is selected then we will be making F-18 in India for India and there is no question that we will do that because today everybody can see all the work that we’re already doing,” he said.

Defence ecosystem

The Indian government has been reaching out to international OEM’s (original equipment manufacturers) for collaboration on technology and building capabilities in India. In 2009, it selected Boeing to provide eight P-8I advanced anti-submarine and anti-surface warfare aircraft.

The P-8I is an India-unique variant of the US Navy’s P-8A Poseidon, which was developed from the Boeing 737- 800. All P-8Is have been inducted into the Indian Navy. The Indian government also extended the order for an additional four P-8I aircraft and the deliveries are expected to begin in 2020.

But Boeing faced flak from the Comptroller and Auditor General (CAG) for failing to discharge its offsets obligation. Boeing however, denied the charges and pleaded that it had not only fulfilled its contractual commitment, but its ‘offsets’ with Indian partners had crossed $800 million.

Boeing is in the process of submitting the report formally. The Union Ministry of Defence (MOD) has granted Boeing time till 2020 to prove that it had indeed carried out offsets work worth $641 million for a naval jet deal.

 In 2018 the MoD decided to finetune the Offsets policies and bring more clarity on items of production that could be sub-units of defence and aerospace. “You know we are a global company and we have customers around the world,” said Miller, “and in every market we have set offset requirements and we have met those offset requirements over decades and in many cases, we have exceeded the offset requirement and now with an ongoing offset you know you have discussions between the company and the government to establish one certain payment and is recognised as offset payment.”

Boeing has been working with suppliers in India for over two decades in manufacturing, IT and engineering services. More than 160 suppliers provide advanced, complex components and sub-assemblies for the multinational’s commercial and defence aircraft as part of an integrated global supply chain.

Boeing’s decision to invest and build a supply chain in India has made critical components like aerostructures, wire harness, composites, forgings, avionics mission systems and ground support equipment available for Boeing’s commercial and defence aircraft, including the 777, 787, P-8, F/A-18 Super Hornet, F-15 and CH-47 Chinook.

This year the Indian Air Force (IAF) inducted the first four of the 15 Chinook CH-47F helicopters it had contracted to purchase from Boeing for $1.5 billion in 2015.

Air Chief Marshal B.  S. Dhanoa has said that he is optimistic about a larger fleet of Chinook. Boeing  has also handed over the first of the 22 Apache attack helicopters that India had contracted to buy in September 2015 for about $3 billion at current prices.

Now that the United States has put India under STA-1 and declared India its closest defence partner in the Indo-Pacific, Boeing will find much of its policy groundwork in place, should it plan to be part of the India growth story – as it certainly seems keen to be.

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