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Jun 27, 2017 08:57 PM IST | Source: CNBC-TV18

Keen on participating through strategic partnership model: Pratyush Kumar, Boeing India

In an interview to CNBC-TV18's Shereen Bhan, Pratyush Kumar, President of Boeing India, spoke about the aviation and the future of his company.

In an interview to CNBC-TV18's Shereen Bhan, Pratyush Kumar, President of Boeing India, spoke about the aviation industry and the future of his company.

Below is the verbatim transcript of the interview.

Q: What is your own take on the fact that the Prime Minister has decided to focus in his op-ed on aviation as a big area of opportunity and focus. The US-India Business Council (USIBC) is also setting up its first working group on civil aviation. How does that make you feel?

A: It is great to see that in his op-ed piece. Of course, the demographics and dynamics of India is such that aviation growth is an unstoppable force. We have seen double digit growth, actually more than 20 percent growth in traffic in India for the last three years and it is expected to be a secular trend for the foreseeable future. So given that 200 aircrafts is just a start, it will be a lot more than that. But good to see that in his op-ed.

Q: So you are saying 200 aircraft is just the start, it is going to be a lot more than that. But let us talk specifics and let me ask you about Boeing's plans for India. I was talking about the SpiceJet order. You have just signed an additional 20 with SpiceJet on the sidelines of the Paris Air Show and this is for the Boeing 737 MAX 10. Take us through the deal with SpiceJet and where this now leaves things because the number was 200 odd aircrafts for SpiceJet alone.

A: As you know, at the Paris Air Show, Spice Jet made announcement to commit 40 737 MAX 10. This is the largest of the 737 family aircraft. Incredible aircraft, incredible economics for our customer. So it is 20 additional and 20 conversion of the 737 MAX 8 order. So it is exciting for us. It is a very strong endorsement of our product by one of our very important customers. So good to see that and this is just on continuation of the announcement that SpiceJet made earlier this year in New Delhi when they had announced a pretty substantial order for 737s.

Q: Given what you are seeing in the Indian market now and I know that Boeing has been a believer in the Make in India story as well, what does this mean from a civil aviation perspective for Boeing in India?

A: It clearly demonstrates the strength of the sector. As you know, civil aviation came up with a new civil aviation policy. Very encouraging to see that they are focusing on the regional connectivity scheme which will further turbo charge the growth of the civil aviation sector. So this is a voting with their wallets, as they customers of the sector. So very good news for the sector.

Q: Let me talk to you about defence because this is the other big area of opportunity and collaboration that both leaders perhaps will talk about today. We have seen the strategic partnership policy which was long pending, finally being announced by the Indian government. Do you like what you have seen? Are there any concerns that you have with the partnership policy?

A: It is a great step forward. We were eagerly awaiting to see the details of the policy is good to see it is finally published. It is important that the process has been laid out. And, as we follow the process, the transparency of the process will help us achieve the end result we are looking to do.

Of course, we are very interested in participating the fighters for the navy which is the carrier borne fighter aircraft for which there are requests for information (RFI) out there for that as well as the two engine aircraft for the air force. And we are looking forward to participating through strategic partnership (SP) model process going forward.

Q: Speaking of bringing on board local partners, how do you see all of that working out now that the details of the SP policy are out?

A: It is a very good question. We have scanned the entire landscape. We have talked to almost 400 suppliers. Almost 160 of them in our supply chain today. So we know the landscape very well. So as the SP model evolves, we will work with our Indian partners to create the full ecosystem for building a fighter aircraft for the country. It is not just about one partner. Of course, the strategic partner itself is important, but that is just one element of the overall ecosystem.

When you are looking at building something like F18 Super Hornets, it will take hundreds of Indian suppliers to build that aircraft and of course, at the end of the day, there will be a strategic partner which does the final assembly, testing and certification. Underneath that, there will be a tiered structure of suppliers in the country. That is what we are working on. That is the heavy lifting.

Q: You are absolutely right about that need to create that entire ecosystem, but zeroing in on the strategic partner itself?

A: We have not made a commitment on this. We have been talking to lots of Indian companies and of course, part of this will be, part of our game is to follow the lead of the Indian government, they have set down a process for strategic partnership. We do not want to jump ahead of that. We are going to follow the process and be ready to announce when they are ready to buy.

Q: Any more joint ventures we can expect? You have already inked on, but any more joint ventures we can expect from Boeing in India?

A: There is nothing that I am ready to announce right now, but of course, we are very excited about the Joint Venture. We have Tatas. The factory, we broke ground on that last year and ready to production later this year. So a very important step for us. It is going to make the fuselage for Apache helicopters. And as we think about the upcoming opportunity for fighter aircrafts, it will entail multiple joint ventures, supply chain partners, teaming agreements. So a massive slew of things will be under way to make that happen.

Q: You just talked about the Apache and your partnership with Tatas. Just ahead of this visit, there has been the announcement of the Lockheed-Tata partnership for the F16. How does Boeing read this specifically in the context of this Make in India versus Make in America and the contradictions if any at all?

A: If at all, the partnerships highlights the clear and present opportunity in India. It highlights that Make in India and Make in America are not necessarily at odds. It is not a zero-sum game. It is accretive and it is positive for both the countries. So in that sense, it really a proof point that this is a model which can actually work.

Q: So in terms of the quantum of investments into India, in creating the ecosystem, the supply chain, etc. what can we expect from Boeing over the next few years?

A: If the fighter campaign actually comes to fruition, we are talking about billions of dollars in manufacturing investment. That goes a long way. I mean creating the full ecosystem is a substantial endeavour. It requires not only building the final assembly plant, but also creating a supply base of tier-I, tier-II suppliers and that is a substantial investment.

Q: What is the current sourcing that Boeing does out of India?

A: We are excited to say that we have more than quadrupled our sourcing in the last three years.

Q: The value?

A: By the end of this year, our total cumulative sourcing will be touching close to USD 1 billion.

Q: Any challenges in being able to achieve that number? Here, yesterday when the Prime Minister met with business leaders of US companies, the overarching theme continued to be issues around the ease of doing business, specifically from your point of view, any unaddressed concerns that you would like the government to facilitate?

A: Government is doing a lot of right things. For example, the GST is a step in the right direction. It certainly helped the movement of goods and services more smoothly across country which is a very important part of our sourcing strategies and makes sure that we bring multiple suppliers together around sub-assemblies and sub-systems. So those are very important steps.

Making electronics or digitisation of processes is a very important step for ease of doing business. For example, one of the things they do is offset management. If they can apply e-governance, electronics submission of offsets, that will help. That is the next step that can evolve from the efforts to improve ease of doing business. But so far, we have seen pretty encouraging signs.

Q: I know that skills has been an issue that your sector has been facing issues within India specifically. And companies like yours are also partnering with the government to try and ensure that we have a skilled pipeline of talent. Where do things stand on that front?

A: The key to success for airspace manufacturing is skill and scale. Scale comes with a lot of orders and skill is something we have got to build from the ground up. So we, along with others are investing in skills across the whole spectrum from frontline factory workers to high end research and development. So we have programmes not only for our suppliers, but also for small and medium enterprises (SME) who can be ready to participate in the global supply chain.

A very important factor, something that we are doing at our own level, but also government is looking at very carefully to in a sustainable way, basis to expand that across the whole spectrum. One of the things we talked about, for example, in the civil aviation sector is the lack of availability of trained or types of rated aircraft maintenance engineers. Although there are lots of so called Aircraft Maintenance Engineering (AME) trained engineers, but they are not type rated. So we are discussing with the government potentially creating a finishing school of sorts to get the full final skills, the last mile connectivity to complete the skills of those AMEs so that they can be employed.

Q: So this is with the central government or any state government in specific?

A: This is Civil Aviation Ministry, partner with them, but of course, by the end of the day we will partner with our airline partners because they are the ones who will employ those AMEs.

Q: Both leaders will like to focus on the fact that they are creating jobs in their respective countries. President Trump continues to focus on jobs and that is what Prime Minister Modi will have to do as well. So given the kind of investments that you have made, given the tier-I, tier-II suppliers that you have been able to bring into the Boeing fold, directly and indirectly, what is the kind of employment that you have helped create in India as well as in the US on account of the dealings with India, if there is a number.

A: There is a number per se, but you can imagine with more than 200 aircrafts on civil aviation side and a pretty sizeable order on the defence side, we are talking about tens of thousands of US jobs that that order supports. At the same time, our sourcing activity in India also creates employment there. So in that sense, we are growing the pie on both sides. So it is all fuelled by the incredible demand we have on India which is sustaining jobs in the US and also creating jobs in India.

Q: There may be concerns that the Indian government has chosen to go the government to government (G2G) route as far as some large orders are concerned, for instance on the Rafale side. How is the private sector in the defence space looking at the fact that the Indian government may choose to go the G2G route again?

A: That is a prerogative the governments have is that for strategic reasons, at some point of time, they decide to go G2G, other times they do competitive procurement. We have done both. So for example, our C-17 was a G2G deal foreign military sales (FMS) deal while other systems and aircraft will be sold like P-8, Chinook and Apache, Apache was a hybrid deal, has been more direct commercial sales.

So we are comfortable with both models and it really depends on the comfort of the government, which way they want to go.
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