US aircraft manufacturer Boeing, which has forecasted that the Indian aviation market will need 2,380 new commercial airplanes valued at $330 billion in the next 20 years, is doing exactly what its report suggests - to put more resources in India.
Boeing, apart from being a leading manufacturer of commercial jetliners, is also the world's largest aerospace company. It has made India its second-largest presence after the home market in the US.
It is banking on the Indian market as one of the channels to overcome the setback that had come from the grounding of its 737 Max fleet after the twin crashes - Indonesia’a Lion Air and Ethiopian Airlines - that led to the loss of more than 300 lives.
Just like what the company illustrated in its annual India Commercial Market Outlook in Mumbai on November 7, the future demand for the aircraft will generate more from Asia Pacific than from any other part of the world, with India being among the biggest markets.
Increasing its presence in this part of the world will make Boeing more diversified, which is something its arch rival Airbus has managed better. It will also balance out its dependence on the North American market.
Talking to the media in Mumbai on November 7, Darren Hulst, Boeing's Deputy Vice President for Commercial Marketing, underlined that India was the company's second-largest investment after the US. Already, its annual sourcing from India stands at $1 billion.
“Our ongoing investments in India span across development of aerospace technology, innovation, production capacity, supply chain, aerospace skilling centres, manufacturing and modernization of airport infrastructure and airspace," added Salil Gupte, President of Boeing India.
The focus will see the company's employee number in India increasing to 4,000, from a little over 3,000, by the end of this financial year. Most of the work take place at the Boeing India Engineering & Technology Center (BIETC) in Bengaluru. The overall number will further increase as the BIETC itself will have 5,000 engineers working in the "next few years", Boeing said in a statement.
The facility will conduct core engineering and research for Boeing’s iconic products and work on path-breaking products and platforms that will redefine the future of flight, Boeing said in a statement shared with Moneycontrol.
The company did not share its India investment numbers.
Boeing has been present in India for more than 75 years in its overall 103-year history. Indian Air Force has been a customer since the 1940s. And, in civil aviation, Tata Airlines (which later became Air India) got the first commercial plane.
At present, it has 160 partners in its supply chain in India. The supply chain employs 10,000 people. It has a JV with the Tata Group to manufacture fuselages for Apache helicopters. The JV's facility is in Hyderabad.
In Chennai, Boeing India has a 500 member team that provides technical content development, software delivery and engineering design services for the aerospace and defense sector.
In commercial aviation, Boeing now has three customers in India - Air India, SpiceJet and Vistara.
Jet Airways suspending its operations in April has also been a setback for the US manufacturer. In fact, if the Naresh Goyal-founded airline does fold as expected by most with the insolvency process not making much headway - Boeing will lose out big.
Jet Airways gave an order of 225 Boeing aircraft. There were reports earlier in 2019 that some of these planes were delivered to Jet Airways' lessor, which refused to hand them over to the Indian airline because of payment default.
Boeing said that it had 125 Max aircraft orders with Jet Airways that are unfilled, which means these planes have not been delivered.
Apart from Jet, SpiceJet has an order of 205 Boeing aircraft, and Vistara 10.
Like in the rest of the world, Boeing faces tough competition from Airbus in India too.
It does not help that the country's largest airline IndiGo remains a loyal Airbus customer. The European aircraft manufacturer has immensely benefitted as IndiGo aggressively added one plane a week to its fleet of single-aisle aircraft as it expanded in India.
That is why the grounding of 737 Max , Boeing's single aisle offering and the debacle of Jet Airways - one of its loyal customers in India - have been troubling for the American company.
The international traffic from India, though, has mostly ridden on Boeing's wide-body aircraft. India's 10 longest haul flights are all on Boeing aircraft. Globally, too, Boeing has led Airbus when it comes to the bigger aircraft.
Given the projection of demand for new aircraft in India, Boeing now hopes to get orders for both - single aisle and wide bodies.
Apart from clearing doubts about the 737 Max aircraft and bringing back the confidence in its safety systems, Boeing will also have to woo the likes of IndiGo and SpiceJet - the two airlines that have expanded the most aggressively. Equally important will be Vistara, GoAir and AirAsia India as all of them expand, both in the domestic and international markets.The critical factor would be the return of 737 Max aircraft at the earliest.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.