Toulouse/France: Airbus has ruled out the possibility of setting up a final assembly line (FAL) in India for its current generation of aircraft, but remains open to the idea for the next generation of airplanes. The largest aerospace company in Europe, Airbus accounts for about three-fourths of India’s commercial aviation market.
Setting up an FAL for commercial aircraft in India would mean that the Airbus would have the entire supply chain—from seats and engines to body and wings—in India, boosting domestic manufacturing and creating more jobs. Airbus has FALs in India for C295 aircraft for the Air Force (in Vadodara) and H125 helicopters, but not for commercial aircraft.
India has a rapidly expanding aviation sector that is expected to trigger demand for an estimated 2,000 aircraft in the next couple of decades. The Indian government has, therefore, been keen on Airbus having a FAL for passenger planes to boost its ‘Make in India’ motto.
“The question for the final assembly line is for the next generation of aeroplanes. For the current generation, I don’t think it makes sense for us and India as well. You have to play to your strengths, not try to replicate what others were doing in the past. India is a fantastic asset in engineering, IT, system, software,” said Airbus CEO Guillaume Faury in an interaction with a group of Indian journalists in Toulouse, France, Tuesday.
He cited two reasons for his company’s reluctance to establish an FAL for commercial aircraft. First, Airbus is “already oversized” in its production capacity, with 10 FALs around the world—two in the US, two in Toulouse, two in China and four in Hamburg.
“It’s much more complex and fragmented than what we see at the competition,” he said.
The second reason he cited was that the FAL adds only “symbolic” value to the aircraft—just 7 percent. He emphasised that the real value today lies in engineering, data, systems, and software—areas where India offers “excellent value”.
“When we think of India, there is a lot on that side. We are increasing the supply base. We are procuring $1.4 billion dollars annually from India (for components, services, etc.) today and we (will procure worth) around $2 billion before 2030. If we compare other sourcing areas, with the exception of the US, from where we source engines, (India is) on the top,” said the Airbus CEO.
He dismissed suggestions about Airbus choosing China over India as it set up the second FAL at Tianjin in the neighbouring country. He said there was already an assembly line in China and the contract was renewed after 15 years. When Airbus started to go out of Europe 15 years ago, it went to China for the first time because at that time the Chinese market was “ramping up significantly”. Today China is a big market but India is growing as a market “very significantly”, he said.
“When we decided to put a second assembly line (in Tianjin), it was not China over India because we were already inside China and we were increasing the output. All the logistics, infrastructure is on that side already. We don’t need to put another site somewhere else…because we have to carry heavy logistics…main components. We have to select a place where there is a harbour. We have to contain the complexity, especially at a time when the world is less globalised (in which) carrying parts, systems and equipment around the world becomes more complex,” said Faury.
Asked about the difference between China and India, he said that the former is “organised” under five-year plans. “Once the plan is in place, all pieces come together—it is structural, organised, long-term thinking. India is a country that relies much more on private innovation, initiative, entrepreneurship and (its) ability to move independently according to the business plan of a company. Characteristics of the workforce are different. Dynamics of the market are different…. It’s on us to adapt (ourselves) to the situation, the constraints…leverage the strength of each and every country,” said the Airbus CEO.
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‘Indigo and Air India on high priority list’
Faury underlined a significant role for India in boosting the supply chain.
“For aerospace, manufacturing parts, sub-systems, air frames, highly loaded components, systems, I see a lot of competitiveness and growth of business in the highly sophisticated systems that can be both reengineered and optimised by engineering in India. That’s what we are doing with Dynamatic, Tata, Mahindra,” he said.
Speaking of the civil aviation ministry’s target of developing 350 airports—from the current 200—in the next decade, Faury said he was amazed at the speed at which new airports are put into operation in India. “Not a place on earth where the scale of growth is so fast. Challenge is for others to support the growth as we discuss with our main customers—Indigo and Air India. Both place significant orders to reserve capacity. Backlog proportion is higher than the market share of the world,” he said.
According to the Airbus CEO, Indigo and Air India, which are “very, very close” to the company are on “high priority list”. “Indigo is relying solely on Airbus. We can’t disappoint or let them down because they are solely dependent on us. With Air India, the majority of their orders are with Airbus. So, we take our responsibility very seriously.”
He conceded that there were supply chain constraints as the demand is higher than the supply. The Airbus is, therefore, pulling its supply chain as much as it “reasonably” can. “If we pull too hard, it doesn’t deliver what we expect. Everyone is looking at us. You are not delivering on your commitment. You are too late, which is true. We have to find a sweet spot between demand and supply,” said Faury, adding that the supply chain is getting better.
ThePrint is in France on Airbus’s invitation
(Edited by Zinnia Ray Chaudhuri)
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