Commercial aircraft makers stay away ?in rough economic weather
By Ramu Patil
As fighter jets performed breathtaking manoeuvres in the skies over Bangalore, reverberations of global economic slowdown were felt on the ground. Aero India-2009, the biggest event of its kind in the country, could not escape the recession radar.
The fighter jets were competing for the $10bn Multi-Role Combat Aircraft (MRCA) deal from the Indian Air Force. While their manufacturers, accompanied by high-level delegations, from their respective countries, lobbied hard, players from the civil aviation sector were missing in action.
Said Air Marshal B.K. Pandey, former chief of IAF Training Command: "This show was completely different from the previous editions of Aero India because of the recession. It became a military-dominated show, as there was not much enthusiasm from the civil aviation sector." Commercial airlines are in no mood to go shopping for new aircraft or equipment, and manufacturers are not spending much on exhibition and advertisements. Except for a few like Embraer, civil aviation giants stayed away from the event.
"People want to conserve money for their own productive activity. That is why we miss many commercial airlines this time,'' said Dr C.G. Krishnadas Nair, former chairman of Hindustan Aeronautics Limited (HAL). Besides, the ministry of civil aviation had organised Indian Aviation 2008, an air show exclusively for civilian aircraft, in Hyderabad last October. By then fuel prices had shot up, and "not a single deal was signed at that event, though it was a good effort and the turnout was good," said Pandey.
The aviation scene today is so bad that even Boeing is not expecting any new orders this year and is happy delivering already-placed orders. "We still see a lot of difficulties, and airlines are losing money. In fact, we are fortunate that no order has been cancelled," said Dr Dinesh A. Keskar, president, Boeing India.
Boeing, which plans to deliver 18 aircraft in 2009 to airlines including Air India, Jet Airways and SpiceJet, feels that the long-term forecast is bullish and the markets may improve by the end of the year. "The impact of recession on the Indian industry is much less than that in the United States and Europe. We hope that from October, things will change for the better," said Keskar.
Yair Ramati, vice-president, corporate marketing, Israel Aircraft Industries, feels that the civil aviation sector could be hit, but "defence spending is largely inelastic and it will not be affected." Israel has always had a large presence in the air show, and this time also it has a huge stall.
Falling oil prices and a 57 per cent reduction in aluminium prices are good news for the aviation industry. But, around 75 airlines have gone out of business in the last few years, said Ramati. He feels that spending on homeland security and low intensity conflict will go up in the near future. A top official of the Indian defence ministry concurs with Ramati's views. "Spending on internal security and unmanned aerial vehicles will increase, while fighter aircraft manufacturers could take some beating," the official said. The government has said that its defence expenditure would continue to be around 2.5 per cent of its GDP. "Despite the recession, there is no question of scaling down our defence expenditure or compromising our ongoing acquisition programmes," Defence Minister A.K. Antony said at the air show.
While the civil aviation sector is driven by the economy, the military aviation is totally dependent on the national security perspective. That is precisely why many major aircraft and defence equipment manufacturers consider India a big market.
The IAF's MRCA deal is a case in point where the US wants India to buy F16s from Lockheed Martin or F18s from Boeing; the UK is supporting the European Aeronautic Defence and Space Company's bid to sell its Eurofighter Typhoon; and Russia wants the IAF to buy MiG 35. They are all pushing their machines' limits at the air show to impress the IAF, which will soon start their technical evaluation. Rafale from Dassault France and Sweden's Gripen IN, too, are competing for the IAF deal.
Aero India, Antony said, would be an opportunity to tap the market and the business potential. Lt Gen. Jeffrey Kohler of US-India Business Council said the downturn in global economy had, to some extent, affected the aviation industry across the world. "But, aerospace industry is the last sector to be affected and the first to recover," said Kohler.
Some feel that this is the right time to start a new venture. Maini Precision Products, a Bangalore-based firm, launched Maini Global Aerospace Private Ltd, while defence PSU Bharat Electronics Ltd signed an MoU with Boeing to jointly develop an analysis and experimentation centre in India. "We have to be optimistic and should continue to work. In fact, it is the right time to start new ventures," said Nair.
The other highlights at the event were: for the first time, a seven-member Chinese delegation attended the air show, and state-owned HAL, in its first major export order, handed over five Dhruv Advanced Light Helicopters to Ecuador.
Defence Secretary Pradeep Kumar said the show was bigger than previous events. "The number of exhibitors, including foreigners, and exhibition area have increased. All efforts were made to arrange business-to-business meetings," he said. As Nair put it, "Indian air shows are more for meetings and knowing each other than for deal signing. Deals will come slowly."