The crisis, however, was not entirely unexpected. Boeing’s factory workforce has undergone a dramatic transformation in recent years. Squads of senior technicians retired when the pandemic hit, and continued to do so even as the company raced to meet demand with air travel resuming and several airlines, including Indian ones, placing orders for thousands of new aircraft.
Boeing has been on a hiring spree to replenish its ranks, but its factories are now populated with young employees who have little or no real-world experience.
Meanwhile, India is set to become the world’s third-largest air passenger market by 2030, after China and the US, according to the International Air Transport Association (IATA). The country’s aviation market, estimated at $13.5 billion in 2024, is projected to touch $23.2 billion by 2029 at a compounded annual growth rate (CAGR) of 11.4%.
No nation is buying as many aeroplanes as India. Airlines such as Indigo (Interglobe Aviation), Air India, and Akasa Air have ordered nearly 1,700 aircraft from Airbus and Boeing. This number is expected to rise to around 2,000 by March 2025, according to aviation consultancy firm CAPA.
Manufacturers seek government support
To capitalise on the growing order books, Indian aerospace manufacturers are seeking government support through policy initiatives. In return for the massive orders to the airline manufacturing giants, the government has proposed that they set up factories in India to cater to their global supply chains.
These measures could streamline manufacturing processes, incentivise research and enhance skill development in the sector. By leveraging these opportunities, India could cater to its burgeoning aviation market and emerge as a significant player in the global aerospace industry. The country’s cost-competitiveness, skilled workforce, and favourable government policies position it as a potentially crucial hub for aerospace production.
Historically, the aerospace industry has been dominated by a handful of countries such as the US, France, and the UK. However, rising labour costs and a growing need for diversification have prompted the aerospace giants to look for alternatives.
The Make in India initiative received a substantial boost when Air India placed its huge aircraft order, which led Airbus to express interest in expanding its supplier base in India.
Airbus plans to have 5,000 employees in India by 2025. There could be a significant increase in manufacturing activity, sourcing, and team size if the order book swells. Airbus is also collaborating with the Tata Group to establish a final assembly line for civil helicopters in India. Boeing has also increased its sourcing of components from India and services to $1.25 billion a year.
The country is expected to receive more than 90% of airplane deliveries to South Asia – about 2,500 – while its cargo market is set to expand from 15 airplanes in 2020 to 80 by 2042.
Boeing’s ‘Pilot and Technician Outlook’ for 2023 also forecasts demand for 37,000 pilots and 38,000 maintenance technicians in South Asia over the next 20 years, driven primarily by growing demand in India.
First movers
Aerospace manufacturing is therefore a megatrend that’s set to take shape in India over the coming decades. However, only a handful of companies are already tapping the opportunity.
Dynamitic Technologies, a relatively small company, recently secured a contract from Airbus to manufacture all doors for the A220 aircraft family. It sees India’s large pool of engineers as a major draw for global manufacturers. It is the sole supplier of the flap track beam assembly for the A320 family of aircraft.
The company specialises in precision engineering and manufacturing solutions. It has a diverse portfolio that includes aerospace structures, systems and components. It has earned recognition for its expertise in complex aerostructures and hydraulics, and supplies critical components to major global aerospace programmes.
Hindustan Aeronautics, on the other hand, is one of the largest and most renowned aircraft manufacturing companies in India. With a rich history spanning more than seven decades, HAL has been instrumental in the design, development, and production of various aircraft, helicopters and aero engines.
Its notable achievements include the production of indigenous aircraft such as the Tejas Light Combat Aircraft (LCA) and the Advanced Light Helicopter (ALH). HAL’s expertise extends to aircraft upgrades, overhaul services and the manufacturing of aero structures, avionics, and other critical components.
Unlisted firms
Currently, there are only a handful of aircraft manufacturing companies and aerospace equipment suppliers in India, and only two of them are listed.
Three unlisted companies to watch out for are Tata Advanced Systems (TASL), Mahindra Aerospace, and Aeronautical Development Agency.
TASL, a subsidiary of Tata Sons, has successfully delivered critical aerospace components and systems, including fuselages, wings, aero structures and avionics to various international programmes.
Mahindra Aerospace, part of the Mahindra Group, has rapidly established itself as a key player in the aerospace manufacturing sector. The company’s capabilities include the design, development and production of aircraft, aero structures and aircraft components. Its achievements include producing the Airvan series of utility aircraft, which have gained international recognition for their ruggedness, versatility and cost-effectiveness.
Aeronautical Development Agency (ADA) was set up under the Defence Research and Development Organisation (DRDO) in Bengaluru in 1984 to oversee the development of India’s Light Combat Aircraft programme.
ADA has played a crucial role in the development of cutting-edge aerospace technologies and platforms in India, having designed and developed the indigenous Tejas Light Combat Aircraft (LCA), a multi-role supersonic fighter aircraft.
As these companies continue to push boundaries and contribute to the global aerospace sector, the future looks promising for aerospace manufacturing in India.
It wouldn’t be surprising to see the Tata and Mahindra aerospace companies be listed one day to create an ecosystem of listed aerospace stocks, much like railway companies in recent years.
Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.
This article is syndicated from Equitymaster.com
