Aircraft Manufacturing in Expanding Aviation Sector
Are the domestic players and the policymakers ready? The foreign players like Pepsi and Coke have captured our cold drink markets; whatever be the product- it’s not about capability, it’s only about vision and the policy. — Alok Singh
The Indian aviation industry has emerged as the fastest-growing aviation industry in the world during the last decade. The number of passengers availing the airways has increased manifold. The UDAN policy of the union government for regional connectivity and the economy-class fares of the airlines matching with that of high-class railway have encouraged the middle-class passengers to travel by airlines, many among them travelled for the first time by airways in their life during the few years. The increasing pressure on the land acquisition for the expansion of newer and newer roadways like expressways, national highways, state highways, expansion of two lanes into four lanes; and the expansion of railways like new rail lines, dedicated freight corridors, and the necessity to create infrastructure to support the GATI SHAKTI scheme has put tremendous pressure on the land. When land is scarce, water and sky are the new limits for mobility.
The alternatives to roadways and railways for the passengers are the airways. The waterways are time-consuming; hence the airways have to offer the best substitute to travel. It is a strategic decision with a long-term vision and the UDAN mission is a success story. Newer airstrips are an additional resource for the defence sector, whether it is to cater to logistics during an emergency time like war or natural calamity. It is more effective if the airstrips are designed in such a way that they can also provide an additional runway for the fighter planes.
Despite discouraging perceptions regarding the investment in the passenger aviation sector, it’s delighting to see domestic aviation industry has seen investors who are actively participating. The perception of the sector is run on money burning model is a myth.
We are the biggest consumer. The privatization of the aviation sector is offering competitive prices to customers. The aviation policy should be formulated to backward integrate the passenger aviation industry. It will serve multiple purposes. It will create jobs and learning for the new Bharat. The aspirations of self-reliance in the defence sector can be replicated more easily in the passenger aviation sector.
We should aim to produce our own passenger planes. The dream to achieve self-reliance in airplane manufacturing is relatively realistic and easier for today’s Bharat. The demand for new airplanes is rising and the lead time to get the order fulfilled is high. The two biggest suppliers of airplanes are the Airbus and the Boeing. Our dependency on these two companies should be seen as an opportunity for the domestic players to harness the manufacturing within our country in the near future.
Moreover, the design of the aviation sector should be such that there is scope for fresh players to enter the market. This will keep the sector competitive and avoid monopoly or duopoly or cartelization. The leanings from the telecommunication sector should be given due diligence. Initially, in the telecommunication sector, there was huge scope for new players to enter the market, but over a period it is restricted to a few players. Any new company that wishes to enter the telecommunication sector must invest a huge amount of capital to get a foothold or to earn new customers.
The aviation sector is also a services sector just like the telecommunication sector. The hardware is imported, and the indigenous company only provided the services from the domestic talent to the domestic customers. Recently the backward integration of the telecommunication sector has started at a fast pace. Now, the technology, as well as the hardware, is also developed and manufactured in India. There was a time when our teledensity was the least in the world and today we are the population having one of the highest teledensity in the world. But the share of public sector units like BSNL and MTNL who once had a monopoly in the market has a contracting share in the expanding market. The privatization of Air India also reflects the decreasing share of the public sector in the expanding market. This is unfortunate that the market is expanding but the share of the company is decreasing. Public policy is to be blamed for the failure of the public sector in the telecommunication and the aviation sector.
Sooner we are going to be the biggest market for air travel in terms of the number of air passengers. The world is eyeing this market. We have recently privatized Air India which was an owned national carrier. The government had to do this because of the accounting reasons when the demand for the domestic aviation sector is expanding. The government diluted its stake in an expanding market. The government is trying to come back to the telecommunication sector. We hope to have another national carrier in the new avatar in a mature aviation market.
Aircraft manufacturing is different from the manufacturing of automobiles. The automobiles are manufactured on the assembly line of a manufacturing plant. The raw materials are moved to the plant and the finished products move out of the plant to the end-user or customer. But the aircraft manufacturing is like a project execution. It is like a construction project where all the raw materials move to the construction site.
We have shown the world that we can execute projects which are a showpiece to the world. The recent completion of the highest rail bridge in the world over the river Chenab in the Reasi district of the union territory of Jammu and Kashmir gives us sufficient confidence to execute the projects of constructing aircraft which match the capabilities of the Airbus and the Boeing.
The aspirations of the young demographic population of our nation are different from the older generation. We need gentle support from the policymakers and sufficient provocation to execute the project of aircraft manufacturing. We can save huge foreign exchange by engaging the resources in building our own aircraft.
We agree that air travel is not a luxury today. It is a necessity for the policymakers to make it affordable for the huge population so that the mobility issue can be handled more efficiently as the land is a scarce resource. The market size is expanding. The requirement for new aircraft is rising. Airbus and Boeing are the suppliers. The lead time of the suppliers is huge. The learning from the telecommunication sector, the accomplishments in the construction sector, and marching towards self-reliance in the defence sector are confidence boosters to plunge into the passenger aircraft manufacturing sector.
Are the domestic players and the policymakers ready? The foreign players like Pepsi and Coke have captured our cold drink markets; whatever be the product- it’s not about capability, it’s only about vision and the policy. The de-globalization of trade and business; the impact of pandemics, war, and financial crisis on the supply chain is visible i.e. The failure of agile supply chain management in the globalized world during a constrained environment has been felt on multiple occasions, and the cheapest raw materials becoming the scarce raw materials, and many more reasons are the turbulences which forced the world to look for new management principles of self-reliance. Each sector needs to have it. We are the market and hence we have enough motivation to do backward integration in the aviation sector.
(Alok Singh is a Fellow of the Indian Institute of Management Indore and is a freelancer academician.)