HAL sets sights on global presence

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Walk into the Hindustan Aeronautics corporate building in Bangalore and it is clear that it is part of a government bureaucracy. Everyone wears the dull brown uniforms. A receptionist hands you a chit that must be counter-signed before you leave by the person you visit. The place screams hierarchy.

After a chat with HAL's amiable chairman Ashok Nayak, however, you get the feeling that the aerospace firm wants to shake off that label and embark on a growth trajectory to becoming a true global player - the equivalent of Japan's Mitsubishi Heavy Industries, for example.

"We had $2 billion in revenues last year and this is expected to reach $3-4 billion in the next five years. We can add $1 billion in revenues every year for the next few years as we get more business from both the military and civil sectors," says Nayak, a mechanical engineer who joined HAL as a management trainee in 1973 and took over as the head of the company in April 2009.

ashok nayak - chariman hindustan aeronautics, hai
 © Hindustan Aeronautics
Nayak: hopes to base move into larger civil programmes on HAL's defence experience

"We are about to embark on the next stage of our growth that will result in us becoming a much bigger company, and at the same time a more nimble one that is able to compete for global contracts and export aircraft overseas."

PRODUCTION CENTRES

HAL, which comes under the defence ministry's purview, has 19 production centres and nine research and development facilities across seven locations in India. Almost all of these are dedicated to the defence market, unsurprising given that HAL's main task is to help the country acquire the capability to develop its own military aircraft.

It has licence-produced aircraft like the BAE Hawk, Sukhoi Su-30MKI and Eurocopter's Alouette and Lama helicopters, and manufactures the much delayed Tejas Light Combat Aircraft that is developed by India's Aeronautical Development Agency and due to enter service around the end of 2010.

It is the main beneficiary of India's offset policies, which require the winners of military tenders to manufacture their aircraft in the country. The biggest deal in the pipeline is from the ongoing multi-billion dollar medium multi-role combat aircraft (MMRCA) competition, in which it will produce 108 of the 126 aircraft that India plans to buy.

It has also developed indigenous aircraft such as the Dhruv advanced light helicopter and the Sitara HJT intermediate jet trainer, two aircraft that it also hopes to export. The first flight of its light combat helicopter is imminent, while it is also developing a light utility helicopter.

"There is a huge defence market, given the acquisitions contemplated by the government. Some will be from the indigenous design and development, some like the MMRCA will be from outside. Both indigenous and licence-production will be important for us.

hal dhruv advanced light helicopter, messe berlin
 © Messe Berlin
HAL's Dhruv advanced light helicopter could be joined by a light utility rotorcraft being developed

"We have been trying to improve our project management by using Lean manufacturing principles and harnessing the ERP [enterprise resource planning] systems for better co-ordination between the various divisions and to keep up with the changing aerospace market," says Nayak.

The defence business, ironically, has also been the albatross around its neck. Nayak points out that the strategic importance of the military sector meant that the company faced numerous restrictions in the kind of business it could take on. The restrictions were gradually eased over the past decade and HAL gained "Navaratna" status in 2007. This status gives state-owned firms more autonomy to bid for commercial contracts, start new programmes and form joint ventures with foreign and local companies.

That has come as the private sector began to agitate for a share of the increasingly lucrative aerospace market. Non-Indian firms, which were required to establish joint ventures and partnerships with Indian industry as part of their offset requirements, were also looking for some competition to HAL.

The government also began to relax the regulations and in 2009 allowed virtually free competition for contracts.

The Tata Group - arguably India's most famous conglomerate - probably poses the biggest greatest challenge to HAL. It has started work on an aerospace manufacturing facility located within a special economic zone in Hyderabad, which will house the first major aircraft production facilities outside those operated by HAL. It has signed deals to assemble the AgustaWestland AW119 and manufacture Sikorsky S-92 cabins and components for other Sikorsky helicopters.

Nayak, however, is not unduly worried about the competition, saying that this will "push up the bar and help everyone to improve". He points out that "there is enough business for everyone, and we are not trying to do everything ourselves. We already outsource 20% of our work, mostly to private sector companies in India."

He adds: "To be honest, we do not see them as a threat. We are a vertically integrated company that does the airframe, the engine and everything else. Others may want to assemble an airplane, but they may not have all the capability that we have. This business requires a lot of experience and a long gestation period before you can establish yourself."

The civil market is clearly an area of improvement. This is now mainly limited to producing the Dornier 228, for which it manufactures the fuselage, wing and empennage under licence, as well as assembling aircraft for the Indian military, and the indigenous six- to eight-seat Saras light transport. It has a joint venture with Russia to produce a 15-20t payload multi-role transport aircraft. It will also manufacture the regional transport aircraft that the National Aerospace Laboratories is developing.

PARTS SUPPLY

Going forward, it also hopes to supply more parts for major aircraft manufacturers. It now produces doors for the Airbus A320 and will manufacture composite flaperons for the Boeing 777, but Nayak admits that it still has some way to go before being a major player in the way Japanese firms have become for Boeing.

"We have a lot on our plate over the next few years from the defence offsets. The expertise we get from this will help us to move on to larger civil aircraft programmes, and we want to establish that capability in the coming years," says Nayak.