Hindustan Aeronautics (HAL) boss R N Sharma's announcement at the Aero India '96 show in December that he intended to start negotiations to license-build a 50-seat turboprop, and to buy a stake in a regional-jet programme, raised a few smiles among the Indian press corps. They had heard it all before. For the best part of the 1990s, the HAL chairman has been appearing at international air shows revealing that his company was just months away from a deal for the local manufacture of a turboprop for the Indian market.

Now, however, bolstered by the surprise announcement from the Indian prime minister that the Government would supply funds to kick-start the turboprop and regional-jet schemes, Sharma is more optimistic than ever that his ideas could become reality.

Whether the prime minister's promise of $200 million is translated into hard cash remains to be seen. What is certain is that India requires indigenous manufacturing programmes to help meet an unprecedented boom in air travel. Much of the growth is expected in the markets that Sharma hopes to supply with aircraft.

India is one of the last great untapped domestic markets when it comes to air travel. About 12 million passengers used domestic airlines in 1995, representing a 14% rise on the previous year. With a population of more than 900 million people, it is not surprising that an Indian Ministry of Civil Aviation report estimates that, by about 2000, domestic air travel will have risen to 22 million passengers a year, with the number of international tourists doubling to around 5 million.


NAL study

A study by the Indian National Aerospace Laboratories (NAL) on behalf of the Government's Department of Science and Technology suggests that, by the time India reaches the same passenger levels as countries such as the UK and Australia - on a trips per capita basis - it "-will have about 100 million passengers annually and over 500 aircraft, compared to the 70 aircraft operating on trunk routes today". The report says that an average annual growth of about 12% will lead to that level of passengers by 2015. As Sharma is well aware, a target of 100 million passengers and about 500 aircraft will "-lead to a healthy domestic industry".

The prospects may be spectacular, but their realisation remains a dream, at least until the new Government of Deve Gowda comes up with a coherent civil-aviation policy. While the industry awaits a policy statement, however, there is growing concern at the stance of civil aviation minister C M Ibrahim - not least over his pronouncements that no foreign investment will be allowed in the airlines.

Liberalisation of domestic airlines in the 1990s is the prime reason behind the growth in recent years, but the industry has been beset with inconsistencies and lack of transparency by the Government and its officers over policy decisions. It is no coincidence that not a single Indian industrial group capable of financing and managing a large domestic airline has started operations - although several possess operating certificates. As a result, the challenge to original monopoly holder Indian Airlines, while damaging, has not been catastrophic.

Industrial giant Tata has come closest to airline operation, in a proposed joint venture with Singapore International Airlines (SIA). The Indian Government's Foreign Investment Promotion Board gave its approval to the project at the end of December, but there remain severe obstacles to overcome, and SIA will be unlikely to make any further moves until New Delhi's aviation policy becomes clear. If Ibrahim continues to block foreign investment, then the new airline will be a non-starter.

If the policy is retrospective, it will also pose awkward questions for Jet Airways, the only really successful private airline (whose shareholders include Gulf Air and Kuwait Airways )to challenge the domestic monopoly of Indian Airlines. Jet Airways has just become the first of India's private operators to acquire new aircraft, by ordering ten new Boeing 737s to add to its growing fleet of older 737s already in service.

Other scheduled operators include East West, Skyline NEPC, Modiluft, NEPC Airlines, Archana Airways and a list of smaller carriers. Several other airlines have already gone to the wall and some of those left, such as Modiluft and Skyline NEPC, have been in almost continuous dispute with a range of leasing companies and service providers over alleged non-payment of bills.


Problems overcome

Despite the problems, private airlines - scheduled and non-scheduled - have grabbed nearly 40% of domestic traffic since the Government's Air Corporation Act effectively lifted the air-services monopoly in 1992.

While the competition has been fierce on some of the main trunk routes, yields have not shown any decline, having risen constantly in rupee terms. The NAL study says that although fares have risen about 2.3 times since late 1990, the resulting cash-flow has been swallowed by the costs of heavily taxed fuel - which accounts for close to 40% of operating costs - and of purchasing and leasing aircraft from overseas. Almost all airlines are operating at a loss.

The NAL warns that unless New Delhi invokes a comprehensive strategy for the airline industry through moves such as reducing fuel taxes for feeder aircraft routes, financing infrastructure improvements for airports and giving tax incentives for the manufacture of small airliners, its projections will not be attainable.

It is against the background of projected growth by the airlines, particularly on feeder routes, that Sharma's hopes of building locally gain renewed credibility. A NAL forecast, which includes market surveys undertaken by itself and the major Western aircraft builders, estimates that 40 aircraft in the 40-seat plus range will be needed between 1993 and 2000 and a further 60 between 2001 and 2010. Sharma believes that he needs to sell 70 aircraft to make his turboprop programme a success, although what account this takes of the pledged Government cash is unknown.

All the usual suspects will be lined up when it comes to speculating on which companies HAL may join forces with. Buying the defunct Fokker 50 production line is one option. Doing a deal with Aero International (Regional) for the ATR, or even the Jetstream range, is another. Bombardier has declined the invitation for license-build talks, but Sharma says it will try and open a dialogue again. Saab, with its 340 and 2000, is also a potential partner, particularly if reports that Alliance Air, the new Indian Airlines subsidiary, has selected the 2000 to meet its requirement are realised. Also in the wings are the Russians and Ukrainians, who have a range of aircraft which could fit India's requirements.

Fairchild Dornier has strongly denied newspaper reports circulating at the time of Aero India '96 that it is considering the transfer of 328 turboprop production to HAL. The US/ German manufacturer is talking with the Indian company, however, about moving wing production and possibly fuselage shell fabrication to India, and has agreed to switch Dornier 228 assembly to HAL's Kanpur Division.

It is also possible that HAL might find itself as a recipient of any offset work negotiated as part Air India's long-standing competition to replace old Boeing 747-200s with either Boeing 777s or Airbus A340s. A decision on the ten firm and 13-option order, worth more than $2 billion, is expected this year. There is also a long-term requirement by Indian Airlines to replace A300 B2/B4s with either 777s or A340s, while Alliance Air plans to offload its 737-200s in favour of 737-500/600s or A319s.

Apart from HAL's activities, there are three other civil- aircraft programmes of note. The largest, in size terms at least, is the NAL's 14-seat Saras twin-turboprop light transport project. Progress on this aircraft, developed in co-operation with the Russian design house Myasischev, awaits a decision from the Russians on exactly what their contribution will be. Subject to outstanding funding issues, the aircraft could make its maiden flight in mid-1999.

The aft-mounted pusher-type aircraft is likely to be powered by Pratt & Whitney Canada PT6As in the Indian version and the Omsk Engine's TVD 20M in the Russian variant, which is called the Duet. The NAL study for the Government reckons there is a requirement for 66 business/regional aircraft in the ten-seat plus range between 2001 and 2010.


All-composite development

Bangalore-based NAL is also completing the development of the all-composite Hansa ab-inito trainer and sports aircraft. The production version of the aircraft - the Hansa 3 - had its first flight late in 1996 after two earlier prototypes had logged around 100h of test flying.

Taneja recently started local production of the six-seater Viator and 11-seater Observer aircraft under licence from Partanevia of Italy at its factory at Hosur, near Bangalore.

After years of lying virtually dormant, in part because of Indian Government preoccupation with funding only aerospace projects which had military or space applications, India's civil aerospace sector is beginning to assume increased importance. Industrial strategic planners hope that a renewed emphasis on civil manufacturing will help raise the country's share of world aerospace production above the miserly 0.14% share it now holds.

Source: Flight International