Little happens in Indian aerospace without Hindustan Aeronautics' involvement. But is the state-owned giant ready for a more open market?
Talking to Hindustan Aeronautics (HAL) executives, it is hard not to be impressed by their shared belief in the company's manifest destiny. That goal can be summed up by HAL's slogan - "Asia's premier aerospace complex".
As a former senior official proudly proclaimed: "No other Asian company can match our expertise or manufacturing capability." While aerospace divisions at Mitsubishi Heavy Industries and Kawasaki Heavy Industries in Japan might disagree, there is little doubt that HAL is one of the region's most successful concerns. But there are question marks over the company's ability to compete on the world stage.
The Tejas Light Combat Aircraft was first mooted in 1983, but was slow to get off the ground
Ashok Baweja, HAL's chairman, predicts turnover will treble to $3 billion earlier than the previous target of 2011. Flight International's latest list of the top 100 aerospace companies puts HAL at number 43 in terms of revenue, and fifth by operating margin. The company has 13 divisions that cover almost all aspects of the aviation industry, with 16 production units and nine research and development (R&D) centres spread across seven locations in India. Almost every overseas aerospace firm that comes to India looks to either collaborate or set up a joint venture with HAL, while domestic companies look to it for lucrative subcontracting work.
"India today is an exciting place for world aviation majors who are looking at HAL as a partner," says Baweja. "There are large offset opportunities in military and civil projects. Indian aviation is set for the same boom as the information technology and pharmaceuticals sectors."
Yet there are threats to this behemoth's strategy for growth. Indigenous programmes face delays and there are problems selling its aircraft outside India. As a public sector company, it is intertwined with and hindered by slow-moving Indian bureaucracy. Officials from foreign companies privately express the belief that it is be better for them, and India, to have a viable alternative. HAL is also dependent on government contracts for its revenue. "Without the military contracts, HAL will be only a pale shadow of itself," says one executive with a Western manufacturer.
Almost from its inception, the company has been linked to the state. Its roots go back to 1940 when Walchand Hirachand Doshi, an Indian industrialist who also set up the country's first shipyard and car factory, started an aircraft factory called Hindustan Aircraft in Bangalore. Long before it was discovered by the IT crowd, Bangalore was famous for being a cool, pristine garden city, and as a centre for aviation design and production.
Hindustan Aircraft's nationalisation came quickly. The UK government bought a one-third stake in 1941 and took management control a year later, ahead of a possible Japanese attack during the Second World War. The company was considered crucial to the war production efforts, especially in the face of a possible Japanese invasion. After merging with Aeronautics India and Aircraft Manufacturing Depot in 1964, it was renamed Hindustan Aeronautics.
Its first indigenous product was the HF-24 Marut fighter-bomber in 1961, designed by German engineer Kurt Tank - the first jet aircraft to be built in south Asia. A total of 147 were built, but the Marut never quite reached its full potential - it was originally envisaged that it would operate at Mach 2, but it barely exceeded M1. Yet the type lasted over 20 years and the final jets were only withdrawn from service in 1985.
The company's record improved with the HJT-16 Kiran intermediate jet trainer. This was introduced in 1964 and more than 250 aircraft have been produced. It has proven to be a reliable and crucial component of the Indian air force, with most of its pilots learning the ropes at its controls. HAL's most successful aircraft is the Dhruv advanced light helicopter (ALH). "This is our core product," says Baweja. "It has immense potential in India and globally."
Delivery to the Indian air force, army, navy and coastguard began in 2002 - 10 years after the prototype's first flight and 20 years after it was conceived - and 300 orders have been made. A civil version is successful in the domestic market, with limited exports also made to Israel and Nepal - which have received three, according to Flight's HeliCAS daabase. There are also plans for anti-submarine warfare, gunship and other military versions. The company also hopes to move into the unmanned air vehicle market. "We have already produced some light vehicles, and are looking for partners to make larger UAVs. We expect to make an announcement in the next few months," says Baweja.
The Dhruv advanced light helicopter is HAL's coreproduct
There are two major indigenous projects in the works - the HJT-36 Sitara intermediate jet trainer (IJT) to replace the Kiran, and the long-awaited Tejas Light Combat Aircraft (LCA). The Sitara project started in 1999 and the prototype flew four years later. Commercial production has just begun, even though first deliveries were originally scheduled for 2006. That said, the aircraft was developed much faster than many observers expected and is believed to be in the final stages of pre-production.
HAL could eventually produce about 225 IJTs for the Indian air f orce and navy, although the initial order is for 16 aircraft. Baweja is confident about the IJT's export potential, saying that its cost is significantly lower than competing aircraft worldwide.
It is through the progress of the Tejas, however, that HAL is judged. First mooted in 1983 to replace the air force's MiG-21s by the mid-1990s, work on the LCA did not really get going until the early 1990s because of problems with its design, engines and bureaucracy.
Overall responsibility for the aircraft comes under the Aeronautical Development Agency (ADA), which is part of the Indian defence ministry. As the main contractor, HAL is responsible for the aircraft's integration, flight testing and production. But the manufacturer must work with government agencies which, its supporters say, were responsible for the overall design yet did not fully understand what was needed.
"This is what happens when civil servants try to manufacture aircraft. The programme is hampered by the red tape, indecision and delays," says a New Delhi-based analyst. "As the aircraft is being built from scratch, there would have been delays even if HAL had led the project from the start. But it would not have been anything like right now, as the company knows the business and bureaucrats don't."
A lack of progress in the development of an indigenous engine, the Gas Turbine Research Establishment Kaveri, also hindered progress on the Tejas. As a result, the ADA awarded a contract to General Electric to develop and produce 17 F404-GE-IN20 engines for the first batch of aircraft.
Regardless of the delays, prototypes have now been flying for a few years. The third made its debut in December, expanding the fleet of two prototypes and two technology demonstrators, and the fleet has completed 575 flights. HAL will deliver four limited series production aircraft over the next 15 months, with initial operational capability targeted for 2008. Full operational clearance is scheduled by the end of 2010, with the aircraft scheduled to enter the service the year after.
The Indian air force, which had planned to buy 200 Tejas aircraft, has so far ordered just 20. With the deadlines fast approaching, Baweja says that any further delays will be "fully absorbed" and production ramped up. "'It will be a challenge and a lot of work needs to be done," he adds.
HAL's record in licence-produced aircraft is more impressive. The first Indian-produced BAE Systems Hawk 132 advanced jet trainer will be delivered in March 2008, and the company is producing the Sukhoi Su-30MKIs. It has also produced the Sepecat Jaguar, Dornier 228, Avro 748, Chetak and Chetan versions of the Aerospatiale Alouette III, and Cheetah, Lancer, Cheetal variants of the SA315 Lama. More work is coming its way, given that India will award almost $17 billion in military aircraft contracts in the coming years. Under the government's offset regulations, a local company will produce 108 of the 126 fighter jets that India will order in its multirole combat aircraft - or F-X - tender, and 137 of the 197 light utility helicopters it will acquire for the army. HAL will almost certainly be that local company.
Overseas manufacturers say they are keen to work with the company. Eurocopter, for example, says: "HAL is the central pole of the Indian aviation industry and has been our proven industrial partner for more than 40 years now, ready to absorb and produce our existing demands." Eurocopter is competing with Bell for the helicopter contract.
Boeing says it is "looking forward to working with Indian industry, in both the public and private sector - in fact [we] have been doing offsets for years". The US manufacturer is also competing for the F-X contract. "We've done offsets in 35 countries. I think the total value of the offsets we have done is $27 billion. We're very comfortable working in this kind of environment."
Yet some privately admit that they would not mind some competition. An official with a major Western manufacturer who does not want to be identified says: "India has an open economy in almost everything else except defence. We have no choice but to go with them, and that is not a good thing for us and for India."
The problem for any potential competitor would be the cost of developing the facilities to match HAL, says a New Delhi-based defence consultant. "It is difficult to see a rival or competitor to HAL in the near future. Ideally there should be competition from civilian manufacturers, but no one company may find the massive investments needed."
Baweja, however, insists that HAL is in the pole position because of its ability to do the job. "We can handle a lot of the design, engineering and manufacturing work for the deals. We have the facilities and technical ability to perform all the work and we intend to work with the Indian private sector on these programmes." Given the sheer size of the contracts, there also appears to be some room for other companies - albeit on a smaller scale. As Eurocopter says: "HAL will not be able to absorb these potential work packages on its own. We see a demand for an even larger Indian aviation industry to evolve around HAL, which is supposed to play a central and leading role in such a development."
Ironically, while civil manufacturers might not be keen to move into the defence sector, HAL is moving on to their turf. Observers say that the company's top executives want to do this partly to show that they are not solely dependent on military contracts. It also makes sense, given that the company can use its experience and expertise to take advantage of the boom in the Indian civil aviation industry.
The maintenance, repair and overhaul (MRO) services it provides to the Indian air force and navy at HAL Bangalore International airport, which it owns, could be extended to commercial operators once international flights move to the city's new airport in 2008. This could be a joint venture with Airbus, but details have not been finalised, says Baweja.
There are also plans to convert passenger aircraft to cargo carriers at a proposed MRO joint venture with Boeing at Nagpur, a pact announced in 2006. The centre could convert Boeing 737s and 747s for the international market, but this has not been confirmed yet. It will also invest Rps 1 billion ($23 million) in an engine components manufacturing joint venture with Pratt & Whitney. The facility should begin operations within two years, and Baweja says it will bring in business worth $50 million a year over the next 10 years. The company has also signed a deal to supply fuselages for the Gulfstream G150 business jet.
There are even suggestions that HAL is looking into the possibility of designing a passenger aircraft, possibly based on a military multirole transport aircraft that it would like to design and produce in collaboration with Russia's Ilyushin and Irkut, industry sources say. Crucial to HAL's plans to making a mark as a global player is how many exports it can win.
As the New Delhi-based analyst says, it is easy to sell aircraft in India, but the true test will come when the company competes for a foreign contract with established international players. "Only the Dhruv, of everything HAL has in its portfolio, has any export potential and that has not been popular. The company needs more products," he says. "Foreign operators are also wary of buying products, saying that they are not proven. They also say there doesn't seem to be much aftersales support."
Baweja says the company is tackling these problems. "We are offering a total solution package to customers, and we remain confident," he says. "The usual criticisms of cost and time overruns, poor management policies and overcoming the bureaucratic red tape are there," says the analyst. "A systematic culture of performance audits and self-assessments within HAL would make the company more efficient and accountable. Total autonomy, greater investment in R&D and bold initiatives of obtaining foreign investments, and joint ventures with leading foreign manufacturers will go a long way in achieving this."
Source: Flight International