Aviation Market Research Report - PowerPoint

							May 2007   Monthly Report   1
UKTI Aerospace Sector
Short Term Business Attachment - India


 1st Monthly Report
 Prepared by Jaimie Rogers




 May 2007                    Monthly Report   2
Introduction
•I have been seconded from Airbus UK for 6 months to work for Jim Feeney in the Aerospace Sector. My primary objective
is to look at how we can add value to UK SMEs through engagement with the Indian Aerospace Market. I am looking to
improve UK SMEs’ awareness of the Indian Aerospace Industry and capabilities. I aim to identify the main routes into
market and current opportunities. I am also going to promote the UK Aerospace Industry in India and increase their
awareness of UK capabilities.

•The intention of this report is to provide regular updates of:
       •My current activities
       •What are the plans for the next month
       •Opportunities
       •Risk, Issues and Threats
       •Financial Summary

•This first report will stick mainly to the high ground/ principles as this is where my research is currently, but should layout
the streams of work that I will pursue over the next 4 months whilst in country.

•The opportunities, risks, issues and threats have been pulled together from the meetings and visits I have had in the UK in
the last month.




    May 2007                                             Monthly Report                                                    3
Achievements
(This section will include activities in the last month, successes and actions)

•I have spent the last month travelling around the UK seeing a number of key organisations, companies and individuals:
       •A number of the UK Aerospace associations, including SBAC
       •Several of the UKTI Aerospace International Trade Advisors
       •20 Aerospace SMEs
       •Key people with UKTI, DTI and Deso that have interests in India and /or Aerospace Trade
       •HAL & Rolls Royce
       •Contacts in Airbus UK
•Meeting the SMEs gave me a small insight of the diversity of the UK aerospace industry and what array of products and
services the 3000 UK SMEs get involved with. Also the enthusiasm and drive that the challenges of the work are
undertaken. More specifically, about companies involvement, interests, and concerns with getting 'involved' in India.
•Meeting the Associations and ITAs was useful in terms of their knowledge of SMEs and also trading with India. It was also
important to meet them so that we have a face behind the phone calls and e-mails while I’m in India.
•The meetings with Government departments let me tap into their experiences of working in India and specific issues and
opportunities in their different fields, e.g. Deso - their interests in India, Julian Stretch - His overview and experience on what
he sees going on in India and its future.
•This has prepared me as I start to look at the Indian Market from Bangalore.




    May 2007                                            Monthly Report                                                    4
Actions in next month
(Plan for the following month’s activities)

Commission an update to the Genser Aerospace Report. Originally published in Oct 2005. 2 years later on it is important
that the updated report captures amongst other things:
       •Level of growth forecast –where are we now compared to the 2005 baseline?
       •Who are the new players in the market
       •Any current opportunities
       •Making the update more focused on SMEs issues: such as examples of how SMEs have already got into market
•Prepare for the Paris Airshow. Primary aim is to set up some 1 to 1s with UK and Indian SMEs.
•Commission a UK Aerospace Industry Brochure of UK Companies wanting to work with the Indian Aerospace Industry.
•At a high level make key individuals and organizations aware that I am in Indian and of my role. This will include visits to
Delhi, and Mumbai to see:
       •UKTI and Deso
       •SIATI, Indian MOD and FICCI, HAL, Key Indian Airlines
       •In country Reps: BAE Systems, Airbus, Rolls Royce
•Support EADS Supplier Selection Campaign in Bangalore as they look for offshore engineering service suppliers. This will
be an opportunity in one week to meet 10 Indian companies providing Aerospace design services.




    May 2007                                          Monthly Report                                                  5
Opportunities
(General opportunities, why work in/ with India, Specific business opportunities from visits & interviews, What is going on
that may open up a route into market )

Low Cost Opportunities - Manufacture/ Design Services:
•Manufacturing: There are a large number (over 200) of Aerospace manufacturing companies in India. Of these there are
currently about 20 worth working with. They should only be considered of low end/ repetitive/ high labour intensive work,
unless UK companies invest time in developing companies capabilities.
•Engineering Services: There are a number of companies who are either pure Aerospace eg Quest or have an Aerospace
division that has developed from a much larger division such as IT or automotive sector, such as Infosys and Incat from
TATA. There are about 25 to 30 companies who we would consider as Engineering Services providers. Of that there are
only about 15 who UK SMEs should considered working with. UK SMEs need to ensure that these companies are actually
capable of deliver project requirements. In general the work should be straight forward design work e.g drafting, 2D
drawings, CAD conversion, or stress work such as FEA generation> Their strenght lies in tool knowledge not engineering
knowledge (yet). As part of my research I intend to identify the companies UK SMEs should be working with, hence these
initial numbers may change.
Indian Open Skies Policy:
•In 1998 there a relaxation of the restrictions on the Indian open sky policy which prevented private operators from
competing in the Indian Civil Airline Market. This has allowed a number of private carriers to start and provide air travel to
the huge Indian middle class (est. 300 million people) Combining this with the huge economic growth in India has made the
Indian civil aviation market on of the fastest growing in the World. Boeing predicts growth of 7.7% a year until 2025, $72 Bn
in the next 20 years. This will provide opportunities not only in the export of products for these new aircraft but also services
such as MRO, training and Airport services. There is currently no offset requirement on civil A/C but it is believed that this
will shortly be put in place. Hence the OEMs are looking to notch up their offset credits.

    May 2007                                            Monthly Report                                                   6
Opportunities
Defense
India is Deso’s number one market
Indian culture is they like things cheap and want to use to its maximum, performance and timescales. E.g. they have an
existing fleet of Jaguar that they will have in-service until 2035. Because of this these aircraft will require in service support.
They also have Sea King Helicopters, Sea Harriers, Hawk and Goshawks which will all require various mid life updates. The
Jaguar engines are shortly to go through a mid life update.
The first of the Indian Hawk - Advance Trainer Fighters will be delivered later this year. Of the order of 66 A/C, 42 will be
assembled in India by HAL. There maybe (to be confirmed) further opportunity as BAE Systems try to fulfill their offset
commitment of 30% of the value of this contract. (The proposed law on defense offset is 30% on any contracts over £40M).
The Indian Airforce are also looking for a new multi role combat aircraft. The order is expected to be about 120 aircraft.
50% will be probably be Russian, MIG 35, but the remaining will be a mixed order of F16, Typhoon, Griphen, Rapheal, Once
again 30% of the value of these contracts will need to be offset in India.
The downside of dealing with the defense industry is that this will involve dealing with HAL which is state owned. Which are
classed as part of ‘old india’, where bureaucracy is king. HAL are also very status driven, who they will work with, what work
they will take on. The simpler route would be to one of HAL 1 st tiers.

In both civil and defense markets there must be an opportunity in the UK for UKTI or SBAC to improve the link between the
prime OEMs and their supply chain when products are sold abroad. This has to be a win/ win situation for all parties.



   May 2007                                            Monthly Report                                                    7
Opportunities
Skill/ Capability Market Gaps
Although India has a a great education system and Indian Companies are very keen to get into the Aerospace they currently
lack the key thing that gives them credibility -experience. Currently there are not the skills/ capabilities required to undertake
some of the high end, high value work, such as conceptual design, product integration, primary structure stressing and
design, high tolerance manufacture. There are opportunities to set up JVs, captives or provide consultancy.

I aim to research these opportunities further over the 4 months. Clarify what the specific opportunities, and what further
opportunities there are, e.g. the growth of civil/private helicopters; No material suppliers in India.




    May 2007                                            Monthly Report                                                   8
Risks/ Issues/ Threats
(This will include what the competition are up to, blockers to market, issues with ways of working)

Working with Indian Suppliers
Indians want to work with UK companies. UK SMEs must be aware that Indians will always say ‘yes’ or cannot say no. They
will always say they can do something. Companies need to come into the market prepared and aware. Challenge and look
that what companies are claiming is achievable based on their experience and current capabilities.

Working with India is not for the quick gain. Neither is it where a company can drop work and forget about it. Time and
money needs to be invested in:
       •The relationship
       •Developing companies so that they can deliver to UK SMEs quality standards.
       (There are only 5 Indian Aerospace Companies currently who hold AS9100)
       •Integration with the supplier – setting up communications/ IT links/ processes and procedures/ transport
When putting all this in place UK companies should be thinking about setting up a relationship with an Indian company for a
minimum of 5 years. But even with all this ‘pain’ there is still a significant commercial benefit to be had. Current average
benefit is estimated at about 45%.

UK SMEs need think very carefully about what the benefit of putting work to India and the kind of work they should offload.
They should analyse their work and decide what labour intensive, repetitive, low risk work could they put into an Indian
company. Will it free up experienced/ skilled personnel and/or capacity on critical machinery that can be used for new orders
to develop SMEs capabilities?

    May 2007                                          Monthly Report                                                 9
Risks/ Issues/ Threats
A number of large US companies are filling up the capacity in Indian manufacture. This raises to 2 points:
1 Not only are they doing it for offset but these companies see and understand the advantage of working with Indian
companies
2 UK SMEs need to find out what work Indian companies are undertaking work for any large customers. The SMEs work
may take a low priority.

Other Issues
When using agents ensure that they are not representing one of the competition. Agents are very much in it for themselves.
(I think that’s the PC way of putting it) But it is important in India who knows who – Rolls Royce are looking to employ an
Indian to support India sales director.

Relationships. Relationships are valued. They want to determine if they can trust a company. This does not mean that it will
take years before a company will get work. It may mean several trips in a relatively short space of time until a contract is in
place.

Foreign Investment can only be a maximum of 26% in an Indian defense company.

Interesting comment from Andrew Dinsley, Head BTO, Bangalore. If UK SMEs don’t act now and use India for suppliers or
partners then very shortly these Indian companies will become direct competitions or even the owners of UK SMEs.


    May 2007                                           Monthly Report                                                 10