One of the major aircraft manufacturers, Boeing Company, expects to bag new orders from Indian carriers starting 2011-12 on the back of the industry’s robust performance. The Seattle-based company considers India a key market for airplanes in Asia, the carriers of which would have more aircraft on the aircraft maker’s assembly line compared to the US and Europe in years to come. The company’s president in India Dinesh Keskar spoke to FE’s Nirbhay Kumar on issues ranging from its market forecast to the offset obligations.
The aviation industry has been reporting robust performance. As one of the lead aircraft suppliers how do you plan to seize this opportunity?
We have a consistent laid-out plan which started many decades back. In the last five years, in particular, India has grown exponentially and Boeing has participated in very positive ways in several areas. First, we have sold the most modern airplanes like 737, 777 and 787s both to Air India and Jet Airways. We have been major supplier to SpiceJet. We have also delivered VVIP airplanes to the government of India. We have delivered 100 aircraft and we have a backlog of 107 airplanes. We have also done several defence deals. On account of all these deals we have a lot of offsets. Over the years beginning 1991, we are working with HAL and other marque companies like Wipro, Tatas, and Infosys. In the process, we are benefiting by getting our work done and at the same time we are creating expertise in aerospace hardware. On the military side we are pleased with the Indo-US civil nuclear deal.
In the short run how many new orders you expect to get from Indian carriers?
We never predict our orders. We talk about two things. We have forecast that India would need 1,050 aircraft worth $130 billion in the next 20 years. These are either 737 or 777 or 787. Fortunately, we have a base of these aircraft with both Air India and Jet. This 1,150 airplanes have to be distributed among many airlines in India. We feel that we are ready for future purchase by these carriers. Next year, by the third and fourth quarter, airlines in India would start buying or leasing new aircraft. To get an airplane and put it in the fleet takes anywhere between 12 months and several years depending upon the backlog.
The smaller cities in India would most likely witness faster growth in the years to come where smaller jets would be needed. How do you see Boeing taking their pie there?
If you see the roles of smaller 70-seater type of aircraft there are many places in India where B737 or A320 cannot land. Jets like ATRs can only land. Smaller airplanes have the benefits of reduced airport landing and parking charges. The city pairs which currently has the potential to absorb the capacity created by regional jets would in 2-3 years grow and need bigger aircraft. Following this the airlines would have to replace the smaller jets with bigger planes like B737.
Boeing has done so many deals in India running into billions of dollars. What?s the company’s offset obligation?
The only offset on commercial side happens on Air India deal. Our commitment is to invest $1.7 billion. We will have to buy goods and services worth that much from India. We have every intention to fulfill our obligation. All the companies I named earlier are helping us fulfill that commitment. Companies like Tata and HAL are doing the hardware and many other companies are doing the software.
For example, the floor beams for 787 would come from Tata’s factory. Military offsets are also there. We have $630 million and as we conclude more deals the goods and purchase procurement value would go up.
Coming to your most valuable customer Air India, it’s believed there is major disagreement between Boeing and airline over compensation for delay of B787s?
I don’t think there was ever a disagreement with Air India. We continue to talk to the airline. It is important that we and Air India settle this and we will do this. All I can say that we have a conversation going on. We are well underway now that our flight test programme for Dreamliner has restarted. Our focus is to first deliver the aircraft to All Nippon Airways and then to Air India sometime next year. It’s unfortunate and we feel the pain the airline is going through due to delay. We have 856 jets sold. This is the best ever programme in the world. These many jets have been sold even before a single plane has been delivered.
It’s understood that the joint MRO (maintenance, repair and overhaul) programme with Air India is also not on time?
People think there have been delays. Why has there been a delay? There are two reasons. First, there was recession in the world. Secondly, we need to bring this MRO on line when there is work. This is not a cheap facility. The brand new aircraft which we are delivering to Air India does not need any heavy maintenance. However, the 737 that they got 4-5 years back will need maintenance in the next two years. Then some of the 777 we delivered about four years back would need maintenance around that time. So in the two years when maintenance is need MRO should be ready. You have to look at these factors. We have finished all contract related works for the proposed facility. It’s $100 million investment.
