Flight to fame

A joint consortium by 3 Asian nations to build a passenger aircraft may shake the Western stranglehold

 
Published: Saturday 30 September 1995

-- (Credit: Rustam Vania)In what is being termed as a historic venture, the India-China-South Korea consortium to build a 100-seater passenger aircraft could cause a severe jolt to the powerful Western aerospace industry.Civil aviatiation experts opine that the Asian airline industry soon expects to see the maximum growth globally, in the medium-size aircraft market.

It is in this context that the formation of this consortium is being viewed cautiously, as the challenge it poses to the absolute monopoly of the existing leading aircraft manufacturers might not be viewed kindly. The governments of these nations have been an 'unseen hand' in promoting passenger aircraft in the past, a hand also used for strong-arm tactics to safeguard its aerospace industry.

The tripartite consortium involves the public sector undertaking, Hindustan Aeronautics Limited, Bangalore, Aviation Industries, Shanghai, and the Korea Commercial Aircraft Development Centre (led by Samsung industries), in a ratio of 30:30:40. The memorandum of understanding (mou) had been signed in Shanghai on August 27.

According to information available at the Union ministry of civil aviation in India, a sizeable portion of the expected global demand for 6,000 medium-size aircrafts -- the market size of which is reported to be us $55 billion-- could be in Asia.

"While the market share of this category of aircraft is only 1/5th of the global us $291 billion aerospace market, its significance should never be underplayed. It is this segment of the aircraft market that has more capacity to grow, as compared to that of the jumbo-aircraft required in the developed world," states a ministry official.

K B Ganeshan, former Director General, Civil Avation, says that the mou augured well for the 3 nations involved. The stranglehold the aircraft manufacturers had over the rest of the world, would certainly loosen.

"The cost factor is hardly material, as safety is always uppermost in the minds of the market. If the end product is competant, there is no reason why the venture should not be a tremendous success," he adds.

While there seems to be no dearth of demand, with just the internal demands of India and China enough to ensure sufficient business, quality and ability pose important questions to the industry-that-might-be.

"China is definitely in the best position, among the 3 countries, as far as ability is concerned. McDonnell Douglas had set up a plant in that country in the 80s, assembling the dash-80 series aircraft. Even if there has been no transfer of technology, they would have personnel trained to handle large aircraft manufacture," states Ganeshan. South Korea, with access to the world of investment and technology, would be expected to provide both for the project.

However, aviation industry watchers advise caution, as such a project would certainly evoke some response from aircraft manufacturers like the Boeing Company, McDonnell Douglas Corporation and the Airbus Industry. They cite the example of the f-16 deal between the us and Saudi Arabia, where the Clinton administration had ensured that Saudi Arabia placed orders with Boeing, as a part of the f-16 deal.

"Australia had to scrap an entire aircraft manufacture project when the powerful consortiums stepped in and ensured that the project was without the required engines" they add. Leading engine manufacturers, Rolls Royce, General Electric and Pratt & Whitney, it would appear, lost interest at the last moment.

According to the industry profile of the European Community's (ec) Panorama '94, a slump in the aerospace industry had led to a fall of 7 per cent in employment between 1990-92, the ec's consumption had fallen by 14 per cent, and production cut by 4.6 per cent.

The profile notes that, "since 1990, airline companies have faced sluggish or negative traffic growth, fierce competition and rising costs, an occurence of factors which translate into deep financial loss. Also enduring large over capacity due to the investment boom of the late eighties, most airline companies have severely revised their investment plans, often postponing or even cancelling orders." The consortium should be able to reap the benefits of this scenario.

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