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Airbus mulls production line in India news
10 June 2009

Paris: With the first A320 due to rollout of the Chinese assembly plant at Tianjin in a couple of weeks, Airbus officials have spoken about the need to open new production lines in the United States and India. While the Airbus move to establish facilities in the US would be an attempt to tap into the lucrative defence market, the move towards India would certainly serve the commercial aerospace manufacturing sector and come as a massive fillip for local companies already engaged in aerospace outsourcing work.

Airbus chief executive Tom Enders, writing a column in UK paper The Financial Times on the 40 years of a four-nation European consortium, said Airbus must adopt a global outlook in order to stay competitive. "We have to leave national sentiment behind us," Enders wrote.

"Airbus will only remain competitive in the long term if it develops resources and markets globally and becomes a genuinely international company, with development and production also in the US, China, India and elsewhere."

Airbus agreed to set up an assembly line at Tianjin in China for the A320 family of jets in 2006. This immediately invited a request from the Indian aviation minister to set up a similar project in India, particularly as India placed an approximately $2.2 billion order with Airbus for 20 A319s, four A320s and 19 A321s in the same year.

Airbus officials had then said that costs might outweigh benefits. In any case the Toulouse-based company got embroiled in internal restructuring programmes as well as a series of aircraft production delays. It also has had to contend with fierce union opposition to off-shoring jobs.

A global economic downturn since has threatened orders. In its perennial rivalry with American giant Boeing, Airbus has been mulling strategies to cut costs and win a larger share of orders. It is faced with a strange situation where its costs are euro denominated, while its sales take place in US dollar terms. With the dollar cheaper than the European currency the European manufacturer is always at a handicap.

The only way it can seek to overcome the handicap is to shift manufacturing activities outside the euro zone.

 Airbus officials in India have said that they already do ''complex assembly sourcing'' from India, which is very similar to what they did in China before the assembly plant opened at Tianjin. They say that the China model could easily be replicated here.

If Airbus should establish a final assembly line (FAL) in India, it will very likely have a capacity of 'Rate 4', which entails a production capacity of four planes in a month. Such a production plant would be 20-30 per cent cheaper than a similar plant in Europe thanks to savings in labour and materials costs.

If Airbus is able to overcome opposition to its plans from shareholders at home, primarily various European governments that will have a vested interest in ensuring that lucrative aerospace sector jobs are not outsourced then a plant in India could well be established in three to four years time, according to Airbus officials.

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Airbus mulls production line in India