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Airbus to bring Indian operations under single unit [India Business] [Times of India]
[March 13, 2014]

Airbus to bring Indian operations under single unit [India Business] [Times of India]

(Times of India Via Acquire Media NewsEdge) MUMBAI: Airbus is integrating all its businesses in India into one subsidiary to increase synergies and provide a single point of interaction for its customers as the European plane maker pins high long-term hopes on India's troubled aviation industry.

"Airbus has a 40-year old relationship with Indian aviation. We now realise that clear governance is essential and there needs to be a one stop shop for our customers and suppliers," said Dwarakanath Srinivasan, the chief executive of the new entity,in an interview with ET.

Registered as Airbus India Operations,the new entity will bring under itself the Airbus Engineering Centre India in Bangalore apart from strategy, customer services and procurement or sourcing. Charles Champion, executive VP, Airbus engineering and member of the executive committee will be chairman of the India entity.

Kiran Rao,VP-sales and marketing will be one of the board members. India is the fifth market to have an independent Airbus entity after Airbus Americas based in Virginia, Airbus Middle East based in Dubai and the entities in China and Japan. Srinivasan, however, said not critical mass but business strategy and enhancement of market presence are the key drivers behind decisions of setting up such units.

Also, there is no final decision yet on merging finances or HR departments of the functions. Srinivasan, who holds a doctorate in design engineering from Cambridge University, UK, joined Airbus, UK in 1997. He moved to Toulouse to lead its engineering software development teams and from there came to India to head strategy.

Airbus engineering will continue to be headed by Denis Bertin while Thiery Legouix will still be fronting customer services. Chandra S, currently senior manager-sourcing will head that function, said Srinivasan.

Turbulent times Airbus takes the decision for India at a time when the country's aviation industry is going through one of its worst phases in recent times. Indian carriers have been hard hit by high fuel rates, slow demand, soaring loan rates, cutthroat competition and government's "policy paralysis".

As of March 31, 2013, the total accumulated losses of the airline industry over the previous seven years was $8.6 billion, while the total debt of the industry -- which has just five active carriers -- piled to a $12.6 billion, according to Sydney-based consultant CAPA-Centre for Aviation.

The consultant estimates three of the country's major carriers - Air India, Jet Airways and SpiceJet - to post combined losses in excess of $1.2 billion. High debt and losses forced Kingfisher Airlines' one of Airbus' customers to fold operations in 2012.

The airline had in a fit of ambition ordered the manufacturers' prized A380 plane -- the biggest passenger aircraft in the world, but could never take deliveries. Airbus' other major customer IndiGo however, is the only consistent profitable carrier in the industry. The unlisted company's annual net profit soared six times to. 787 crore in the last financial year.

But Airbus, like its US rival Boeing, remains bullish about the market's growth potential. "The fundamentals of the market are right. Having a high traffic growth helps a country's GDP. And I believe there is still a lot of pent up demand," said Srinivasan. In its latest global market forecast, Airbus estimates that by 2032, Indian carriers will need over 1,200 new planes.

Indian operations Airbus now has close to 250 planes flying in India and another 200 on order.

About 60% of Indian carriers' new orders are from Airbus. Srinivasan said in 2006, Airbus' sourcing from India totalled $25 million. By the end of last year, it soared more than 10-fold to $300 million. The Airbus engineering team in 2007 had 4 people, a number that's grown to 350 now and will grow by another 30% in the next few years, he added.

The engineering centre, Airbus ' biggest captive centre outside of Europe, was launched in 2007 and contributes to design, said Srinivasan.

(c) 2014 Bennett, Coleman & Company Limited

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