Aerospace industry eyeing India

FARNBOROUGH, England -- Orville Prins, a top Lockheed Martin salesman, left London late last week for India on a mission aimed at selling F-16 fighter jets. It's his 10th trip to the South Asian nation in 12 months.

Prins is one of many aerospace industry representatives and executives spending a lot of time in New Delhi lately. Counterparts from nearly all of the world's handful of major defense and aerospace companies are assiduously courting Indian government and private industry, seeking to tap a vast and ripe market.

With an entrenched democratic government, growing economy and flowering capitalism, India is seen as perhaps the hottest market for sales of weapons, commercial aircraft and other new technologies. It's also viewed as a potential source of new capital, lower-cost production capacity and talented people.

"It's not just a commercial market; it's a military and commercial market," said Mark Kronenberg, an executive with Boeing Integrated Defense Systems.

Representatives of India's government and military services were the center of lots of attention from Prins, Kronenberg and other aerospace company executives last week at the Farnborough International Airshow, one of the aerospace industry's premier business events.

India is expected to issue a formal request soon for proposals to purchase and co-produce 126 multirole combat aircraft. It's a deal that, based on a roughly $50 million per plane price tag for the F-16, would be worth upward of $6 billon to $7 billion just for the airplanes plus spare parts, training and other support.

The competition, which could last at least two years, is the first big combat aircraft deal of the 21st century, and the winner will gain an important foothold in a fast-growing nation with many defense requirements.

Nearly every fighter jet manufacturer, backed by their governments, is expected to submit bids to the Indian government: Lockheed for the F-16, Boeing for the F/A-18E/F, the Eurofighter Typhoon consortium, France's Mirage 2000 or Rafale, Sweden's Gripen and Russia with a MiG-35.

"This is going to be a tough dogfight," said Prins, vice president of business development for India with Lockheed Martin Aeronautics Co. in Fort Worth.

India is largely a new and untapped market for U.S. defense and aerospace companies. The huge nation was off-limits for years because of Cold War politics when India's allegiance was with the Soviet Union. In the late 1990s, the Clinton administration embargoed weapons sales to both India and Pakistan.

"If I went into the Department of Defense five years ago and asked for an export license to India, there was no chance," Kronenberg said. That began to change with the Bush administration, and little more than a year ago, President Bush approved arms sales to India.

The Indian government is shopping, looking to improve its defense capabilities against both traditional enemy Pakistan and other potential threats like China.

"They live in a dangerous neighborhood," Kronenberg said.

Lockheed has been preparing to do business with India for years. The company has kept an office in New Delhi for 20 years that is staffed by seven resident employees.

The company sees "opportunities across the entire corporation," Prins said, and has submitted proposals to sell P-3 patrol aircraft, C-130J cargo planes and even Sikorsky UH-60 Black Hawk helicopters, which Lockheed outfits with sophisticated electronics and weapons systems.

Boeing has already sold commercial airliners and is pitching not only F/A-18s, but Chinook helicopters and its own P-8 patrol plane.

Another company trying to cash in on opportunities in India is Fort Worth-based Bell Helicopter.

"You're seeing us take a very active role in India," said Robert Fitzpatrick, Bell's senior vice president for business development. "Over the next 20 years, we see it as a $4.3 billion market for vertical-lift aircraft."

Bell is in the final stages of a competition with Eurocopter to sell 197 aircraft to the Indian army for observation and reconnaissance missions. The Indian requirements are stiff.

Both companies have had to show that their helicopters can take off and land while loaded as high as 25,000 feet altitude and function perfectly after spending an entire night parked on the side of a mountain at minus 20 degrees Celsius.

Bell sold 18 helicopters into the Indian market last year and has 20 orders so far in 2006. The market potential is vast. In the U.S. economy, there is about one helicopter in use for every 20,000 residents. That figure is one for every 10 million people in India, which has just one emergency medical service helicopter in the entire country.

If Bell wins the army contract, it would make 60 of the aircraft in its plants in Fort Worth and suburban Montreal. The rest would be assembled by Hindustan Aeronautics Ltd. in India, with Bell producing many of the key parts and assemblies in Texas.

The fighter-plane competition figures to be a free-for-all, with each country and manufacturer touting its aircraft's capabilities, the purchase and operation cost, and trying to offer the Indian government the best package of work-sharing and other perks to sweeten the package.

Lockheed believes that its experience exporting various F-16 models to more than 70 nations, with 50 making repeat purchases, is a big selling point. The company would, with U.S. government and Air Force involvement, offer India an F-16 version customized to its needs. As it has with numerous other customers, Lockheed will offer India a major share of F-16 work, including probably final assembly of the aircraft.

"We think the F-16 brings the optimum blend of capability and cost, both acquisition costs and life-cycle costs," Prins said.

There will be cheaper planes to buy, he said, but they may not be cheaper to own. The Russian MiG, for example, carries a sticker price of $30 million to $35 million.

But the Russian planes, and especially their engines, are not noted for reliability and require heavier spending to keep flying.

At any one time, 15 to 20 people out of Fort Worth are working on preparations for the Indian fighter bid.

"This is an important program to our company," Prins said.

He can, if needed, call on the added firepower of Ralph Heath, president of the aeronautics division, or even Robert Stevens, Lockheed's chief executive.

Boeing has also called in the heavy artillery to aid its efforts to sell F-18s and other aircraft to India. Chief Executive James McNerney has made one trip during his short time with the company. James Albaugh, head of Boeing's defense business, has also made the trip in recent months.

The key to working with India for all of the U.S. companies will be patience, a long-term view. The Indian political and acquisition process is described as thorough and deliberate.

"This isn't something that either us or Lockheed Martin is going to realize huge benefits from in the short term," said Boeing's Kronenberg. "It's going to take a decade."