General Electric's (NYSE:GE) aviation arm, GE Aviation, is a pioneer in manufacturing aircraft engines for commercial, business, military, and general aircraft worldwide. The company, which powers "the world's fleets," is quite bullish about the prospects evolving from emerging economies such as India.
The company's CEO Jeff Immelt had said that he expects revenue to gallop between 15%-20% every year in the third largest Asian economy. Though Immelt did not say from where this will be generated, it wouldn't be farfetched to assume that aviation could form a key component of this growth. Here's a low down on the prospects of the Indian aviation sector and GE's plans.
In pursuit of achieving brisk growth
GE Aviation's India Fact Sheet (link opens a PDF) reveals some amazing facts about the prospects of the Indian aviation industry, and forecasts phenomenal growth over the next 20 years. Some key projections are:
- By 2031, aircraft fleet is estimated to increase to 1,606 from 402 in 2011.
- Through 2031, Indian domestic air traffic would grow at a CAGR of 9.9% compared with 4.7% by the worldwide air traffic.
- By 2031, the Indian domestic sector would see the fifth largest air traffic in the world.
- Market value of new planes required to satisfy the demand in India between 2012 and 2031 is $175 billion.
GE wants to be a part of this growth story. With more than 30 years of operating history in the Indian aviation sector, the company could make big gains if it puts its resources in the right channel.
Investments in capacity and technology
GE has just set up its first multimodal manufacturing plant in Pune, spread over a total area of 68 acres at a cost of $200 million. In this facility, the company would make a host of different aviation and turbo machinery components. GE's management aims to develop India into a global manufacturing hub and the new plant is in line with this vision.
Rival engine maker Pratt & Whitney, a unit of United Technologies (NYSE:UTX), is also a veteran player in the Indian aviation market. Pratt is about to set up a training centre for aircraft engineers and technicians at the Hyderabad airport to train them on the latest engine models. The company has also opened a new MRO (maintenance, repair, and overhaul) unit in the nearby country of Singapore.
To secure its competitive position, GE plans to use 3-D printing for production of critical components of jet engines at the new India plant. Explaining this technology, GE's CEO Jeff Immelt said that 3-D printing "makes unique shapes with high tech material, in a quick period of time that is worth my time and a lot of investment." The company will first start with printing plastic components and then move on to metal parts.
Perfect for Indian carriers
GE's commercial aircraft engines are fuel efficient and are currently in service for every major Indian carrier. The GE90 engines, which enjoyed huge popularity in its heydays, powered the first nonstop flights between the U.S. and India operated by an Indian carrier in 2007.
The GENx engine marks a giant leap over the GE90 engine, promising up to 15% extra fuel efficiency, more than 30% engine noise reduction, and nearly 40% nitrous oxide emission reduction. More than 450 GENx engines are presently operational in India and there's an order backlog of 200 more. Comparatively, Pratt's PurePower PW1000G engines, having similar features, are installed in approximately 300 aircraft in India, and there are 300 more in backlog.
For further improvisation, GE is using light ceramic matrix composite in the hot section of the engine that would enhance engine efficiency by an additional 15%. GE is all set to provide this better LEAP engine for Airbus A320s and Boeing 737 MAX aircraft fleet to increase their fuel economy by early 2016. Pratt is also developing a similar product in its PurePower Geared Turbofan engine family that would save 20%-30% fuel consumption.
These engines are bound to be an attractive proposition for Indian carriers as it would reduce operating costs.
In addition to commercial aircraft orders, there have been some other positive developments that deepen GE's India ties.
The company has bagged a deal worth $822 million to power the fighter jets of the Indian Air Force and the Indian Navy for the first time in 2013. In another deal, the company recently tied up with the Airport Authority of India to improve airspace efficiency by adopting Required Navigation Performance technology. This will help pilots to use on-board technology to map the track to fly en-route without depending on ground navigation signals resulting in reduced fuel burnout, more safety, and less noise pollution in areas close to the airport.
All eyes are set on the Indian aviation sector for its mind-boggling growth prospects. Fuel efficient engines could play a big role in the evolution of this market. GE's engines are already popular in the country, and could be a bigger hit with the roll out of more technologically advanced offerings. Stay tuned.