Daily Memo: Safran Places Leap Bets On India
Over the 2018-25 period, Safran intends to invest a total $200-250 million in India, essentially around Leap engine production and MRO.
The amount, given recently as factories were inaugurated and further plans announced, signals the growing importance of the country in commercial aircraft engine sales, especially for the Leap.
To start with, India is poised to become the world’s most populated nation. Combined with the low proportion of Indians who fly at least once a year (the ratio to Europe’s travelers is 1:10) and the expected improvement in their standard of living, the potential is immense. Safran has already enjoyed brisk commercial sales in India and intends to make the most of the anticipated growth.
A total 154 Leap-equipped aircraft are in service in India, according to Aviation Week Network’s Fleet Discovery data. Another 745 are on order. One way to harness the swelling fleet of Airbus A320neos and Boeing 737 MAXs is to draw revenues from MRO services.
To support the existing and future fleet, Safran has announced plans for the construction of its largest heavy maintenance facility in the world, with annual capacity for up to 300 Leap engine shop visits, in Hyderabad.
The Safran Aircraft Engines Services MRO center is slated to start operations in 2025. As the first A320neo family aircraft in India was equipped with Leap-1A turbofans and entered service in 2017, it will require shop visits from 2024-25. Safran CEO Olivier Andries therefore believes it is the right time for the $150-200 million investment. Groundbreaking is scheduled for 2023.
For Indian customers, the proximity of the new MRO facility will reduce turnaround times. Moreover, Middle-East and Southeast carriers will be invited to have their Leaps maintained in Hyderabad. In 2035, Safran Aircraft Engines CEO Jean-Paul Alary predicts, the facility will conduct 250-300 shop visits per year on Leap engines.
“This is a consistent investment,” AlixPartners MD Alain Guillot says. “Aviation’s growth is forecast to be strong in India, the domestic market is very large, major orders have come from IndiGo, and we can see prospects for Air India to be taken over and consolidated.”
Meanwhile, manufacturing components in India helps Safran in two ways. First, the country is a weighty buyer of military aircraft, such as the M88-powered Rafale, and those contracts include offset obligations.
Second, Safran sees Indian know-how in engine part production as proven. Safran plans to have those sites increasingly integrated into its dual-sourcing strategy for the Leap. Hence the grand openings of factories in Bangalore and Hyderabad, producing rotating turbine seals, pipings (produced at the Bangalore plant, which is an expansion of an existing factory), and electrical harnesses.
The complexity and criticality of the parts Safran has been manufacturing in India has been increasing consistently, according to Safran’s officials.
Producing in India is all the more relevant for those processes that cannot be automated. The typical monthly salary for a production worker is close to $250 (that is the cost for the company; the worker’s net salary is in the $220-230 range, according to Alary). An engineer costs $500-600 per month, Alary adds.