India’s US$7.1 billion multi-national Mahindra Group has set its sights on the aerospace industry as its latest growth opportunity.
The group started out assembling the Willys Jeep in India in 1945 and is now involved in utility vehicle and tractor production, information technology, financial services, infrastructure development, tourism and logistics. The group comprises more than 100 companies and lays claim to being one of the world’s top three tractor manufacturers.
In 2006, Mahindra entered the aerospace industry with the acquisition of aerospace and automotive engineering services company Plexion Technologies. “Over the years, our footprint in the [aerospace] industry has increased through both organic and inorganic growth,” explains Arvind Mehra, executive director and chief executive officer of Mahindra Aerospace.
In late 2009, Mahindra expanded its aerospace portfolio further, with the acquisition of Australian companies, general aviation aircraft manufacturer Gippsland Aeronautics, now called GippsAero, and aircraft component and assemblies company Aerostaff Australia, in a US$38 million deal with Kotak Private Equity. Prior to this, Mahindra was already active in Australia, having established an assembly and customer support centre in Queensland for its tractor and utility business in 2005.
“As Mahindra Aerospace, we are growing in the manufacturing space with the recent acquisitions of Aerostaff Australia and GippsAero. At the group level our aerospace portfolio has expanded with the investment in Mahindra Satyam, which has a sizeable aerospace practice,” adds Mehra.
Prior to the purchase of GippsAero and Aerostaff, Mahindra’s aerospace activities had been concentrated on design engineering services, in addition to some manufacturing services. “Some of the successfully completed programmes include the turnkey production of the Seabird Seeker aircraft [for Seabird Aviation Jordan – the Jordan-based branch of Seabird Aviation Australia],” says Mehra.
In addition, the company has partnered India’s national Aerospace Laboratories (NAL) on the five seat NM5 utility aircraft, scheduled for its first flight in mid-2011.
“We anticipate a further 12 to 18 months before we can achieve type certification to start commercial production,” says Mehra. “The NM5 has been designed to augment the utility-aircraft segment with a modern design that meets the latest safety and operational regulations, compared to several designs now in service that were designed under much older regulations. We believe its low operational costs and versatility will give us access into many market segments across the globe.”
With its Australian acquisitions, Mahindra took on GippsAero’s aircraft portfolio, comprising the GA8 Airvan utility turboprop, of which more than 150 are flying around the world, and the GA200C Fatman agricultural aircraft. The company also acquired GippsAero’s fully operational production, maintenance and product support facility in the Latrobe Valley in Victoria, as well as Aerostaff’s CASA-approved, AS9100-certificated sheet metal workshop in Port Melbourne, also in Victoria.
The Aerostaff facility manufactures close-tolerance, high-precision sheet metal components and assemblies for the aviation, defence and specialised sheet metal industries, with customers including Boeing Australia, General Dynamics and Thales.
Expansion is on the cards for both its Australian operations and its aerospace capability in India. Commercial production at a new Indian facility, in Bangalore, is planned for 2012.
“This facility will span over 200,000 square feet of production area, with unique capabilities in the private sector in the Indian aerospace industry,” says Mehra. The Indian facility will be part of the company’s aerostructures division, with capabilities in special processing, machining and assembly work, complementing its Australian operation.
Mahindra recently purchased from Boeing Aerostructures Australia at Fishermen’s Bend in Melbourne “selected equipment” which will be transferred to the new Indian facility. “This equipment will be recommissioned in the upcoming Indian plant, where it will be the cornerstone of the new capabilities that we are introducing into the Indian aerospace industry,” he says.
Aerostaff Australia has been and will continue to be a key contributor to the development of the Indian facility, says Mehra.
“It will continue to operate in its current form as a part of our aerostructures business,” he says. “We see tremendous synergies between the two plants as well as the two divisions. We will continue to leverage off Aerostaff’s rich experience and capitalise on the synergies being generated between the companies.”
The intention is not to transfer production to India, Mehra says. “We have no plans to move Gippsland production to India. On the contrary, we are actually investing in the expansion of the current facility at GippsAero. The expansion is aimed at increasing the production capacity for the current product, the GA8, and to allow for future development and production of two new products in the pipeline.”
Mehra says Mahindra is also creating “an integrated technology team” with facilities in India and Australia to expand the current aircraft portfolio to span the two- to 20-seat sector and to develop derivatives that enhance the aircraft’s utility and flexibility for operators.
“We are making substantial investments in our Australian facility [GippsAero] – one, to ramp up production capacity for the GA8 to meet market demand, and two, investing in new products and derivatives to expand our aircraft portfolio,” he says.
Within two years, Mahindra plans to bring to market a 10-seat stretch of the GA8 Airvan, dubbed the GA10, and the relaunched Nomad – the 18-seat GA18. Some US$20 million will be invested in GippsAero over the next two years for product development.
The acquisition by Mahindra has allowed the company to realise some of its aircraft portfolio expansion plans. The Australian manufacturer had been considering the development of a 10-seat stretch of its popular eight-seater prior to the acquisition by Mahindra and had been seeking international funding to relaunch the former Nomad programme since it acquired the type certificate from Boeing in June 2008.
The GA10 Turbine will be powered by a Rolls Royce 250 B17F2 engine and capable of carrying eight occupants on routes of five hours or more, or as many as 10 occupants. It will have a maximum all-up weight of 4,750lbs and an estimated empty weight of 2,350lbs. Maximum fuel capacity will be 550 litres.
GippsAero says the GA10 will maintain the concept of the GA8, namely simplicity at low operating costs. The aim is to use the current aerodynamic design of the GA8 and as many existing production parts as possible to minimise development and production costs, the company adds. First flight is scheduled for November, with CASA type certification planned for February 2013 and the type’s public debut at the Australian International Airshow at Avalon, Victoria in March 2013.
Another variant, the GA18, will then follow, featuring new engines and propellers, a glass cockpit and weight-saving measures.
“GippsAero and Mahindra Aerospace are also jointly working on multiple technology initiatives to take advantage of new engineering and manufacturing developments across systems, structures and propulsion to improve the global competitiveness of our aircraft portfolio,” says Mehra.
Executives from Mahindra have previously been quoted as saying the company has ambitions to be the “Embraer of India”, but Mehra says: “It is more accurate to say that we are committed to becoming a manufacturer of globally competitive aircraft. We believe it is possible, that there are opportunities in developing economies for our class of aircraft, and that the time is right for us to deliver in aerospace what we have been able to accomplish in other sectors of the industry.” The product portfolio is unlikely to stop there.
When asked if the company is interested in adding more aircraft, possibly even a regional jet, Mehra responds: “While we are starting with utility aircraft in the two to 20-seat class, we are also watching developments in applying new technologies to the next class of civilian aircraft and if the right combination of market demand, technology enablers and partnerships become possible, then who can tell?”
The focus at the moment is to complete the projects the company has already committed to.
“Our current priority is to consolidate our achievements and build a strong foundation for ourselves in the global aerospace industry. This would be necessary to accomplish our strategic plans – commission the new Indian facility and quickly move up the value chain in aerostructures, as well as complete development and commercially launch the new aircraft models in the pipeline,” says Mehra.
The Mahindra chief adds: “In the medium term for the aerostructures business, we aim at establishing ourselves as a tier-one supplier to large aircraft OEMs. On the aircraft side of the business, we want to become globally recognised as a manufacturer of cost-effective, efficient, robust utility aircraft, producing and supporting a portfolio of four to six models.”
New partnerships are also being considered to grow the business further.
“We are exploring potential strategic partnerships in both the aircraft and aerostructures business,” Mehra says. “This could be either through acquisitions, joint ventures, revenue-sharing models or risk-sharing partnerships.”