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Airbus flying high on Indian skies
Bhupesh Bhandari | January 02, 2007
Most Indian visitors to the Airbus headquarters at Toulouse in France are pleasantly surprised when Kiran Rao, executive vice-president (marketing and contracts, customer affairs), Airbus, serves them hot dosas with lip-smacking sambhar and coconut chutney. All made at home, with the choicest of Indian spices, by his wife.
What few people know is that his wife is English (Bangalore-born Rao himself is a British citizen) - as far removed from South Indian delicacies as an Eskimo from swimming trunks, writes Bhupesh Bhandari.
If that doesn't convince you that he is a marketing genius, you could take a look at the numbers. Rao has so far sold between 250 and 300 aircraft to various Indian carriers in the last few years. "I don't need to spend so much time in India now. Most of my deals are now done on SMS," he said as we settled down at Club Floor restaurant in the Maurya Sheraton in South Delhi.
The winter chill had started setting in Delhi. As both of us had a busy day ahead, we quickly ordered breakfast: A dosa (what else!) for Rao and idlis for me.
Rao was leading a top Airbus team to Delhi including the company's COO (customers), John Leahy. Coincidentally, the visit of the Airbus brass had come exactly a day after Boeing delivered the first of the 68 aircraft ordered by Air India.
Not that this seemed to have perturbed Rao. Airbus' market share in India, he said, had improved from 70 per cent in 2005 to 75 per cent in 2006. "Boeing has a market share in news articles, we in aircraft delivered," he added for good effect.
It might have been a friendly dig at his arch rival, but it made it abundantly clear that India is the next frontier for the world's leading aircraft manufacturers, Airbus and Boeing.
Over 10 per cent of the 430-odd aircraft made by Airbus in 2006 winged their way to India. The Indian market for civilian aircraft, in Airbus' projections, will grow at 7.7 per cent per annum for the next 20 years, compared to China's 7.2 per cent and the world average of 4.8 per cent.
Rao can count leading Indian carriers like Indian, Kingfisher, Air Deccan, Go Air and IndiGo amongst his customers. Consequently, Toulouse is known to be swarming with Indians at any time of the year. And Rao has the opportunity to press into service his dosa diplomacy more frequently.
Though Kingfisher (62 aircraft) and IndiGo (100 aircraft) may have placed bigger orders, the deal that Rao counts as his best, and the one that is said to have got him a massive bonus, is the Indian order for 42 aircraft at a cost of $2.2 billion.
After a crash in 1991, Indian (then Indian Airlines) had grounded its entire fleet of Airbus A320s. The company's image had taken a beating. So, it was a sticky wicket when Rao opened negotiations with the state-owned airline in 1996. Things moved back and forth over the next eight years till Air Deccan arrived on the scene.
"It was the arrival of the value airlines that triggered it. Praful Patel (the current Union civil aviation minister) moved really fast," said Rao. "G R Gopinath (the chief executive of Air Deccan) initiated the change, Vijay Mallya (of Kingfisher) sparkled it, Naresh Goel (of Jet) has a great business and Patel has wrapped it all quite well," he added.
Apart from markets ranging from Africa to south-east Asia, Rao is also in charge of the A350 - Airbus' answer to the Boeing 787 Dreamliner. However, the project is one year behind schedule and the aircraft is now expected to be in the market only in 2013 - full five years after the Boeing 787. "Doesn't this give the first mover's advantage to Boeing," I asked Rao.
"Coming out second has its advantages," said Rao as we moved on to coffee. In the last one year, Rao said, Airbus studied every aspect of the Boeing 787 to come out with a better aircraft.
"The A350 is wider, lighter, consumes less fuel and flies longer than the Boeing 787," he added. These factors, according to Rao, can make or break an airline. As airlines operate on wafer-thin margins, 1 per cent improvement in fuel efficiency can result in savings of millions of dollars.
One additional seat in economy can earn $2 million and one additional seat in business class can earn $6 million over the life of an aircraft. "At the first preview of the A350 last week, the reaction from all the airlines was: Great aeroplane, now launch it," Rao added.
That may be fine, but what about the A380? Aren't there reports that some airlines are re-thinking their decision to buy the aircraft because of the delays in delivery? "So far, only FedEx has done it. Others have actually increased their orders: Singapore has added 10 more and Qantas has placed orders for another six. We have sold over 150 A380s so far," said Rao.
The problem, according to Rao, has been caused by a small mistake in the design process of the A380. As various parts of the aircraft are made in different countries of Europe, there was a problem with the wiring alignment, which Airbus is now trying to set right.
However, this has caused a delay of two years in the commercialisation of the aircraft. "All the airlines know we will get it right," said Rao. In the same breath, Rao went on to mention that the A380 has 100 more seats than the Boeing 747 and burns 10 per cent less fuel per seat.
Around the same time as we were talking, at a function not very far from where we were sitting, Mallya told newspersons that he would seek damages from Airbus for the delay in the delivery of the five A380s he had ordered.
Surely, a small irritant for a master salesman.