Airbus wins US$1.87b Indian military order for cargo planes

MAY 14, 20157:04 AM

[NEW DELHI] India agreed to buy 56 transport aircraft from Airbus Group NV for 119.3 billion rupees (US$1.87 billion) to replace an aging fleet, as Prime Minister Narendra Modi seeks to modernize the country's military.

The C-295 planes, which will replace Avro cargo planes in the Indian Air Force fleet, will be jointly built with India's Tata Advanced Systems Ltd, an Indian government official said in New Delhi late Wednesday, asking not to be identified in accord with policy. Sixteen of the aircraft will be manufactured at Airbus plants in Europe, while the rest will be made in India.

Since coming to office one year ago, Mr Modi's government has approved military projects valued at more than US$40 billion, as India moves to catch up with an assertive China, which spends thrice that amount in military purchases every year. Mr Modi has allowed more foreign investment in defense and is trying to overcome a history of graft scandals that slowed purchases.

In addition to the transport plane order, India's Defense Acquisition Council approved other orders Wednesday valued at at least US$875 million. They include 145 BAE Systems Plc M777 howitzers, Indo-Russian BrahMos cruise missiles for six warships and 197 Russian Kamov helicopters. The helicopters will be manufactured in India.

The council also approved the construction of India's second domestically built aircraft carrier.

The helicopters, like the local manufacture of the 40 Airbus transport planes are part of a plan to stoke domestic production after India surpassed China to become the world's largest importer of weapons. Mr Modi is also seeking to rely less on state-run companies that have failed to help replace obsolete military equipment.

The announcement of the transport plane order comes less than a week after an Airbus A400 transport plane crashed in Seville, Spain several minutes into a test flight prior to delivery to Turkey. The incident has prompted air forces across Europe to suspend use of the A400 while the investigation of the crash occurs.

BLOOMBERG