It’s largest military market, by far, was the Republic of India which has the world’s 2nd largest military and is the 3rd largest military spender. At the time of the Soviet Union’s breakup, over 70% of the country’s army armaments, 80% of its aviation systems and 85% of its naval platforms were of Soviet origin. However, over this past decade, Russia’s share of Indian arms imports fell from 70% in 2012-17 to 46% in 2017-21.

This has primarily been of benefit to manufacturers in France, Israel and the U.S. Boeing benefited enormously too: of the various military products made by the company, the Indian military operates the world’s 2nd largest fleet of P8I submarine hunters after the U.S., 22 Apache helicopter gunships built with India-specific requirements, several Chinook transport helicopters as well as C-17 Globemaster III heavy transport aircraft. But the outlook for future orders looks cloudy on account of an increasing push on foreign manufacturers to either set up base in India by themselves to produce a substantial proportion of the systems being purchased or initiate joint ventures with Indian companies with Indian employees and facilities.

Most of Boeing’s purchased were made under the previous military imports regulations which required an «offset», i.e ,for every weapon system being introduced via a foreign manufacturer, said manufacturer must set up a certain number of localized production-related facilities in India and must select a certain number of system or sub-system suppliers from among India’s high-tech enterprises. However, a key component of U.S. government policy is the leveraging of arms exports to maintain its industrial base and — through economies of scale — reduce costs to the U.S. armed forces. Thus, Boeing has been unable to comply with offsets under the previous law and faces difficulties in maintaining sizeable production work under the current law.

In contrast, Airbus has registered significant success recently: in a deal agreed upon in September 2021, the company secured the sale of 56 C-295 tactical transporters to the Indian military. After a outright import of 16 aircraft in fully-prepared condition, the company will be developing an entire industrial ecosystem – from manufacture, assembly, testing and qualification, to delivery and maintenance over the aircraft’s lifecycle – in a joint venture with its partner Tata Advanced Systems Limited (TASL). The company undoubtedly hopes to leverage this new industrial base to drive future sales of other aircraft and thus deepen market penetration.

In previous years, after a deal for 126 Rafale fighter jets by French company Dassault Aviation was watered down to 36 in «fly-away» condition by the Indian government, the French government – also a key stakeholder in Airbus – pitched a proposal to set up a completely indigenous production facility for manufacturing Rafales if the deal size was pushed up to 100. Additionally, French engine manufacturer Safran offered to modernise and co-develop the indigenous Kaveri engine. After 30 years of intensive work which resulted in nine full prototype engines, four core engines and strong capabilities developed in many critical technology domains, this engine was passed over to meet the changing requirements of the Indian Light Combat Aircraft program – which opted for General Electric engines instead. The French government guaranteed that Safran’s proposal will ensure the republic’s complete ‘sovereignty’ in aero-engine technology. Given how seriously both the Indian government and its billion-plus citizens take the notion of sovereignty, this is a very canny offer and, unsurprisingly, is in the final stages of discussion.

These sorts of innovative decision-making by European players (as well as Israeli companies) indicate why the likes of Boeing and UNAC are finding making inroads into this massive market so challenging. The latter, particularly, has floundered in effectively meeting the Indian government’s stringent requirements in areas such as quality, efficiency and timely delivery when it comes to new orders of next-generation aircraft (as opposed to upgrades and spares for Soviet-era acquisitions).

An order placed with Boeing to acquire six additional P8I aircraft in 2019 was cancelled earlier this year in favour of an indigenous platform based on locally-produced Airbus C-295.

The military market is a very complex place, thus making it difficult to take a call on which company will perform best in weapons sales all over the world. In India’s case, however, Airbus is increasingly stronger in terms of positioning over both Boeing and UNAC.

Ratios and Trends

With regard to fiscals, while the strong net cash position shown in a previous article might suggest that Boeing is in a strong position, this was more due to the fact that the reduction in orders on account of problems with the 737 Max had lowered expenses. This supposition is validated by the Price-to-Earnings (PE) Ratios seen for Boeing making it on par with UNAC. While Boeing’s Price-to-Sales (PS) Ratios led over Airbus for a while, both companies’ PS Ratios are now beginning to draw par. UNAC is a laggard in this metric.

Debt is not a huge concern given the sheer size of these companies. Nonetheless, in this metric, UNAC leads the pack, with Boeing being next (which is predominantly long-term debt). Airbus has also recently been packing on long-term debt as well (which now constitutes around 89% of its total debt).