Brendan Nelson Discusses Aviation Sector Outlook, India Expansion Plans |Global Dialogues |CNBC-TV18

Well, thank you for speaking to me, Shireen. It's a privilege to do so. I think in terms of context, firstly, something I didn't realize until I came to Boeing is that 80% of humanity has not yet flown, has not yet been on a plane. And when you look at the long-term future, providing we get to sustainable aviation—which is a priority for our company—the growth is enormous. We've been through this perfect storm, if you like, in terms of the aviation sector with the global pandemic and the devastating impact that it's had on the industry. That growth has rebounded extremely quickly, and in fact, in all of the markets, we are close to, if not in some cases exceeded, pre-COVID levels of air travel domestically certainly, and international aviation is running at about 80% of what it was pre-COVID. You've seen what's happened in China; President Xi changed the approach to COVID-19, and we've seen a very rapid increase in demand for domestic aviation in China, and it's anticipated that China will get to 65, perhaps even 80%, of pre-COVID by the end of 2023. So it's very much on the way back. And particularly for India, we're forecasting that over the next 20 years, India will need about 2,200 more aircraft for its commercial fleet, and that's a conservative estimate. So the growth is very significant.

Well, certainly we face challenges. For Boeing last year, we had 800 orders, and we'll be working hard to support our customers throughout the world, including in India. Many of them are going through fleet renewals as a way of increasing their sustainability, reducing their greenhouse gas emissions, modernizing fleets, and achieving much more efficient operations. We clearly face supply chain constraints at the moment, as do many industries, and we've been working hard to have our teams working with our suppliers. We're looking at bringing new suppliers that we may not have used in the past into our supply chains. We're also very focused on what we call our safety inventory—the amount of inventory that we have as a reserve—and building up those reserves, essentially doing everything we can to keep our supply chains going. One of the things that's really important is that we make sure that our production rates are able to be supplied confidently by the supply chains to make sure that we get production right, that we deliver what we promise to deliver, and when we say that we will do it. We're confident that we'll be able to meet the expectations of our customers in the near term. The supply chain issues will continue to challenge the industry at least for the next one, perhaps two, years.

Well, there are a range of things that are in constrained supply at the moment. Engine manufacturers are challenged in meeting the demands of the aircraft manufacturers, including us, as well as electrical components and of course computer chips. Nonetheless, we're managing our supply chain issues, I think, very effectively. India is extraordinarily important. India, of course, is an emerging superpower, a vibrant democracy, and it is now the most populous country in the world. At Boeing, we have 5,000 Indians employed by Boeing in India. We've got 300 suppliers in our supply chain in India at the moment. We invest $1 billion US a year with those suppliers, and that has a multiplier effect of supporting around 14,000 Indians in looking at furthering our supply chains. You're absolutely right, Shireen. We're very focused on India, and you'll see in the near and medium term we'll be making further announcements about our suppliers who come from India supporting our international supply chain. We've currently got 2,200 international suppliers in 58 countries, and India is very much a growth priority for Boeing and will receive further investment from our company in a number of areas, supporting not just commercial aviation but also the defense sector. We'll be supporting manufacturing and also skills growth. I should have said earlier, by the way, Shireen, that in terms of growing the aviation sector in India, those 2,200 planes or thereabouts will require about 100,000 Indians—pilots, crews, engineers, technicians, mechanics—a whole range of people. We'll be investing also in skilling up the Indian population to support aviation growth in this country.

Well, there's not a lot specifically that I'm able to announce to you at the moment. We will be making some announcements at Aero India about our further footprint. We'll also be making some further announcements following some commercial negotiations that we have been involved with. We'll make further announcements about expansion of the supply chain once our teams have completed consultations and reviews in India itself. But I can only reassure you that our workforce in India, our direct workforce, is certainly going to grow from its current 5,000, and our suppliers will be increasing from the 300 that it currently is.

Well, at this stage, Shireen, there's not a lot that I am able to say about the detail of Air India. We work very closely with all of our customers, including Air India. I would say to you though that the Tata Group acquiring Air India is good for the Tata Group, good for Air India, but most importantly it's good for the nation of India itself. The Tata Group has a track record of ethical performance, of delivering outcomes for India, and their ownership of Air India is good for the nation. We will work very closely with Air India and all of the carriers across India to support them and to provide them with whatever they need from the Boeing company. At this stage, I can't say much more than that.

Well, obviously, as you would expect, Shireen, we would like to provide as many aircraft as is possible and considered necessary by Indian carriers. Those decisions are entirely in the hands of the Indian aircraft industry and our customers. But we have an extraordinarily impressive range of commercial aircraft which we offer and support. If you are an airline and you're going into a long-term relationship with a company, Boeing is a company that will certainly support, deliver, and maintain aircraft in a way that our customers' customers expect. The availability of the aircraft is outstanding, and we expect to have a significant slice of that growing market. That's one of the reasons why we're increasing our investment in India and employing Indians. We believe in India, and we want to support it in every way that we possibly can.

Well, we support Prime Minister Modi's vision for India, Made in India for India and for the world. At this stage, as I'm speaking to you, there are 154 Boeing commercial aircraft in operation. We've delivered 22 Apache helicopters to India, 15 Chinook helicopters, 12 P-8 Poseidon aircraft, and 11 C-17s, as well as Triple 7s and 737s for the VIP fleet. Those platforms require sustainment and support, and we've invested in support of those. We also have other platforms which we have offered and are offering to the Indian government, including our Block 3 Super Hornets, and we have autonomous vehicles, aircraft, and some weapon systems which we will also be offering to the Indian government. India has the third largest defense force in the world, and quite rightly, the decisions that are made by India are entirely a matter for India itself. But we're confident in what we've got to offer. The joint venture that we have with the Tata Group in Hyderabad is an example of what I think the future is going to be with Boeing co-investing with Indian companies in the development of products for India and, as I say, for the rest of the world. We have built nearly 200 Apache helicopter fuselages in Hyderabad. In fact, the first one delivered in January to the Indian Army—or has been produced for the Indian Army—which is an illustration of what we're doing. We invested $100 million in developing the technology necessary there to build vertical fins for 737s, and we're doing nose cones and tail cones for Chinook helicopters, and tail cones for P-8s. This is the kind of co-investment that's important not just for us and our business strategy but also for India itself, and that's a win-win. I should also say, of course, that we've spent $200 million on a 43-acre site to develop the Boeing India Engineering and Technology Center, which is an extraordinary capability that will house some 4,000 Indian engineers. So we're very pleased.

Well, we will be and are exploring further opportunities for co-development in India that meet the needs of India and of Boeing. I can't be too specific about them at the moment for reasons I hope you would appreciate. We currently have about $1 billion in exports from India that we have produced here, and we anticipate that that is going to grow. It's going to grow firstly because as a company we believe in India and supporting India itself. We also know that that's an important part of the decision-making process that the Indian government quite rightly makes when it's making decisions about procurement—what it's going to buy. We also know that as a consequence of the geopolitical tensions that we have in the world, nations are increasing their investment in defense, which means that us and companies like us that produce and provide defense platforms and services will be selling more of them to these countries, and that means more of what we make in India is going to be exported to the rest of the world. So in that sense, that's a good story for India and a good story for Boeing.

What's extraordinarily important, Shireen, is that all of us—no matter what you do, where you live, what industry you're in—we have to cater for the needs of our generation whilst protecting the capacity of the next and subsequent generations to cater for theirs. We have to be sustainable. Aviation is 2.6% of global greenhouse gas emissions, about 12% of that in the transport sector. So for Boeing, at every part of what we do—in our manufacturing plants, our assembly facilities, the management of waste, water, energy, recycling, all of those things—we aim to reduce our footprint to zero. Our ambition is to get to net zero in aviation by 2050. So what you're seeing at the moment is fleet renewals by airline carriers because the quickest way to reduce your greenhouse gas footprint is to purchase new aircraft. A 737 MAX 8, for example, will reduce your footprint by about 25%, a 787 by about 20%. Sustainable aviation fuels are certainly in the near, medium, and long term for long haul especially, the solution for decarbonizing. So we're investing very heavily in various facilities around the world and partnering with other companies in the development and production of sustainable aviation fuels, or SAF, as it is called. In the near term, that is the quickest way, apart from fleet renewal, to get to zero emissions. We're also working on electrification, which will certainly come in the near term for smaller aircraft on shorter flights, turbo props. And of course, we're working on hydrogen, but hydrogen is not going to be the solution for commercial aviation in the near or medium term. In fact, The Economist last year described hydrogen for medium and long haul flights as a techno fantasy for the next few decades. But we're working on all three of those ways of decarbonizing aviation, as well as the complete life cycle of aircraft themselves. So it informs everything that we do, and we have an immense responsibility to decarbonize as quickly as we can. Our ambition is to be at net zero by 2050. That's the commitment of the entire aviation industry and certainly of Boeing.

The decision to certify the 737-10 and other platforms is entirely a matter for the regulators themselves. We're working very closely with the regulators in getting the aircraft certified as soon as they safely, practically, and confidently can. I'd also say on the financial front, for those who follow our financial performance, last year we were back to $66.6 billion in revenue and free cash flow of $3.1 billion. We advised at our investor conference in November last year that we expect in 2025-2026 to have about $100 billion in revenue, an operating margin of about 10%, and $10 billion in free cash flow. As I said earlier, we had 800 orders last year. We are very confident that we're very much on the right track and have significant growth ahead of us. But we still have a lot of hard work to do, and we're making sure that we earn the confidence of our customers and the traveling public.

Thank you, Shireen, and I will be back.