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For the Third Time, India Restarts Aerial Tanker Competition

RAAF KC-30 & RSAF(?) F-16s

RAAF A330-MRTT
(click to view full)

July 1/19: Refueling Aircraft to participate in Exercise According to local reports, the Indian Air Force will be participating in its biggest joint air exercise of 2019 with the French Air Force at France from July 1 to 14. The French Embassy in New Delhi said that the Garuda-VI exercise is a tactical Indo-French exercise aimed at enhancing the interoperability level of the French and Indian crews in air defense and ground attack missions as part of the Indo-Pacific cooperation between the two countries. The exercise is alternately held in France and India. The Indian Air Force contingent comprises of 120 air-warriors and four Sukhoi 30 MKI along with an IL-78 flight refueling aircraft.

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Air India A330 (click to view full) By the early 2000s, India’s Air Force was expressing interest in buying modern aerial tankers, AWACS radar planes, maritime patrol aircraft, and other long-range, high-value aircraft. Things always take a longer time than they should in India, but the IAF is moving ahead on all fronts. IL-76TD based A-50EI Phalcon AWACS radar aircraft are arriving from Israel, as are has ordered Lockheed Martin’s C-130J-30 Hercules transports for its special forces and Boeing’s 737-derived P-8i Neptune for maritime patrol. A project is underway to develop a mid-size AWACS aircraft, and a competition will select a similar-sized maritime patrol plane to complement the new P-8is. Aerial tankers enhance the capability of nearly every aircraft in this set, along with India’s fighter fleet. The IAF already operates Russian IL-76 transports, and 6 or 7 related IL-78MK “Midas” aerial tankers, but that won’t be enough. As the Indian Air Force inducts new high-value aircraft, the need for aerial refueling tankers grows along with them. In response, the IAF plans to buy another 6 aerial tankers. In order to add to its fleet, however, the IAF must first overcome India’s bureaucracy. India’s New Tankers: Enter Airbus IL-78MK with […]

Air India A330 (leased)

Air India A330
(click to view full)

By the early 2000s, India’s Air Force was expressing interest in buying modern aerial tankers, AWACS radar planes, maritime patrol aircraft, and other long-range, high-value aircraft. Things always take a longer time than they should in India, but the IAF is moving ahead on all fronts. IL-76TD based A-50EI Phalcon AWACS radar aircraft are arriving from Israel, as are has ordered Lockheed Martin’s C-130J-30 Hercules transports for its special forces and Boeing’s 737-derived P-8i Neptune for maritime patrol. A project is underway to develop a mid-size AWACS aircraft, and a competition will select a similar-sized maritime patrol plane to complement the new P-8is.

Aerial tankers enhance the capability of nearly every aircraft in this set, along with India’s fighter fleet. The IAF already operates Russian IL-76 transports, and 6 or 7 related IL-78MK “Midas” aerial tankers, but that won’t be enough. As the Indian Air Force inducts new high-value aircraft, the need for aerial refueling tankers grows along with them. In response, the IAF plans to buy another 6 aerial tankers. In order to add to its fleet, however, the IAF must first overcome India’s bureaucracy.

India’s New Tankers: Enter Airbus

IL-78 Refuels SU-30MKIs Side

IL-78MK with SU-30MKIs
(click to expand)

Despite the IL-76 family’s strong position within the IAF as transport and aerial tanker planes, and an attractive price tag of well under $100 million for the base aircraft, May 2009 reports from India indicated that Russia’s position as India’s top arms exporter was about to take another blow.

Airbus’ A330 Multi-Role Tanker/Transport (MRTT), which had won the initial KC-X tanker competition in the USA, was reportedly about to win a EUR 1 billion order for 6 Indian aerial tankers. If so, India’s aerial tanker fleet would double to a mixed group of 12, while the A330 MRTT’s confirmed customer base would expand to include Australia, Britain, India, Saudi Arabia, and the UAE.

The A330’s is a much more expensive base airplane, with commercial costs reported at over $150 million. Its other drawback is its lack of commonality with the IAF’s existing fleet, which creates additional burdens for maintenance and spares. On the other hand, commonality is not an insuperable barrier. Air India already operates the A330, and other buyers have leveraged their national airlines’ experience. Australia, for example, hired Quantas as its “KC-30B” maintenance provider, creating a global maintenance network. Given the historically poor performance of Russian suppliers, and India’s expectation that it would deploy its forces abroad more often in the coming years, that kind of maintenance arrangement was attractive to the IAF. The A330 would also offer them a more modern platform and engines, with good fuel economy and an advanced refueling system.

The problem was India’s Finance Ministry. They refused to approve the IAF’s choice, on the grounds that the A330 was not the lowest-cost option. The government gave up, and canceled the initial tender in January 2010.

The IAF’s need for more aerial tankers didn’t change, but its tactics did. A v2.0 RFP was released in September 2010: the IAF’s goal remains a buy of up to 6 more aerial tankers, with a budget of up to $2 billion. Besides an increased budget, the big difference this time is that the IAF has added lifetime operating costs into the equation.

RAAF KC-30 & RSAF(?) F-16s

RAAF A330-MRTT/ KC-30B
(click to view full)

Boeing’s KC-767 is smaller than the A330, and reportedly offers even more economical long-term operating costs, but it was not bid. That left Round 2 as a re-match between the same 2 competitors: IL-78MK vs. A330 MRTT.

India’s military believes that their RFP v2.0 changes will make the A330 cheaper to buy over the long-term, even if it’s more expensive in the short term. A design optimized for high-altitude cruise instead of short takeoffs with heavy loads, fitted with western avionics and engines, and having commonality with existing Indian airline fleets, may indeed be able to win on lifetime cost. After all, India knows the IL-78’s operating costs. If Airbus figures show a total cost crossover at some point within a reasonable service lifetime, it’s a simple matter of setting the RFP’s calculation time frame accordingly, in order to get the aircraft you wanted in the first place.

Will that work? The answer may depend on how much extra margin was built into the service lifetime assumptions. Boeing’s KC-X win showed that an unprofitable bid can upset standard calculations, and India’s procurement system has been vulnerable to Russia’s “lowball, then renegotiate” tactics in the past.

Contracts and Key Events

Indian flag

July 1/19: Refueling Aircraft to participate in Exercise According to local reports, the Indian Air Force will be participating in its biggest joint air exercise of 2019 with the French Air Force at France from July 1 to 14. The French Embassy in New Delhi said that the Garuda-VI exercise is a tactical Indo-French exercise aimed at enhancing the interoperability level of the French and Indian crews in air defense and ground attack missions as part of the Indo-Pacific cooperation between the two countries. The exercise is alternately held in France and India. The Indian Air Force contingent comprises of 120 air-warriors and four Sukhoi 30 MKI along with an IL-78 flight refueling aircraft.

January 29/18: Competition Restart For the third time in seven years, India has issued a Request for Information (RFI) for the purchase of six aerial refueling tankers. Issued on January 25, the new procurement hopes to overcome pricing issues which have befallen the previous acquisition attempts, and will include necessary training and associated equipment. Previous entrants into the competition include the Airbus A330 multi-role tanker transport (MRTT) and Ilyushin’s Il-78. At present, India operates six IL-78 tankers that were purchased in the 2003-2004 Fiscal Year, however, improper storage and maintenance over the years has adversely effected their serviceability and life, and the aircraft continue to fly with vintage 1985 avionics.

February 14/17: India’s state-run Defence Research & Development Organisation (DRDO) is seeking permission to buy six A330s from Airbus and convert them into early warning radar platforms. The deal is currently before the Cabinet Committee on Security and once clearances are given, the DRDO claim they can have the indigenously-built Airborne Warning and Control Systems (AWACS) integrated on the first aircraft and delivered to the Indian Air Force within seven years. The IAF has also recently inducted an indigenous AWACS platform on a Brazilian-made Embraer-145 aircraft.

July 29/16: The Indian government has backtracked on a plan to procure six A330 multi-role tanker transport (MRTT) aircraft for the Indian Air Force. This marks the second time that India has scrapped the aircraft’s tender which is estimated at $2 billion. But Airbus, already in the midst of financial hits due to its A400M transporter, seems to be remaining confident with an official saying the company “will engage with the Indian government in finding a way to bring the A330 MRTT’s capabilities to the IAF.”

March 8/16: Airbus plans to generate $2 billion in procurement under the “Make In India” initiative between now and 2020. The statement comes as the company’s Indian suppliers and partners generated over $500 million worth of aero-structures, components, materials, and services in India during 2015, which represented a 15% growth over the previous year. Over 45 suppliers, both private and public, have employed more than 6,000 people to contribute toward most of Airbus’ leading platforms, including the A380, A350 XWB, A320 Family, A330, C295W, A400M, Eurofighter, Tiger, and NH90. The company hopes that its willingness to engage in the “Make In India” program will put it in the running for India’s plans for a indigenous fighter.

January 26/16: Delays in the approval of six Airbus MRTT tankers has given to a rise in tensions between Indian Air Force brass and the Defense Ministry. The former has grown frustrated with the ministry’s lack of decision regarding the acquisition which is said to be worth $2 billion. The IAF, citing the urgency to quickly induct any new tankers into the air force, want either the purchase to be confirmed or a new competition to be announced and quickly processed. With the manufacturer’s headquarters stationed in Toulouse, the visit of French President Hollande may be cause for the renewed sense of urgency. But with the Dassault’s sale of Rafale fighters going nowhere fast, the tanker procurement might not go as quickly as the air force wants.

March 5/14: Singapore. Singapore picks the A330-MRTT as their aerial refueling platform and signs a contract for 6 planes, joining Australia as regional operators. Airbus also discusses Indian negotiations, which they still describe as being “in the final stages of contractual negotiations” for 6 aircraft.” MINDEF cyberpioneer, “Dr Ng showcases SAF 2030 at budget debate” | Airbus Military, “Singapore selects Airbus Defence and Space A330 MRTT Multi Role Tanker Transport” | Flight Global, “Singapore confirms A330 MRTT buy”.

Feb 25/14: Airbus officials tell Flight International that they’re “in the final stages of negotiations and down to the fine contractual details,” and have extended their bid terms to July 2014 at the request of the Indian government. National elections is coming by May 2014, which means another extension will almost certainly be needed.

India is yet to finalize its choice of A330 engine, which they’ve set up as a separate acquisition. In practice, that’s between GE’s CF6-80E1A3 or the Rolls-Royce Trent 772B. Pratt and Whitney’s PW-4168A exists in theory, but India would be the 1st to pick it if they do. Sources: “Airbus Military extends India A330 MRTT bid until July”.

Jan 9/14: Progress on the MRTT has been delayed by the death of the senior acquisition official, but meetings have been scheduled for mid-January 2014, according to “an informed source close to the program” who adds that “This contract has no political overtones or baggage attached to it.” Which makes it possible to imagine an actual contract, if it can fit into a budget that has been reduced for the 2nd year in a row. Sources: AIN, “India May Close Interim MMRCA Deal Soon – Plus MRTT”.

Jan 11/13: Airbus Military confirms they have been selected as the preferred bidder. After further negotiations to flesh out details, they expect a final production contract later this year.

Jan 4/13: A330 reportedly L-1. The Times of India quotes unnamed Ministry of Defence sources who say that the Airbus A330 MRTT was indeed L-1, the lowest cost offer when lifetime operating costs are accounted for.

“Defence ministry sources on Thursday said the European Aeronautics Defence and Space Company (EADS) “is now being called for the final commercial negotiations” for acquisition of six Airbus-330 MRTT…. The actual contract will be inked in the 2013-14 financial year since commercial negotiations with EADS will take some time. Moreover, there has been a massive cut (Rs 10,000 crore) in the defence capital budget for the ongoing fiscal…. the four-engine IL-78 and the two-engine Airbus-330 had passed the extensive field evaluation trials conducted by IAF but the latter emerged the cheaper option in the subsequent commercial evaluation…. “Four to five years have been lost. IAF could have got the Airbus-330 MRTT much earlier and at a cheaper cost,” said the source.”

The note about capital acquisition cuts is actually the bigger story. India has many major programs underway at the same time, and cost has been notably absent from the criteria for some of its most expensive buys. If ambition is forced to meet fiscal reality in the next few years, the collision could be messy.

Airbus picked, again

March 21/12: India’s PTI reports that there is no change to the basic situation, though Airbus thinks the final total may be more than 6 aerial tankers after follow-on buys:

“Flight trials were concluded by the end of last year. So the ball is now back in the court of Indian authorities,” Ian Elliott, Vice President, Defence Capability Marketing, Airbus told reporters… Talking about the requirement placed by the IAF, he said, “Requirement is of six tankers. But it is the initial stage of the competition and that number can probably go up because of the nature of the requirement in this part of the world.”

Jan 2/12: Rediff reports that the IAF has finished trial reports for the Airbus A330 MRTT and Ilyushin IL-78 Midas aerial tankers, following July 2011 trials in Spain (Airbus) and Russia (Ilyushin), as well as earlier trials at India’s Gwailor AB. Rediff | UPI.

Nov 28/11: Defence Minister Antony responds to a Parliamentary inquiry by saying that:

“Indian Air Force is processing a case for procurement of six Air to Air Re-fuellers from the global market. The Defence Procurement Procedure envisages a timeline of about two and a half years from the date of issue-of RFP to conclusion of contract in such multi-vendor cases. The delivery schedule is expected to be between 36 to 51 months from the date of signing the contract.”

In other words, India won’t see its new aerial tankers for another 4-5 years, and possibly much longer. By this time, Boeing’s 767-based KC-46A had won the American KC-X competition, removing uncertainties and ensuring production for many years to come.

KC-46A & F-35

KC-46A concept
(click to view full)

Feb 24/11: Boeing 767 for American KC-X. The KC-46A win surprises many aerospace analysts, who expected an EADS win based on leaks that EADS had scored better in the USAF’s models, and expectations they could price their planes lower. That expectation proved untrue, for 2 reasons.

One was an unprofitable bid by Boeing, who bid $20.6 billion vs. EADS $22.6 billion to develop and build the initial planes. The other had to do with changes to the KC-X v2.0 formula. These are adjusted prices. Rep. Norm Dicks [D-WA], for example, claims credit for successful pressure to change the USAF’s costing model from 25 years of expected fuel costs to 40 years, which he boasts cost Airbus “billions of dollars” in the respective calculations.

This decision has implications for India, on a couple of fronts. One is that it removes all production uncertainty for a KC-767, if Boeing wishes to change its mind and bid. The other is the insight it provides into the ways that RFP construction and bids can interact, in a competition of this type.

Jan 20/11: Reports indicate that the EADS A330 MRTT will face off once again against Russia’s IL-78, for India’s aerial refueling contract. IAI Bedek offered to convert a used Boeing 767-300 MMTT the way they did for Colombia, carrying the same IAI refueling system used on the IL-78s, but India insisted on new-build aircraft. On the new-build front, Boeing itself did not submit a KC-767 bid, and indeed made an active decision not to bid. Boeing DSS India VP Vivek Lall told reporters that:

“Only upon the outcome of the [American] KC-X competition will we be able to fully determine our ability to participate in future international competitions.”

Without a KC-767 order from the USAF, Boeing will close the 767 production line, in favor of putting resources into 777 and 787 production. If so, it would leave Japan (4 AWACS, 4 KC-767), Italy (4 KC-767), and Colombia (IAI 767-MMTT) as the only 767 military operators, alongside the world’s large civilian fleets. See: Defense Update | DNA India | Flight International | RIA Novosti | Seattle Post-Intelligencer.

September 2010: India’s Air Force issues a revised aerial tanker RFP.

Jan 6/10: DNA India reports that India’s government has canceled the proposed program, after the Ministry of Finance insisted on “L1 norms” where the cheapest item that satisfies the criteria must be bought.

That means the IL-78, but the Indian Air Force had justified their A330-MRTT choice in a detailed written reply, based on superior technology, competitive through-life costs, and the ability to service it in India. That last provision would help to avoid the dismal in-service readiness record of Russian equipment, which generally has to be shipped to Russia and back if anything significant goes wrong. An IAF officer told DNA:

“For every bit of sophistication, we have to pay a price, and that makes a huge difference in the battlefield… It would take us a few years now to select a tanker, unless they force us to buy the Russian tanker.”

The reason it would take years is because the tender would have to be started over again from the beginning, with criteria set up to exclude the IL-78 and favor the A330. This would achieve the same effect as complying with the IAF’s stated preferences, just force the service to jump through far more bureaucratic hoops before getting the aircraft it wants.

Dec 14/09: Reports surface that India’s mid-air refueling program may be canceled and rebid, following September 2009 objections from the Ministry of Finance over procedural maters, and the selection of Airbus over Russia’s IL-78. Brahmand Defence & Aerospace News | Indian Express | Defense News.

May 28/09: Pravda reports that India rejected the IL-78s because of they didn’t meet stated requisitions, but adds that Russia’s poor performance with spare parts supplies and after-sales service also played a role.

May 25/09: The Hindustan Times adds more fuel to the fire:

“In an exclusive interview to HT, IAF chief Air Chief Marshal Fali Homi Major said, “We have finished all evaluations and selected the A330 MRTT. The deal will come up for final approval by the Cabinet Committee on Security (CCS) very soon. The Russian platform did not meet certain requirements.”

The report places the deal’s value at 48,000 crore, which would be INR 480 billion or $10.1 billion. It’s very likely that this is a typographical error. The actual value for a purchase of this type should be closer to $1 billion, a figure that was also used in the article.

Jan 4/09: India Defence reports that the IL-78 may be set to lose the IAF’s follow-on order. That order’s value is reported as EUR 1 billion, or about $1.3 billion at the time.

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