Purchase of Pilatus trainer aircraft deferred, future in limbo

Pilatus tells HAL to negotiate directly with sub-vendors for licences to use and maintain equipment

By Ajai Shukla

Business Standard, 30th Nov 2014

Last Saturday, the ministry of defence (MoD) postponed a decision on buying 106 PC-7 Mark II basic trainer aircraft from Swiss vendor, Pilatus, to supplement the fleet of 75 trainers already contracted for Swiss Francs 577 million (Rs 3,727 crore).

The defence ministry was not convinced by the IAF’s reasons for abandoning a 2009 decision to buy 75 trainers from the international market in the “Buy Global” category; while Hindustan Aeronautics Ltd (HAL) built 106 in the “Make Indian” category.

Now more reasons are emerging for being cautious about buying additional Pilatus trainers. It is unclear whether the IAF has informed the MoD of these.

With 53 PC-7 Mark II trainers already delivered and more on the way, Business Standard has learnt that Pilatus is shrugging off direct responsibility for their maintenance, repair and overhaul (MRO).

This after Pilatus charged the MoD 80.25 million Swiss Francs (Rs 515 crore) for maintenance knowhow to HAL in the contract signed on May 24, 2012. This so-called “Maintenance Transfer of Technology” (MToT) was to be formalised in a separate contract within three years.

With just six months left for that deadline, there is no contract in sight, only uncertainty about how the PC-7 Mark II trainers will operate over decades.

Pilatus has told HAL --- which will eventually maintain the PC-7 Mark II fleet through its service life after receiving maintenance technology --- to negotiate directly with sub-vendors for licenses to use and maintain their equipment.

Pilatus only assembles and integrates the trainer, using sub-systems bought from global vendors. That means HAL will now have to seek licenses from sub-vendors that include Pratt & Whitney; Honeywell Aerospace; Rockwell Collins; Claverham and Ontic.

Pilatus has flatly refused to be even a signatory to those licensing agreements.

According to Pilatus, the PC-7 Mark II has 159 sub-assemblies, which are called “line replaceable units” or LRUs (e.g. the engine supplied by Pratt & Whitney). The MToT contract drafted by Pilatus covers just 65 LRUs. Pilatus says 72 LRUs are non-repairable, which should just be thrown away when they go bad. Seven more LRUs are the responsibility of the IAF; while the remaining 15 items are on various countries’ “export control lists” and would have to be stocked in advance.

Pilatus wants HAL to negotiate individually with 29 global vendors that provide the 65 replaceable items. There is no telling what price they will demand. When Pilatus charged Swiss Francs 80.25 million for MToT, it did nothing to bind the sub-vendors to conform to this price.

With foreign vendors confident that the IAF has nowhere else to go, they are negotiating for fees much higher than had been budgeted.

Contacted for comments, Pilatus cited a confidentiality agreement with the MoD, but stated that, “suffice it to say that we are working on this diligently to achieve an acceptable outcome for the GOI and IAF. As Pilatus does not hold authority over the individual companies regarding licensing of other vendor IP rights, it is using its best endeavors to mediate between each company and HAL to reach an acceptable position.”

A key vendor, Honeywell, admits it is in “active discussion with HAL on this program” for a “licensing arrangement”. Another vendor, Rockwell Collins, declined to comment.

When the main contract was being negotiated, HAL had alerted the IAF to clearly list Pilatus’ maintenance responsibilities. However, with the IAF eager to seal the contract, Pilatus’s obligations remained vague.

Now the IAF itself is passing the buck to HAL. In emailed comments, the IAF stated, “The MToT of Pilatus was negotiated at contract negotiation stage by a team of HAL specialists headed by a GM level officer…  It will be a prudent to ask HAL as to why they have not signed the MToT contract with Pilatus.”

Within six months of the contract, Pilatus made it clear it would assume minimal responsibilities. On November 30, 2012, a draft contract from Pilatus proposed to confine MToT to facilities set up by HAL.

Pilatus repudiated responsibility for renewing original equipment manufacturer (OEM) licences, updating technical documents, software upgrades and maintenance of special tools and test equipment --- which are standard MToT components. For these India would require separate contracts at extra cost, over and above the 80.25 million Swiss Francs the main contract specified for MToT.

Under Pilatus’ draft contract, India will have to pay for establishing maintenance facilities like the Engine Test Bed. Pilatus would only provide the design.

According to established norms, aircraft acquisition contracts include aspects of maintenance, including details of initial repair kits, base spares, and licensing and escalation mechanisms for 30 years.

(This is the concluding part of a two-part series on the Pilatus trainer)