Airbus is contemplating the establishment of a final assembly line (FAL) in India for its ATR regional aircraft, a move spurred by the Modi government's aggressive drive to bolster aerial connectivity across smaller towns and cities, reported TOI.

This would mark a significant expansion for the European aerospace giant, which already operates two FALs in the country in partnership with TATA Advanced Systems Limited (TASL)—one for the C295 military transport aircraft in Vadodara and another for the H125 commercial helicopter in Karnataka.

The ATR, a turboprop jointly owned by Airbus and Leonardo with up to 78 seats, boasts a strong foothold in India. IndiGo, the nation's largest airline, flies 50 of these aircraft, while Goa-based FLY91 operates a fleet of six, set to double this year.

Airbus's existing supply chain in India further strengthens the case, with Bangalore's Dynamatic Technologies producing A220 family doors and TASL manufacturing bulk and cargo doors for the A320 family.

This development follows the government's recent approval of a revamped Regional Connectivity Scheme (RCS) on Wednesday, extending it for a decade with a ₹28,840 crore outlay. The scheme aims to upgrade 100 airstrips into full-fledged airports and provide subsidies for RCS routes, addressing the limitations of the original three-year plan launched in 2016.

Airbus is evaluating two key factors for the ATR FAL's viability. First, high operating costs for airlines in India, driven by jet fuel prices, airport fees, and navigation charges, must be mitigated to ensure sustainability once RCS viability gap funding ends. Sources emphasise that airlines need a robust cost structure for long-term operations on regional routes.

Second, acquisition costs for airlines remain a hurdle. Airbus aims to slash these through greater indigenisation of components in India, potentially paving the way for the FAL. The government is eager for this step, given Airbus's massive orders from IndiGo—the world's top A320 family operator—and the Air India Group, totalling around 1,300 aircraft worth billions.

Pilot training costs add another layer of complexity. Type rating for smaller aircraft like the ATR and Embraer exceeds those for Boeing 737s or Airbus A320s, posing challenges for Indian operators and trainee pilots. Resolving this is essential to spur regional aircraft adoption.

The proposal echoes Embraer's recent announcement of an FAL with the Adani Group, contingent on securing 200 firm orders. Airbus India and South Asia president and MD Juergen Westermeier discussed the ATR FAL with Union aviation minister Ram Mohan Naidu on Tuesday, focusing on local manufacturing and component sourcing in line with the 'Make in India' vision, as the minister noted on X.

Sources indicate Airbus could announce the FAL imminently if consultations confirm its feasibility. Notably, the company established the H125 FAL without prior orders, and any ATR announcement is expected to be unconditional, not tied to future Indian purchases. Local production of ATR or Embraer aircraft would further benefit from planned government fiscal incentives, lowering ownership costs for operators.

This regional push aligns with India's aviation boom, following explosive domestic growth. Airbus anticipates international travel and enhanced regional links as the next catalysts, positioning an Indian ATR FAL as a strategic bet on sustained demand.

TOI