Bangalore: European passenger plane maker Airbus SAS will move 20% of its engineering and design activities to low-cost countries, a majority of it to India, by 2012 to bring down the cost of making planes and be able to compete better against its main rival Boeing Co.

Airbus has a 120-people engineering centre in Bangalore, which will grow to 400 employees by 2012.

It outsources work to around 20 Indian information technology and engineering service providers, including Infosys Technologies Ltd, Satyam Computer Services Ltd (now owned by Tech Mahindra Ltd), Quality Engineering and Software Technologies Pvt. Ltd (Quest) and HCL Technologies Ltd.

Cutting costs: An Airbus A380 plane at the Indira Gandhi International Airport in New Delhi. Airbus has asked its top suppliers such as aero engine maker Snecma to move work to India to drive down costs. Ramesh Pathania / Mint

Airbus will increase the work it outsources to Indian firms to save as much as 40% of costs, he said.

Airbus has also directed its top suppliers such as aero engine maker Snecma SA to move work to India to drive down costs, either by setting up captive centres or working with local suppliers.

"“They have price reduction target(s) every year," said Safouret.

Airbus has centres in China and Russia as well, but a majority of the work will be done out of India, he added.

India is the fastest growing market for Airbus, with 68% of its future plane orders coming from the country.

In 2006, European Aeronautic Defence and Space Co., or EADS, the parent company of Airbus, committed investments of €2 billion (Rs13,700 crore) in India over 15 years, including for the Airbus engineering centre.

EADS spends about €2 billion per year on engineering services like research, modelling, flight physics and aircraft design, it said in a statement in May 2008.

Safouret declined to specify Airbus’ budget for engineering services. The firm’s Indian unit builds flight management systems and models to test aircraft parts and systems virtually before production.

Boeing too has increased the work it outsources to Indian firms.

In December 2007, Boeing signed a 10-year $1 billion (Rs4,650 crore) manufacturing contract with Hindustan Aeronautics Ltd for making subsystems for its fighter planes such as F-18 Super Hornets and Apache helicopters.