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, New Delhi
Vipin K. Sharma, SBU Head MRO (E&C) Air India
Civil Aviation - India
14 Scheduled Carriers, operate about 430 aircraft. About 131 Holders. Non-Scheduled Permit
Total aircraft and helicopters registeredexceed1400
Growth of Air Travel in India
India will be the fastest growing country for air travel for the next 10 years. India
2010-2018 2019-2028 20-Year Growth 7.3% 2010-2018
2019-2028 20-Year Growth 4.8% 4.7%
Fleet 2011 4 .India .
Fleet will grow more than four-fold in next 20 years 5 .Aircraft Fleet – Expected Growth in India Fleet is expected to double in size over the next five to seven years.
20-Year Demand for 1300 aircraft in India ( assuming phase outs & conversions) 6 .
Aircraft Maintenance ( MRO) MRO is the third largest component (about 15%) of the operating cost of an airline after fuel and salaries. The MRO sector is typically divided into four major segments: Airframe Heavy Maintenance and Modifications Engine Maintenance Line Maintenance Component Maintenance 7 .
Engine Maintenance: The largest MRO segment. Remaining cost pertains to subcontract/ proprietary repairs. Engine maintenance comprises 35 % of total maintenance expenditure.MRO Heavy Maintenance : More than 65 %of the cost of heavy maintenance is labour. with labour accounting for 22 %. More than 60 % of the cost of engine maintenance is materials. 8 .
Issues cover minor and major aircraft inspections and repair / rectifications. Each component has its own value chain. Approximately 70 percent of component maintenance is generally outsourced by operators. Component Maintenance Comprises of several component types.MRO Line Maintenance: Mainly labour-intensive. based on complexity. 9 .
World MRO Market 10 .
there is a possibility of a shift towards the emerging market economies in the Asia Pacific region.World MRO Market While approximately 70 % of the MRO market is based in North America and Western Europe. 11 . almost 40 percent of air traffic will be to. Over the next 20 years. The most significant MRO growth will be witnessed in Asia. The air transport MRO market is expected to reach USD 61 billion by 2017. from or within the Asia Pacific region.
India as MRO Destination Business Drivers: Growth in air traffic Increasing fleet size Competitive manpower cost Government Initiatives Cost reduction initiatives by Airlines Available skilled and trained manpower 12 .
locational As per the recent report by the Aeronautical Society of India.India as MRO Destination India has the potential to be a global MRO destination due to continued growth. 13 . / regional economic industry. it is estimated that the MRO market would grow at the rate of 10% per annum from 1 billion USD to about 2.6 billion USD by the year 2020. liberalization of aviation globalization of MRO services. its advantage and the availability of talent.
India as MRO Destination Engine overhaul market comprises the largest component in the Indian MRO and is worth US$ 174 million and is expected to grow to US$ 490 million by 2014 India could become the MRO global hub by capitalizing upon: Manpower cost Availability of talent Locational advantages Untapped opportunity 14 .
Labour costs in India are around $30 to $35 per man-hour. compared to $55 to $60 in Southeast Asia and Middle East and even higher in the United States and Europe 15 .India as MRO Destination Manpower India has a large pool of technical manpower India has around 55 aircraft maintenance training schools.
16 . International carriers.India as MRO Destination Location Indian MRO companies can leverage India’s inherent geographic advantage of being between Europe and the Asia Pacific region. Domestic carriers can benefit from having MRO facilities within India’s borders. thereby leveraging cost opportunities. can have their aircraft serviced in India. This cuts the cost of sending their aircraft to other MROs abroad. who have been increasing their flight routes to India.
to reduce costs and on-ground time. 17 . MRO companies believe that this segment offers significant opportunity since demand for MRO activities / facilities is high.India as MRO Destination Un-tapped Opportunity Given the growth of Indian commercial & military transport aircraft. Growth of several low cost carriers in India. it is logical to build a MRO infrastructure to support current and future growth in the sector. has increased competitive pressure on the aircraft major operators who would prefer to have aircraft serviced locally.
India as MRO Destination Leasing has become a popular mode for aircraft acquisition in India. providing opportunity for MROs for maintenance and re-delivery checks. Growing numbers of non-scheduled operators and corporate companies owning aircraft would provide additional opportunity for MROs. 18 .
Air India and erstwhile Indian Airlines were the monopolistic airlines. After liberalization of civil aviation in India. the stage is now set for fullspectrum expansion of the industry. Both developed their own in-house MRO facilities mainly for the captive work load. private airlines also started developing MRO facilities. Contd. already exist in India. Currently. 19 . all four types of MROs. in some form.Current Scenerio of MRO in India Until 1990s.. limited & mainly catering to their captive work loads.
. 20 . LCCs in particular.Current Scenerio of MRO in India A worldwide trend for the airlines is to focus on their core business of transporting and to outsource their maintenance requirements to third-party providers. Contd. are more likely to outsource maintenance to an MRO rather than establishing their own engineering facilities.
Aircraft are flown to these destinations without passenger loads resulting in additional operational and fuel costs. Others and particularly LCCs have only line maintenance facilities. the Middle East and Europe.Current Scenerio of MRO in India Only Air India and Jet Airways have in-house MRO facility. Most of the line maintenance activities are carried out inhouse in India but majority of C and D checks ( Heavy Maintenance) are done outside India from service providers in other parts of Asia. 21 . The total outgoing MRO expenditure abroad each year is estimated to be 700 million USD.
New universal hydraulic component testing and other Fuel & Oil components servicing facilities . Contd. Wide Body MRO being established at Nagpur. Delhi. New airframe MRO with two–bay hangar at Shamshabad airport.New MRO initiatives in India By Air India CFM56 Engine MRO capability at JEOC. GE90 Engine MRO capability at Nagpur. 22 .. Honeywell APU 131-9A/B overhaul facility at Kolkata. ATR & CRJ aircraft MRO. Hyderabad.
Some of the ventures relating to MRO activities.New MRO initiatives in India Recognizing India’s locational and cost advantages. GMR Aerospace Engineering Company Taneja Aerospace & Aviation Max Aerospace & Aviation Limited 23 . foreign companies are bullish regarding India’s potential as an MRO hub and several alliances with local companies have been announced. are indicated below: Air India MRO Air Works India Engineering Pvt. Ltd.
MROs that are able to offer comprehensive portfolio of services will also attract work from overseas. and an overall lift to the economy.MRO Development in India Establishing MRO facilities in India will enable operators to achieve: Faster turnaround time. Decline of foreign exchange outflow. Savings in operating costs. 24 .. Contd. which will result in increased job opportunities.
MRO Development in India Cautious Approach While there is huge potential for growth of civil aircraft MRO in India.e.. strategies of cost control and demand & supply dynamics of the business without creating over capacity. MRO being a capital intensive sector with long gestation period. from under served sector to over served sector. 25 . Contd. investment should be made keeping in view the complexities of MRO business. there should not be a situation of over capacity i.
efforts have significantly progressed to harmonize with ICAO standards and international approvals -.for both FAA and EASA regulations.critically for the potential of doing work on leased aircraft -. 100% FDI in MRO business 26 .MRO Development in India Government Initiatives On the regulatory front.
Challenges High and multi-tier tax regime Restricted availability of land at major airports 27 .
. Contd.Taxes The complex and multi-tiered tax structure makes Indian MRO uncompetitive The high taxes make third party aircraft maintenance servicing more expensive than international rates in excess of 50 % due reasons indicated below: Service Tax of 10.5 % Octroi of 4 % at some airports. 28 .3 % Importing spares and equipment involves customs duty in the range of 3% to 50% VAT of 12.Challenges .
. the estimated servicing costs in India would be close to Rs 3 crore. High taxes offset any advantage that India gains in terms of labour cost.Taxes A major check on an Airbus A320 would cost around Rs 2 crore abroad. 29 Contd..Challenges . The effect would be much more on engine maintenance.
Challenges . Preferential land allotment by airport operators for facilitating the setting up MROs . 30 . Waiver of or lower rate of Mark-up / Royalty charges by airport operators.Land MRO service providers should be encouraged by establishing special economic zones (SEZs) by the Government.
Meeting the Challenges Tax framework needs rationalization. under tax reforms for MRO sector. 31 . Exemption from customs duty. MRO service providers should be encouraged by establishing special economic zones (SEZs) Preferential land allotment by airport operators for setting up MRO . Extending focused benefits similar to those extended to IT sector. GST. Waiver or lower rate of charging Mark-up/ Royalty by airport operators. VAT. Service Tax etc.
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