After fighting to gain a foothold for more than a decade, MRO expansion in India is finally happening—based on airlines’ projected growth and government incentives for investment.
Indian carriers now operate about 400 aircraft, but estimates indicate local airlines will receive 1,740 aircraft in the next 20 years.
“India’s current civilian MRO market size is estimated to be around $700 million. The market is expected to grow at 8% CAGR [compound annual growth rate] for the next 10 years to reach over $1.4 billion by 2025,” says Amber Dubey, partner and head of aerospace and defense at KPMG.
Sensing the intense demand, several MRO service providers and OEMs are scouting for places to set up facilities in India, and existing major players are upgrading their offerings to meet the growing demand.
On the back of its single biggest order from low-cost carrier IndiGo for 250 Airbus A320neo aircraft, “Airbus is exploring the possibilities of establishing an MRO unit in India,” says Dwarakanath Srinivasan, managing director of Airbus India. Including the current order, IndiGo has committed to 530 A320s, 100 of which have been delivered.
Airbus has a market share of about 70% in India, and more than 500 aircraft are scheduled to be delivered to local airlines.
“An MRO facility to cater to our aircraft will be in our interest. We are talking to our partners and other companies,” says Srinivasan, without elaborating on the time line or a possible partner for the facility.
Airbus already has ties with AirWorks of India to service a few of its airplanes that are flown by the new full-service Indian airline, Vistara.
Meanwhile, Boeing recently handed over to Air India an MRO facility in the western India town of Nagpur, which it had built as part of its offset commitments for airplanes bought by the national carrier.
The facility has two 100 X 100-meter (330 X 330-ft.) hangars that can accommodate widebody aircraft such as Boeing 777s and 747-800s; an approximately 24,000 sq.-meter (258,000-sq.-ft.) area is dedicated to backshop work. Each hangar can accommodate four widebody and six narrowbody aircraft at a time.
The Nagpur facility is Boeing’s second greenfield facility outside of the U.S. (Shanghai was the first) and it features solar power, a natural lighting system and a rainwater harvesting system.
Air India has 102 aircraft in its fleet—a mixture of Airbus and Boeing models.
The MRO facility will offer A checks (scheduled maintenance performed every 125 flight hours), B checks (detailed inspections of components and systems performed every 4-6 months) and C checks (extensive scrutiny of individual systems and components for serviceability and function conducted every 20-24 months).
The original agreement called for Boeing to set up and operate the MRO for Air India, but it will now be operated by Air India alone.
“We have now nothing to do with the MRO facility at Nagpur as we have handed over the facility to Air India under the 2005 agreement. The aviation regulator, the Directorate General of Civil Aviation (DGCA), has also given its approvals to the facility,” says Dinesh. A. Keskar, Boeing senior vice president for sales (commercial airplanes) for Asia-Pacific & India.
India has a relatively young fleet of commercial aircraft, with an average age of 5-7 years, resulting in limited heavy maintenance requirements. Going forward, as the fleet ages, the need for advanced checks is bound to increase.
But despite steady growth, the country has limited resources to cater to the increasing demand, and most of the players in the aviation sector must rely on MROs outside the country.
Indian MROs are mainly equipped for line maintenance. “We need to build more sophisticated facilities and [hone our workforce’s skills] to do the heavy maintenance work that is mostly outsourced now,” adds Dubey.
There are about 40 overseas MRO providers approved by the DGCA to conduct work on Indian-registered aircraft in locations such as Australia, China, France, Germany, Israel, Jordan, Malaysia, Romania, Singapore, Sri Lanka, United Arab Emirates (UAE) and the U.K.
“Almost 90% of the MRO jobs of Indian carriers go outside of India due to inadequate arrangement, lack of infrastructure and cumbersome regulatory policies in India,” says Dubey.
The federal government seems to have taken note of this and has finally realized the potential of this industry. The ministry of civil aviation has formulated an ambitious plan to develop India as an MRO hub by granting tax benefits and the easing of security protocols.
According to the new draft Civil Aviation Policy, the government is weighing the merits of exemptions such as customs duty, zero-rate service tax, and easy access for foreign pilots and technicians to help the MRO sector grow.
“Of the MRO business of Indian carriers, which stands at 50 billion rupees [about $760 million], 90% is currently being spent outside India in Malaysia, Singapore, Sri Lanka and the UAE, among others,” says Civil Aviation Secretary R.N. Choubey.
“Given our technology base, the government is keen to develop India as an MRO hub in Asia, [to attract] business from foreign airlines,” he says.
The policy proposes that tools and tool-kits imported for MRO use will be exempted from customs duty—and the DGCA will compile a list of these tools. The imported tools and parts that will be used for MRO purposes will be allowed to be stored for a period of three years, tax-free. “This will ensure economies of scale,” says Choubey.
The government also will hold discussions with airport operators to set airport royalties and additional levies on MRO service providers.
The policy is also designed to smooth the bureaucracy related to foreign carriers entering India. “Foreign aircraft brought into India for MRO will be allowed to stay up to a period of six months. However, the aircraft cannot be used for any kind of commercial activity, and for a tenure beyond six months, the carrier [must receive] permission from the DGCA,” he adds.
Visas will be given to foreign MRO specialists, especially in cases of aircraft-on-ground situations. Foreign pilots operating an aircraft to and from India for the purpose of servicing at an Indian MRO facility will be issued temporary landing permits, the government official says.
The sector is even open to international players because the government is now allowing 100% foreign direct investment in the MRO sector, which is enabling foreign entities to tap the potential of the market and expand their businesses in India.
In terms of MRO spending by value across different categories, engine overhaul remains the largest MRO market segment in India, with about 60%; airframe MRO accounts for 24%, and components service, 16%, according to a KPMG analysis.
“All that it needs is the continued intervention on the part of the government to create a congenial environment in the country to stem outgoing business and to arrest the flow of valuable young technical and engineering graduates from leaving the country,” says Pulak Sen, founder and general secretary of the MRO Association of India.
The country’s “Make in India” initiative provides a welcoming environment in which to establish a comprehensive in-country MRO base.
“A strong MRO industry is critical to the growth of the aviation sector in India. It produces employment, and revenue to the government [via taxes]. India has a huge potential to become a global MRO hub, thanks to its growing aircraft fleet size, strategic location, rich pool of engineering expertise and lower labor costs,” says Sen.