Taxes, Customs And 3D Printing Effects On MRO Expansion

Some countries’ regulations deter business, but Dubai is taking the opposite approach to attract aviation work.

Business leaders and economists have followed the ups and downs of the BRIC countries (Brazil, Russia, India and China) for more than a decade, expecting the four countries (then South Africa, too, which was added later) to become economic juggernauts.

As our cover story on the BRIC countries (see page MRO14) shows, air transportation in all four will be expanding—but the fleets in China and India exceed the growth rate of the other two—with China the biggest. Airlines in India have sought relief from high tax and duty fees imposed on spare parts and MRO services, with some relief recently gained, which could help their cost structure and expansion.

Brazil is the biggest Latin American aviation market and could be a very logical place to set up spares pools, but it has long been ostracized by foreigners due to difficult and lengthy customs procedures. Many aviation companies instead stock parts in Miami. But Brazilian carriers such as Gol and Azul know the system requirements and don’t have as many headaches. Interestingly, China’s HNA Group purchased a minority stake in Azul in 2015, the focus of our Airline Insight this month (see page MRO12)—bridging two of the BRICs. Companies exporting goods and services do need to grasp individual countries’ compliance rules, but you do have to wonder how much extremely stringent custom and tax burdens limit aviation’s growth.

Business deterrence is the opposite of how the CEO of Lufthansa Technik Middle East feels about operating in Dubai and in particular, Dubai South, a planned community around Al Maktoum International Airport. “The support we are getting and the aviation environment. . . we are in is very positive. You can see the results from how fast we’ve grown,” says Ziad Al Hazmi. “The various authorities—customs, licensing, approvals from different entities—work as business enablers,” he says.

The company moved to Dubai South’s Aviation District in May 2017—specifically the Aerospace Supply Chain section of the 7.2-km2 (18.6-mi.2) district—from Dubai Airport, where it started operations on Feb. 1, 2016. And it just signed a contract with Dubai South to double its facilities to enable more parts storage and component capabilities. “It’s a big step, especially for the region,” says Al Hazmi. Other Dubai South Aviation District MRO entities include GE Aviation, DC Aviation, Advanced Aerospace Industry  (second quarter 2018), Falcon (third quarter 2018) and STTS (first quarter 2019).

Tahnoon Saif, vice president of aviation, Dubai South, sees his role and the site as “an enabler” and partner of the industry. For example, he says one of its 2018 targets is to build a platform for 3D printing for the Aerospace Supply Chain cluster at Dubai South. “It would be like a printing shop,” in that it would take orders from its occupants and then use additive manufacturing to create the part. “Not everyone needs a printer, but they would like to use the service,” says Saif.

Given that the cost of the equipment is a barrier to entry for many companies that would like to use 3D, this is a great idea. A shared service—and business enabler for the community. 

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