India Looks To Encourage More Domestic MRO Activity.jpg Air India Engineering Services

India Gears Up For MRO Growth

With a growth rate of 10% forecast this year, India is expected to generate $1.4 billion in MRO demand in 2017.

Home to one of the world’s fastest MRO growth rates and a population in excess of one billion people, India has long been viewed with interest from MROs looking for a valuable gateway between the Middle East and Asia-Pacific.

Like China, India is often measured individually rather than encompassed with a whole region due to its sheer size and scale. According to Aviation Week Fleet and MRO Forecast data, the majority of demand from this year through to 2026 will come from airframe work, with a sizeable chunk coming from engine maintenance. This year alone, it is estimated by the same data that total MRO demand should hit $1.4 billion.

With a compound annual growth rate of 10% for this year, higher than China’s 8.6%, India has continued to attract the attention of international companies enticed by factors from cheaper labor costs to skills access.

In recent years, Boeing set up a joint venture facility with Air India’s MRO division in Nagpur, while SIA Engineering also established a partnership with the airline earlier this month for aftermarket services. These followed last year’s announcement that Airbus intended to set up an MRO technician and pilot training center in New Delhi with the capacity to prepare more than 8,000 pilots and 2,000 maintenance engineers over 10 years beginning in 2018.

However, despite the growth, India has long been viewed by some as a complex place to do business. Challenges regularly cited by analysts and businesses relate to regulation, heavy taxation and expensive infrastructure to operate in.

To remedy the taxation issues, the Modi government passed a series of tax reforms earlier in 2016 aimed at making India’s aviation aftermarket more competitive domestically. Relating to MRO, it set out to simplify business practices while lowering the cost of importing machine parts and equipment.

Bloomberg reported in August that domestic carriers were buoyed by these measures aimed at encouraging them to service their aircraft within India and reverse the trend of work being outsourced overseas.  

The taxation issue certainly resonates with MROs in the country. Speaking in the next issue of Inside MRO, H.R. Jagganath, CEO of Air India Engineering Services, cited issues around taxation as one of the key challenges facing the maintenance provider today. “High rates of taxes tend to destroy the competitive advantage of cheap manpower in India,” he says.

Air India’s maintenance arm has ambitious growth objectives. At present, Jagganath estimates around 15% to 18% of its activity is carried out for third-party customers. With lofty ambitions to grow this to 50% within the next five years, Jagganath says there are plans to service more overseas aircraft from regions such as the Middle East but some regulatory challenges are prevalent.

“Obtaining FAA and EASA approvals for the entire organization so that foreign aircraft can be serviced in India is a challenge,” he says. “At present only some facilities such as our engine shops at Delhi and Mumbai and some of the component facilities have these certifications.”

Specialist panel sessions related to Indian aviation will be held at MRO Asia-Pacific, taking place in Singapore from Oct. 31 to Nov. 2.

TAGS: Asia
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