Page 11 - AAA JULY - AUGUST 2013 Online Magazine

FeATure ouTsourcing Mro

Understanding just what prevents India
from becoming a MRO or an aviation hub is
the need of the hour ... Though the mid- to
long-term fundamentals are robust, the
lack of infrastructure and facilities prevent
growth in the sector

despiTe exTensive debATe And from ground handling, and increasing
speculation as to whether India has the taxes on export of MRO work are
potential to develop as a Maintenance, some ways by which countries such as
Repair and Overhaul (MRO) hub in the Singapore, Brazil, UAE and Malaysia have
Asian region, the industry is not growing become major MRO hubs. By emulating
rapidly. It is, say observers, constrained these best practices, India can hope to
with no definite strategy for developing be the next MRO hub in one of the fastest
global standards of excellence that could growing regions,” notes Dubey.
attract business into the country. The airline fleet size in India is now
“Understanding just what prevents reaching a critical mass where it makes
India from becoming a MRO or an aviation sense to have a strong MRO industry, not
hub is the need of the hour,” says Amber just for the domestic fleet but also for
Dubey, a partner at auditor KPMG. “Though international airlines. Growth of MRO in
the mid- to long-term fundamentals are India is now a necessity rather than an
robust, the lack of infrastructure and option, says Dubey. On the plus side of
facilities prevent growth in the sector.” the account, India will have no dearth of
The MRO spend by airlines in India skilled manpower and has the advantage
currently is a significant US$800 million- of its good geographical position. The
plus, and is likely to grow to over US$1.5 potential is there.
billion by 2020, estimates indicate. But currently, over 70% of all critical
But locally speaking, India has only an checks on narrow-body aircraft in
insignificant 1% of the US$45 billion India are farmed out to international
global MRO market. About 15% of the destinations. Barring aircraft belonging
revenue of airlines in India is channelled to national carrier Air India and to a
towards maintenance; second only to certain level private airline Jet Airways,
the cost of carriers’ aviation fuel. Most most of the other carriers outsource their
of the airlines make their own engineers MRO requirements. IndiGo, the largest
carry out tarmac inspections, but work privare airliner, gets its MRO done at Sri
with third-party MROs for engine, heavy Lankan Engineering, in the neighbouring
maintenance and modifications. island nation of Sri Lanka, which is a
mere half-an-hour from India’s southern
Good prospects, poor results tip. Similarly, other low-cost carriers
There are several financial, legal and such as SpiceJet and GoAir have also
procedural limitations that are currently signed agreements with MROs outside
preventing the local MRO industry from India – but still within Asia – to provide
growing. In addition to taxation, the key a wide spectrum of cost-per-flight-hour
impediment to growth of airline MRO maintenance for their fleet of aircraft.
capacity is the lack of availability of hangar “Since MRO operators in India are
space at key international airports. laden with unfriendly custom duties and
“Removing fiscal disincentives (import other tax structures, it makes it cheaper
duty, value-added tax and service tax) on for airlines like ours to repair the aircraft
domestic MRO, delinking MRO services overseas rather than in India,” one
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