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Air India to fly solo for airframe MRO

by August 16, 2016 General

About six months after inviting expression of interest (EoI) from private players for operating and managing the airframe branch of its maintenance, repair and overhaul (MRO) facility at Mihan in Nagpur, national carrier Air India has now decided to operate it on its own.

The company now thinks that it can do the job better than the private players.

“We will be running it on our own and can do it better than any private player as we have decades of experience,” said a senior executive at Air India Engineering Services Ltd, a subsidiary of national carrier Air India during an interaction with dna.

The company had in February issued a public advertisement stating, “Expression of interest from interested parties having technical/ financial capabilities for operating and managing Air India’s Air Frame MRO which is already set up in Nagpur and functional on a revenue-sharing basis or any other viable business proposal.”

The MRO was set up by aircraft manufacturing giant Boeing at a cost of over Rs 600 crore as part of its memorandum of understanding with Air India in bargain for purchasing of over 100 aircraft in 2006. However, the MRO project at the special economic zone of Mihan in Nagpur got delayed for several reasons including land acquisition. Boeing has already handed over to the MRO project to AIESL but refused to be a partner in its operations, even though there was a specific request made in this regard by chief minister Devendra Fadnavis.

Currently, due to lack of adequate world-class MRO facilities in India, many airlines, especially the low-cost ones take their planes to nearby hubs including Singapore, Dubai or Colombo, leading to India losing millions of foreign exchange to other countries that provide better tax laws and cheaper costs. Maintenance accounts for approximately 10% of airlines’ cost.

According to aviation advisory firm CAPA, the global MRO business is estimated to be over $50 billion. The largest providers typically offer the three main MRO capabilities — airframe, engine and component services. Engine maintenance makes up the largest proportion of the global market (35%), followed by component (22%) and airframe heavy maintenance (13%).

According to CAPA, in the past most maintenance work was conducted in-house, with a movement in the 1990s towards outsourcing the work to independent and airline third-party providers, led by the emerging LCCs. Most airlines which outsource work to a third party do so to allow them to focus on their core business — commercial flying.

AIESL has already signed MoUs with a handful of airlines for repair and maintenance of aircraft of airlines including SpiceJet, Jet Airways, apart from all works for the fleet of parent company Air India.

The aviation industry experts said the MRO industry will get further impetus with the government liberalising the sector with better tax and other benefits. The growth of regional connectivity scheme will also help in giving further thrust to it, the officials said.

“Around the world airlines’ primary job is to make passengers and cargo travel from point to point and they are more than happy to outsource their planes’ maintenance and overhauling work. We intend to tap that market in India by approaching the airlines. The regional connectivity, as new aviation policy has also opened a huge scope for us,” H R Jagannathan, CEO, AIESL, had earlier said.