Flight International – 6 August 2019

NEWS FOCUS

14 | Flight International | 6-12 August 2019 flightglobal.com

W

hen Indian low-cost carrier

GoAir needs the CFM Inter-

national CFM56 engines of its Air-

bus A320-family aircraft over-

hauled, they are sent to MTU Aero

Engines’ facility in Zhuhai, China.

Similarly, fellow low-cost

airline IndiGo’s fleet of more than

200 A320-family aircraft heads to

Malaysia and the Philippines for

heavy checks.

For a country where the com-

mercial aircraft fleet is expected

to increase three-fold over the

next two decades, carriers having

to send the bulk of their fleets

overseas for MRO services is, as

industry watchers and insiders

put it, something of a travesty.

“As the third-largest and fastest

growing aviation market in the

world, having only less than 2%

of MRO business globally is an

irony,” says Dr S Vasudevan, part-

ner and global sector lead for air-

ports at KPMG. He estimates that

only about 10% of India’s com-

mercial aircraft fleet is serviced by

domestic MRO providers.

growing demand

Still, demand for MRO in India is

high, and only set to grow: the na-

tion’s airlines operate some 614

aircraft, and have nearly 700

more on order, according to Ciri-

um’s Fleets Analyzer.

India is home to 99 approved

aircraft maintenance companies,

of which 12 are capable of under-

taking major maintenance of

large aircraft, according to New

Delhi’s civil aviation ministry.

Major players include Air India

Engineering Services (AIESL) –

owned by the Air India Group –

GMR, and Air Works.

By 2040, India’s MRO industry

is projected to contribute $

million in annual revenue, up

from the current $50 million.

On the face of it, India’s grow-

ing fleet, low cost base and edu-

cated labour force should make it

an MRO superpower. But as is so

often the case with India’s avia-

tion sector, it is not that simple.

polIcy alfred Chua SingApore

india seeks to overhaul domestic mro

With many carriers sending their aircraft overseas for maintenance, new Delhi must nurture industry to meet demand

Despite high taxes, Air India has fleet serviced locally by subsidiary AIESL, a rarity among nation’s airlines

AirTeamimages

“The indian mro

industry should have a

master plan for robust

development”

Pulak Sen

Founder secretary-general,

Mro Association of india

Industry observers say a major

stumbling block is the country’s

tax structure. Pulak Sen, founder

secretary-general of the MRO As-

sociation of India, believes the

steep goods and services tax (GST)

is “foremost” among the challeng-

es facing the industry.

MRO providers in India pay a

GST rate of around 18% and

while this has fallen, it is still

higher than India’s nearest MRO

competitors, Malaysia and Singa-

pore, which charge 7% GST.

“The Indian airlines, therefore,

are forced to avail MRO services

out of the country,” Sen says.

Fleets Analyzer shows that

most Indian carriers send some, if

not all, of their fleet for MRO ser-

vices out of the country. One ex-

ception is Air India, which uses

subsidiary AIESL.

Vasudevan says the MRO in-

dustry’s growth has been stunted

by a “skewed tax structure”. He

also cites “onerous royalties, sti-

fling skill-retention challenges,

and regulatory inconsistencies”

that have let foreign MRO service

providers gain a “lion’s share” of

Indian carriers’ business.

“Migration of skilled labour to

overseas markets is another huge

challenge that MRO businesses in

India are contending with because

of strict regulations on workforce

certification and employment

norms,” Vasudevan adds.

At this year’s budget speech on

5 July, the Indian government

hinted – yet again – at policy

moves to give the industry a boost.

“It is proposed to leverage In-

dia’s engineering advantage and

potential to achieve self-reliance

in this vital aviation segment. The

government will adopt suitable

policy interventions to create a

congenial atmosphere for [the] de-

velopment of MRO in the coun-

try,” Indian finance minister Nir-

mala Sitharaman said.

But this is not the first time In-

dia’s government has floated the

idea of assisting the MRO indus-

try. In a five-year strategic plan

released in 2010, the civil avia-

tion ministry said it was targeting

the “creation of... world-class

MRO in India” to retain mainte-

nance work in the country.

It said that price competitive-

ness and infrastructure, as well as

a skilled workforce, were critical

to helping the industry.

But little had changed by 2017,

when Indian civil aviation minis-

ter Jayant Sinha said 90% of the

Rs50 billion ($726 million) in

MRO costs Indian carriers cov-

ered that year was spent overseas.

But obstacles to achieving the

goal of capitalising on the grow-

ing market and becoming a pow-

erhouse in its own right – like

Singapore – still remain.

Sen says the government

should come up with a strategy

for the sector, similar to that de-

veloped for regional connectivi-

ty, to spur growth.

“[The] MRO [industry] should

also have a master plan for robust

development and build an ecosys-

tem to fuel its growth,” he says.

Vasudevan believes the Indian

government needs to tackle four

“key areas” with “sharp focus”:

GST, royalties, customs proce-

dures and skills retention.

This, he adds, will “possibly

open the floodgates for more in-

vestment in India, building a ro-

bust domestic MRO industry, and

more importantly bringing back

jobs that we have consistently lost

to competition outside, in an une-

ven playing field”. ■

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