Despite booming air travel, skilled workers, and low labour costs, India has yet to become an MRO powerhouse, but two local MRO leaders are bullish about the future.

Bengaluru-based MRO firm Air Works, for starters, told Flightglobal that the company has recently been awarded the “largest MRO contract in Indian aviation history, with a 14-year agreement that covers the ‘head to tail’ maintenance of an Indian carrier’s fleet”.

Company managing director Vivek Gour, however, was coy about his client. He declined to reveal the identity of the airline until “all contracts have been signed.”

Gour adds that the new agreement is in line with Air Works’ focus to further develop its MRO capabilities in India. It aims to focus on narrowbody aircraft as they represent the majority of the country’s airline fleet.

Flightglobal’s Ascend Fleets database shows that excluding regional jets, India has over 320 narrowbody aircraft in service and over 430 on order. The types include Airbus A320 family aircraft and Boeing 737s.

With over 70% of its business coming from overseas, Gour believes that there is potential to win more local clients, especially with the advent of more regional airlines.

“They [regional airlines] are all in the formative stages, and while we may not be the lowest priced MRO firm, we assure highest quality pegged to a fixed benchmark [in terms of price],” he says.

“But once you go down that route [of undercutting competitors’ prices], your quality suffers.”

Gour admits it is not competition nor a shortage of labour, but high taxes that represent the industry’s top challenge to growth, which he describes as having “provided no incentive for local MRO firms”.

At present, local MRO companies must pay a 12% service tax, 19% import duty on spare parts, and 13% royalty fee for work done at airports owned by the Airports Authority of India.

Air works

High local taxes have pushed India's Air Works into diversifying its business beyond MRO

Air Works

Gour says Air Works has been obliged to diversify its business into areas such as aircraft management, painting and sale of spare parts. MRO comprises just 30% of revenue.

“After years of [the Indian government] not listening to our feedback, I have concluded that the best way to escape [their rules and taxes] is to expand our MRO operations outside of India – something we’re pursuing,” says Gour.

India’s high taxes have also been affecting Air India Engineering Services Limited (AIESL).

A subsidiary of Air India since February 2013, AISEL was hived off Air India as part of the airline’s organisational restructuring to provide maintenance services for its fleet, as well as that of other customers.

Rohit Nandan, Air India’s chairman and managing director, shares Gour’s sentiment that growth among Indian MRO companies has been hampered by the country’s tax system.

“The entire industry has been talking about it for the past two or three years, [and finding ways] to reduce taxes on parts and MRO [services],” said Nandan in a previous interview with Flightglobal.

Putting negatives aside, Nandan envisions a big market for the local MRO scene. As of early January 2015, AIESL has received foreign approvals from the FAA and EASA for its third-party work.

“Gradually AIESL’s business plan is, over a period of time, to have 60% foreign clients and 40% from India,” said Nandan.

AIESL counts foreign legacy carriers such as Etihad, Cathay Pacific and Korean Air among its growing customer base, along with Indian airlines such as IndiGo and Jet Airways. AIESL also provides MRO services for the Indian air force and navy.

With hangar facilities located at five major cities in India, AIESL’s capabilities enable multiple types of services to be conducted concurrently.

These include major checks on A320 and 737 aircraft at its New Delhi base, component overhaul for 777, 747 and 787 aircraft at its Mumbai facility, as well as overhauls of auxiliary power units of A320 family aircraft at its Kolkata hangar.

The latest addition to AIESL’s services is attaining landing gear capability for the 737.

“The facilities are absolutely state of the art, and I think that Air India MRO can start actually looking at taking a bigger share in the international business,” added Nandan.

Looking forward, AIESL seeks to expand its operations with a Nagpur facility via a joint venture that focuses on landing gear overhauls, as well as setting up a test engine cell with General Electric by 2017.

“I think that we will be in a state of readiness for Air India, [and if] we want to strengthen [our] MRO services, we have to work on the certifications,’ said Nandan.

Source: Cirium Dashboard

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