India's Air Works struggles under weight of taxes

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India's aircraft MRO industry is struggling under the weight of taxes that its competitors elsewhere in the region do not face.

Independent MRO company Air Works, which has a long history of supporting business aircraft, expanded into commercial aircraft support in 2010, and now completes up to 35 heavy checks on commercial aircraft yearly, primarily for India's privately-owned carriers such as Jet Airways and Spicejet.

Managing director Vivek Gour says that MRO companies in the country face three kinds of taxation - a 12% service tax, a 19% import duty on spare parts and, for work done at airports owned by the Airports Authority of India, a 13% royalty fee.

In comparison, competing MRO companies in Dubai, Malaysia and Singapore pay little or no taxation, something which results in nearly 60% of India's MRO market going to foreign companies.

"The MRO industry, unfortunately, has not been understood by the government," says Gour.

To overcome the royalties issue, Air Works does its commercial heavy maintenance at a private airfield in Hosur, where it has a 25-year lease and rights to develop five hangars.

Gour says that it also runs multiple shifts to get work completed quicker, which allows his customers to get the aircraft back into revenue service more rapidly, sometimes only 30min after leaving the Hosur facility.

"By running two or three shifts a day, we finish the same work in a lesser number of days," he says.

"I am not charging less because the rates in the region are low already, but I can give them an additional day of revenue service."

Air Works performs up to D-checks on Boeing 737s and ATR aircraft and up to C6-checks on Airbus A320s, and will soon raise this to C8-checks. It is also adding the capability to perform up to D-checks on Bombardier Dash 8 Q400s.

The company is building a widebody hangar at Hosur to give it additional capacity, but Gour says that it will still focus on supporting narrowbody aircraft as they represent the majority of India's airline fleet.

Despite the challenges put up by the government on the MRO industry, Gour remains confident in the industry and his company's ability to deliver.

"I hope that by positioning ourselves well and developing our capabilities while the market is still nascent, we will be well positioned as and when the market starts to explode," he says.