Aircraft maintenance has $1-bn business potential in India

SINGAPORE: Indian aviation industry may be going through turbulent weather, yet experts see a growing potential for the maintenance, repair and over
haul (MRO) segment of the industry, with projected revenue of $1.07 billion by 2013.

Many companies, including Boeing in a tie-up with the state-run Air India, have announced joint ventures in MRO business and others are waiting in the wings for the government to address some tax issues to jump into the market, the experts added.

Speaking during an MRO Asia symposium here, C.S. Tomar, vice president of engineering and maintenance for Kingfisher Airlines, said the MRO market in the country was currently valued at $405 million with a potential for $1.6 billion by 2018.

"It makes economical sense for us to set up an MRO facility," Sitham Nadarajah, vice president for technical development with Jet Airways, told IANS. "With volumes increasing, we will be looking at D-checks for narrow bodied aircraft like Boeing-737s."

The D-checks are done on aircraft every four-five years, during which the aircraft is completely stripped, checked and then restored.

With India's current fleet of 907 including helicopters, business jets and 395 commercial aircraft, it makes a business case for the MRO industry, the experts said, adding some issues remained to make it a more viable proposition.

"To many, India is still a black hole and yet to be understood," said Bharat Malkani, chief executive of MaxAerospace, a leading private sector MRO provider since 1994, providing support to all the major commercial airlines and aircraft operators in India and the Middle East.

With aviation infrastructure in the process of being ramped up, MRO providers said the high cost of entry into the Indian market, especially on account of high taxes, was proving to be the main barrier.

They said if repairs, for example, were undertaken outside the country, it was not subject to service tax or value-added tax. Since India is still in the development phase of offering a good MRO base, most Indian airlines go abroad to get their aircraft maintained, they added.

"We are being penalized for being Indian as we are charged taxes; companies abroad are not," said Malkani, whose engineering facility is located in Mumbai, supporting a variety of aircraft and components.

Recently, Lufthansa Technik, one of the world's largest MROs that had tied up with the Hyderabad International Airport, pulled out, saying high taxes were making it too expensive for it to operate in India.

"Taxation is a finance ministry matter," said R.K Maheshwary, deputy director general at industry watchdog in India, the Directorate General of Civil Aviation.

Yet, things are moving in the domain.

Recently, the National Aviation Company of India, the company that owns Air India, and the European Aeronautic Defence and Space Company, or EADS that owns Airbus, signed a joint venture agreement in the area.

They have proposed that their 50:50 aircraft MRO centre at the Indira Gandhi International Airport in India's national capital with an investment of $40 million will start its operations from early 2009.

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