International maintenance, repair and overhaul (MRO) companies are seeing good business prospects in India, with industry analysts estimating the market for MROs to be over $100 mn per annum- excluding Air-India and Indian Airlines.

In addition to Airbus and Boeing, global MRO majors Jordan Aircraft Maintenance Ltd (JorAMCo), Singapore Technologies Aerospace (ST Aerospace), Lufthansa Technik AG and Singapore International Airlines Engineering Company (SIAEC) are in talks with Air-India and Indian Airlines for setting up a facility in the country.

The Foreign Investment Promotion Board has cleared the proposal of Lufthansa Technik for setting up a wholly-owned subsidiary, One Stop Airline MRO Support Pvt Ltd. The Company will undertake provision of spare parts and consumables to be used in the maintenance, repair and overhaul of aircraft. According to industry sources, Lufthansa is targeting legacy carriers, start-up and low-cost airlines of India and West Asia who do not want to invest heavily on technical services.

JorAMCo, an MRO firm that specialises in Boeing and Airbus aircraft, is said to be in discussion with Indian government and companies to set up an independent MRO facility in the country. The aerospace arm of Singapore Technologies Engineering (ST Engineering), ST Aerospace and SIAEC are also exploring all possible routes for setting up MRO facilities in India. Airbus and Boeing are also in the process of finalising the project

Airbus and Boeing are all set to sell aircraft worth Rs 45,000 crore (US $ 10 bn) to Air-India and Indian Airlines and each of the two rivals might set up a MRO to service these aircraft.

Air-India is planning to set up a ground handling and cargo engineering facility for its own aircraft as well as for others in Bangalore. In view of its fleet acquisition programme, Air-India is also planning an engineering base at Bangalore International Airport Ltd.

Our Say With a 26% rise in passenger travel, India is the world’s fourth most favoured travel destination and has a large percentage of world orders for aircraft. But infrastructure, including MRO infrastructure, is already the major constraint. MRO operations usually require airport land (that is extremely scarce in major Indian airports). Besides bilateral certification arrangements are needed (DGCA’s certification must gain international validity), and tax and custom duty structures must change (MRO operations will today cost 11% more out of India), in view of the extremely high costs involved (between Rs 750 crore and Rs 1,500 crore which is approximately US$ 165 mn to US$ 335 mn). Viable FDI policies are needed, international collaborations would be essential and Indian documentation practices must improve very significantly. To top it all, operations would have to be extremely efficient because profit margins are rather small.