India's big idea

Evidence of India's aviation boom is hard to miss - and the growing interest in air travel is fuelling demand for maintenance services to be performed in-country

Slogans like Kingfisher Airlines' "Fly the Good Times" and Air Deccan's "Simplifly" are aimed at the estimated 3 million who join India's middle class every year, in a country with a booming economy and a population that will become the world's largest in a few decades.

Newer airlines such as Deccan, GoAir, Kingfisher and SpiceJet, as well as established carriers like Air India, Air Sahara, Indian Airlines and Jet Airways, have gone on buying sprees. Manufacturers like Airbus, ATR and Boeing are all reporting brisk sales, with at least 450 firm orders in the past few years.

Alongside this there has been a boom in demand for secondary services, especially in the maintenance, repair and overhaul (MRO) sector. Some predict that the Indian MRO market, worth more than $100 million annually and growing, could become Asia's largest in the coming years.

"Indian airlines are flying their aircraft to places as far away as Singapore or Frankfurt for their checks, but there is no reason why it should not be done here in India," says Air Deccan's chief executive Capt G R Gopinath. "We have the talent and facilities, and it saves time and money to do it where we are based."

Foreign MRO companies, as well as airlines like Air Deccan, Kingfisher and Jet, are all eyeing the market. Established overseas players like Germany's Lufthansa Technik (LHT) and Singapore's SIA Engineering, as well as airframe manufacturers such as ATR and Boeing, are leading the way. They have the experience and know-how, and are looking to set up joint ventures with the airlines or engineering companies.

"A large number of aircraft are being replaced, and the number of new aircraft coming in is immense. The market potential is very good," says Johannes Bussman, LHT's vice-president marketing and sales while Prashant Gurha, managing director of Indian general aviation company Taneja Aerospace, which is also entering the MRO business, believes that "foreign companies have the expertise and that can benefit us, as we have the talent".

Recognising potential

LHT was one of the first non-Indian companies to recognise the potential. It began in 2002 with components support for Jet Airways, and has since become involved with Air Sahara and Kingfisher as well. LHT is believed to be in talks with several airlines, including Jet and Kingfisher, over setting up a maintenance shop in India, although nothing has been confirmed. Others are forging ahead with their plans: SIA Engineering, a subsidiary of Singapore Airlines, is establishing an MRO joint venture with the Wadia Group, the Indian company behind low-cost carrier GoAir.

The new venture will start with line maintenance at eight airports across India and eventually roll that out to narrowbody and widebody aircraft.

SIA Engineering's chief executive William Tan cites the liberalisation of India's aviation sector and increasing demand for MRO as the main reasons for his company's move. For Jeh Wadia of the Wadia Group, a shortage of world-class MRO facilities in India was the prime mover. India, he says, is an ideal location for the businesses due to its low cost and large pool of untapped engineering talent.

Boeing is investing $100 million into an MRO facility at Nagpur in central India. This is part of a maintenance and training agreement built in to Air India's December 2005 order for 27 787s, 23 777s and 18 737-800s. "We believe that Nagpur will be an excellent location for the Boeing MRO facility because of the tremendous investment being made in the area by government and private companies," says Boeing vice-president of sales for commercial airplanes Dinesh Keskar.

Turboprop manufacturer ATR, which won an order for 30 ATR 72-500s from Air Deccan and 35 aircraft from Kingfisher, is establishing a technical support centre in Bangalore and choosing an MRO centre in India. MRO companies in the Middle East, where some Indian airlines already send aircraft for checks, such as Abu Dhabi-based Gulf Aircraft Maintenance and Jordan Aircraft Maintenance, are also looking for opportunities in the area.

The main market is in light checks, given the relatively low average age of the Indian aircraft. A lot of facilities being built cater for these, and Indian airlines still have to go overseas for their D checks. However, there are plans to add facilities for heavy checks in the medium term.

Most companies say they are unfazed by the increased interest in the Indian MRO market, given that the pie is growing fast. "We will continue to develop our own ideas and there is demand for various businesses. Different companies provide different services. We are confident the market will stay strong," says Bussman.

But a major problem is India's creaking infrastructure, and the lack of investment in facilities such as runways and hangars. Airports are not being developed fast enough to keep pace with investments in aircraft, with long delays common at major airports. "I went on vacation to India recently and we were circling for an hour due to the heavy traffic. What will happen when all of the aircraft are delivered?" asks Bussman. "The new orders must be in line with new infrastructure. I hope progress is made there quickly, or that could be an issue."

The government appears to be trying to alleviate the situation. Its plans have included privatising hubs like New Delhi and Mumbai so they can be developed by new long-term lease holders, and eventually turned into regional and international hubs. India is also trying to develop other parts of the country and secondary airports to help serve the growing demand.

Bureaucratic delays

Regulatory restrictions and a cumbersome bureaucracy can lead to long delays, for example, in the waiting time to get a hangar for maintenance. The cost of flying into airports also hinders both commercial operations and MRO.

There are solutions, however. Taneja owns its own airfield in Belagondapally, outside Bangalore, and is lengthening its runway and building a new hangar so that it can expand into the civil aviation MRO business. The hangar would be able to accommodate an Airbus A320 or a Boeing 737. This helps get around the high charges and regulatory problems encountered at major airports, says Gurha. "We are unique in the business, in that we own our own facilities and airfields. We are able to operate without worrying about ongoing air traffic - and that is a big advantage," he says.

Another challenge is the Indian labour force. Kingfisher's executive vice-president Hitesh Patel says that "80% of any check is labour", and that labour costs in India are low enough to bring it in-house. Salaries, however, have risen over the past few years and are unlikely to plateau.

"The availability and the cost of talent could become an issue in India due to the growing global demand," says Gurha. "The Indian workforce is getting more expensive, and companies in the MRO business must keep an eye on that."

Cost, however, is not the only factor that drives companies to invest in India, say others. "Of course, the labour cost is good, given that India has a big pool of labour. But so do many other countries around the region," says Bussman. "Education is important, and their knowledge of English and technical and mechanical knowledge are huge advantages. Development is not just driven by the availability of staff or their cost."

While costs may be rising, observers say that the price of conducting checks within India for domestic carriers can be a tenth of what it would be overseas. With maintenance amounting to almost 20% of total costs for some, and carriers constantly monitoring their bottom line, it makes sense to keep their MRO in-country.

A growing number of smaller Indian companies, that provide specialised services, such as repair of avionics and landing gear, support the bigger players in the MRO industry. That means services previously only available overseas are becoming possible in India. Some even suggest that if India fixes its infrastructure it could become the maintenance workshop for the region, with non-Indian airlines finding it more cost-effective to conduct checks in India than in established centres like Singapore.

But that is some time away - especially since the facilities are insufficient to meet domestic demand. But there is no doubt the MRO sector is growing. As Bussman says: "India has an important role to play in the MRO and aviation markets."

Source: Flight International