1. Maintenance money

Maintenance money

Air India’s Hyderabad facility to open doors for other airlines.

By: | Published: June 24, 2015 12:05 AM

Ailing Air India would see a significant saving in its maintenance, repair and overhaul (MRO) expenses from this year. The national carrier has recently opened an MRO facility at Shamshabad, near Hyderabad’s Rajiv Gandhi International Airport.

Air India is also ready with one of the largest MRO centres in Asia in Nagpur. More MRO facilities are being set up in Kolkata, Delhi and Mumbai. Typically, MRO eats up 13-15% of airline revenues in India—the largest after fuel expenses.

Moreover, despite India having nearly 20 MRO facilities of various sizes, most airlines service their aircraft in neighbouring countries like Singapore, Sri Lanka and the United Arab Emirates (UAE). These places offer 30-40% cheaper services compared to Europe or the US.

MRO facilities are considered critical to the development of India as an aviation hub. Though the country was projecting revenue from MRO to reach R5,000 crore by this year, the actual could be far less. Air India itself is projecting only annual revenues of R500 crore from MRO services once all its facilities come on stream.

The Hyderabad facility, run by subsidiary Air India Engineering Services (AIESL) can accommodate two narrow body aircraft or a wide-body aircraft at a time. The $17-million facility, scheduled to have been completed by 2011, was meant exclusively for Air India’s fleet, to render services like aircraft maintenance, line maintenance, engineering and technical support, component support, etc. But senior Air India officials said the MRO would open up its services for other airlines in the near future.

The Nagpur MRO is being developed by Boeing Co, as a part of its offset obligation in the deal to deliver 68 aircraft to the airline. The $107-million facility, whose inauguration has been delayed by over three years, is finally ready and is spread across a sprawling 50 acres of space. It can accommodate four wide bodied aircraft like a Boeing 777 or Airbus 380 and six narrow bodied aircraft like Airbus 320 at a time. The carrier also plans to build a $90-million engine MRO unit with engine maker General Electric (GE), next to the recently functional airframe MRO unit, which is equipped to offer A-checks, B-checks (both tarmac checks) and C-checks (engine and component maintenance) to aircraft.

“The plan is to create a one-stop hub for maintenance, repair and overhaul of airframe and aircraft engines. The new facilities, which will initially serve the national carrier’s fleet, will be opened up for other airlines, as Air India senses opportunity to add to its revenues by this process,” said a senior Air India official.

“Other MRO units by the national carrier in cities like Kolkata, Delhi and Mumbai are expected to be completed in the next couple of years. Once all such facilities are fully operational, Air India is expected to clock R500 crore revenue a year from MRO services,” another senior AI official told FE.

Once functional, all MRO units will be transferred to AIESL, which is expected to post profit from 2017-18, with half of its revenue coming from the parent company.

A report on India’s MRO industry by consultancy firm KPMG early last year pegged the MRO market in India at $700 million. With several Indian airlines expected to double their fleet size by 2020, the demand for home grown MRO services are expected to pick up in the future.

Tags: Air India
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