The state-run aircraft MRO services company AIESL (Air India Engineering Services Ltd) is set to diversify its revenue stream by developing aircraft scraping infrastructure in India.
Speaking to FE, AIESL CEO Sharad Agarwal said that the company is working on plans to diversify its revenue sources beyond its two primary clients, Air India Group and the Ministry of Defence (MoD), which currently constitute more than 75% of its total business.
“We are looking at various ways to diversify our revenue streams, including new businesses such as aircraft scraping facilities,” Agarwal said.
Agarwal also added that the conversion of old passenger aircraft into freighters and MRO consultancy businesses are other areas where the state-run enterprise plans to foray.
“The P2F conversion is a big area. We are looking at entering this space. Also, consulting services and servicing aircraft for foreign airlines are on our radar as potential avenues for expansion. We plan to add value to our service by doing ‘heavy’ checks; presently, only 15% of the overall MRO work is done in India. There is ample opportunity to expand the scope and value of work by adding capabilities to service different kinds of aircraft and engines,” he said.
The need for the company to diversify its revenue comes after Air India’s transition to a Tata Group company and the subsequent development of its own Maintenance, Repair and Overhaul (MRO) facilities. Moreover, the sector is witnessing a surge in competition.
“In India, most MROs are just focused on airframe maintenance, which rakes in very little value. All other businesses, like engine and component overhaul, are losing out to international MROs. The flight of business to foreign MROs needs to be checked since we will have a large domestic fleet shortly. We need domestic capacity and capabilities; especially for this reason, we are in touch with engine manufacturers and others for MRO work.”
Further, he pointed out that the company is scouting for a location to set up a new facility in addition to its existing hangar in Nagpur. “These initiatives are capital-intensive and have a long gestation period before they start producing returns. However, we will be taking up these initiatives,” he added.
The divestment-bound company is expected to make a net profit on revenue of around Rs 2,000 crore in FY 24.
In the last fiscal year, the company made a net profit of around Rs 800 crore. However, this was possible due to certain book adjustments that were made after Air India’s divestment.