Air India’s MRO: Traffic, tax incentives imperative for Nagpur facility to take off

Air India’s MRO

The Indian air travel market, which is currently witnessing a 20 per cent annual growth in domestic passenger traffic, is pegged to be one of the fastest growing markets in the world. However, to sustain this growth, it is also deemed essential for the country’s aviation infrastructure to grow. Although various parties are putting their weight behind the front-end infrastructure such as airport terminals and runways, the back-end infrastructure, a major part of which is aircraft maintenance, is still a laggard compared with its global peers.

Air India Engineering Services Ltd’s (AIESL) Nagpur maintenance, repair and overhaul (MRO) facility is a step in the direction to correct this issue. However, the growth and commercial viability of the facility depends on a number of factors such as air traffic growth at Nagpur, having better commercial sense for private airlines, and fiscal incentives to the unit to make it competitive with other MRO companies in India and other key locations spread across Asia.

In the new Civil Aviation Policy, the Centre laid down its aim for developing India as an MRO hub for aircraft. “The MRO business of Indian carriers is at around Rs 5,000 crore, 90 per cent of which is currently spent outside India — in Sri Lanka, Singapore, Malaysia, UAE, etc. Given our technology and skill base, the government is keen to develop India as an MRO hub in Asia, attracting business from foreign airlines,” the policy document, which was released last year, noted.

Since the first aircraft checked in at the facility in May 2015, AIESL has done maintenance works on 21 planes so far, including the recently concluded ‘C-check’ on SpiceJet’s Boeing 737. A senior AIESL official posted at the Nagpur MRO said that the firm entered into an MoU with SpiceJet in 2016 for maintenance of the airline’s aircraft for three years, post which AIESL got the necessary tools and manpower in place to get an approval from the Directorate General of Civil Aviation (DGCA) for servicing of the single-aisle Boeing 737.

Even as Boeing had built the facility for Air India as part of its commitment to set up an MRO when the flag-carrier placed an order for 68 aircraft with the US firm, independently operating the facility on which only Boeing aircraft could be serviced made less commercial sense for AIESL, the official said, considering the majority chunk of Indian skies have Airbus A320 aircraft, a direct competitor to the 737 model. Air India alone has 65 Airbus narrow bodies in its fleet, including the shorter A319s and the longer A321s. India’s largest airline IndiGo has 136 A320 aircraft in its fleet. Apart from these two airlines, other domestic carriers Vistara, and AirAsia India also fly the French manufacturer’s products.

Another senior Air India official, on condition of anonymity, said that it would be imperative for the Nagpur facility to generate revenues to the tune of Rs 500-600 crore per annum to become profitable.