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INDIAN AIRCRAFT MAINTENANCE, REPAIR & OVERHAUL (MRO) MARKET

The global Aircraft MRO is a multi-billion dollar industry growing at a robust rate year-on-year, however the Indian market is yet to catch up. The author explains the estimated market size from the MRO and its market segmentation…

Maintenance, Repair and Overhaul (MRO) includes all actions which have the objective of retaining or restoring an item in or to a state in which it can perform its required mission. Aircraft MRO is the overhaul, repair, inspection or modification of an aircraft or aircraft component to keep it operational and air worthy. MRO has become an indispensable activity of air assets in the aviation industry.  MRO is a multi-billion dollar industry growing at a robust rate year-on-year. The global MRO market is estimated to be around $61 billion in annual revenue growing at a CAGR of 3.80 percent over the period 2012-2020. Country-wise, North America is expected to account for the largest share (around 40 percent) of the MRO market followed by Asia and Europe.

Market Segmentation. The market for the Aircraft MRO sector is typically divided into four major segments, which include Airframe heavy maintenance and modification, Engine maintenance, Line maintenance and Component maintenance. Engine maintenance makes up the largest proportion of the global market (39%), followed by component (22%) and airframe heavy maintenance (17%). Line maintenance / modifications account for just over one-fifth of the global market (22%). Most major providers cater only for commercial customers with the minority offering services to government and defence clients.

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INDIAN CIVIL AIRCRAFT MRO MARKET
The civil aircraft Maintenance, Repair and Overhaul (MRO) industry of India is at a nascent stage and at present constitutes only 1 percent of the total global MRO market. Indian carriers are expected to double their fleet size by 2020 to 900-1000 aircraft and about equal number of aircrafts/helicopters are required for the defence/paramilitary services in the next 8-10 years, promising a huge opportunity for the MRO business. The rapidly growing aircraft fleet and growth in domestic traffic and the increasing age of Indian aircrafts (both civil and defence), the MRO activities in India is expected to witness a significant growth in coming years.

The Indian civil Aviation MRO market, at present, stands at around $900 Million and is anticipated to grow to $4.33 Billion by 2025 increasing at a CAGR of about 14-15 percent. This, however, is still a small percentage especially when compared to the present size of per annum MRO business in China ($2 Billion) and Singapore ($5 Billion).

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Also to be noted that currently, merely 5-10 per cent of MRO work for Indian airlines was carried out in India and most of it outsourced to third-party service providers outside the country. The "A" and "B" checks (Line Maintenance/Components) are mostly performed by the owner/operators as a part of their daily and weekly aircraft operations and being done by their own personnel or personnel contracted specifically for the task. "C" and "D" checks (Engine/Airframe/Heavy Maintenance) usually require more labor and are infrastructure intensive. Thus, these tasks are performed by specialized agencies.

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The largest providers typically offer the four main MRO capabilities: engines, airframe, component services and line/modifications/field maintenance. Engine maintenance makes up the largest proportion of the Indian MRO market (50%), followed by component (17%) and line maintenance (17%) followed by airframe heavy maintenance and modification (16%).

DEFENCE MRO
Defence MRO is no different from civil MRO and will improve the nose to tail ratio. India is poised to become a large defence aircraft market. As military expenditures increase, the necessity for military MRO capabilities will increase.

Considering the other perspective the capital expenditure earmarked towards the aircrafts/helicopters for the Indian Air Force has been on an upward surge since last five years and will be witnessing substantial growth in coming years owing to the present depleting and aging fleet. The shelf life/life cycle of a typical aircraft/helicopter spans about 25-30 years. Considering the age of large sections of the Indian aerospace fleet with more than 50% of the fleet is above 20 years of age, the IAF has to certainly replace these with new procurements in the next 10-15 years. Figures on the next page depict the current and desired vintage spread of aerospace platforms. To overcome the gaps in the desired and existing force levels, the favourable procurements trend for Aero platforms is likely to continue for the next 15-20 years.

Around 650 aircrafts are estimated to be acquired during the 12th Plan period compared to around 300 during the last 5 years. IAF has a long list of acquisitions which includes 214 FGFA, 126 MMRCA aircraft and additional Sukhoi-30MKI fighters, as also over 100 upgraded MiG-29s and Mirage-2000s, 75 trainers; two more AWACS systems; C-17s, P-8Is and C-130J and C-18 Aircrafts Mi-17 medium-lift helicopters; 22 attack helicopters and 15 heavy lift helicopters. The estimated price tag for just these jets roughly comes to $100-$150 Billion.7

In normal case 3-4 percent of the platform needs to be replaced every year. To cover the gap India needs to replace 5-6 percent platform every year. Hence the additional resources need to be allocated. The total/cumulative capital budget till the end of 12th to 14th five year plan (2012- 2027) for the Indian Air Force is projected to be approximately $218 Billion; out of which 69 percent is earmarked towards acquisition of aircrafts/aero engines and this is expected to grow at least 10-15 percent every year. Considering this, the IAF would be 8spending about $150 Billion on aircraft/aero engine in the next 15 years. Further, it is estimated that around 13-15 percent is devoted towards MRO and related activities. So about 19.5 - 22.4 billion is likely to be spend in the 2012-2017 years by the IAF on MRO. Say about $1.3-$1.5 Billion average year-on-year.

It is to be noted that it is basically the Stores Sub-Head under the Revenue Budget which caters to the MRO and related activities (assemblies/ sub-assemblies/ spare parts/ components/ lubricants / upgrades/ maintenance). It is apprehended that around 15-20 percent of the entire expenditure allocated towards stores under the revenue expenditure is spent on MRO activities of the Indian Air Force. Further, trends depicts that during the last five years, the expenditure towards maintenance and related activities of the Indian Air Force has been increasing at the rate of 7 per cent approx. Taking this into consideration it is seen that around $18.79 billion would be spend by the IAF towards maintenance and other related activities between the period 2010-2025. Refer Table and Graph. The Base Repair Depots of IAF is mainly responsible for Line and Component Maintenance (which is catered through the stores expenditure) while HAL is responsible for Air Frame and Engine Overall (which is catered through the capital expenditure).

YearComp/Line AllocationAir Frame /Engine Overhaul
 2010-11 0.18  0.36
 2013-14  0.23   0.47
 2015-16  0.29  0.58
 2018-19  0.38   0.76
2020-21  0.45  0.90
 2023-24  0.59   1.18
2025-26   0.70  1.40

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Currently, overhaul of military aircrafts is almost entirely undertaken by the public sector Hindustan Aeronautics Ltd which is gradually getting overloaded with increasing fleet inventory. However, the Defence Procurement Procedure (DPP) 2008 outlines opportunities for outsourcing maintenance operations through the establishment of public-private partnerships. The core MRO capability of the Air Force Base Repair Depots could function as an interface with the private industry. The Indian Air Force has also started showing interest in outsourcing most of its MRO requirements to privately-owned companies in the country.

The manufacturers nowadays are offering serviceability (sometimes 70-80 per cent) along with its purchase enabling it to be operational at all times. This means the manufacture has to set up MRO shop with any Indian private player to do the job which will pave way for growth of defence MRO in India. In the case of Boeing P-8I also Indian Navy has engaged the service of CFM International to train its engineers at the engine makers newly set up CF56 training centre in Hyderabad. It is now exceedingly evident that India is on its path of engaging third party for not only manufacturing, but also MRO capabilities and training in the area of defence. This trend is only the beginning of a new chapter in the history of Indian military aviation.

Estimated Overall Market Size
The Indian MRO sector has the ability to absorb technology transfer at depot level for aircraft as well as components, and has the potential of becoming the international hub for MRO needs. For a reputed MRO there is a huge market waiting to be tapped especially considering that the Engine, Airframe and MR Blade & Hubs facility is non-existent. Further, Retro-Fitment of essential components like CVRs, FDRs, Transponders, Sand Filters and even interiors is needed desperately.

As a support service to the aviation industry, the Indian MRO sector is expected to grow with the industry. Considering the increasing civil and defence spending on MRO every year, the total estimated market size of Indian MRO Market in the next 15 years which comprises of civil and defence spending ($28.88 Billion in Civil MR) + $18.79 Billion in Defence MRO) during the period from 2010-2025 is estimated to be around $47.67 Billion.

The opportunity also originate from the fact that location-wise there are no MROs facilities between West Asia and South East Asia, and India is strategically located for over-flying as also transiting. In fact, there is no MRO hub within five and half hour fly zone over India.

Current MRO Infrastructure in India
In the absence of well-developed maintenance infrastructure in India, there are currently over 40+ overseas MRO providers approved by the DGCA to conduct work on Indian-registered commercial and general aviation aircraft, in locations such as the UK, Scandinavia, Germany, Malta, Romania, Slovenia, Jordan, Israel, the UAE, Sri Lanka, China, Singapore and Australia. At present, there are a handful of very small times MROs who basically only have AMCs for keeping the helicopters afloat.

 

MAJOR MRO PROVIDERS IN INDIAEMERGING MRO SERVICE PROVIDERS IN INDIA
Taneja Aerospace & Aviation Ltd (TAAL), Pune
Max Aerospace & Aviation Ltd, Bangalore
Air Works India Engineering Pvt Ltd, Gurgaon, Haryana
Air India Limited
Hyderabad Aircraft Maintenance Company (HAMCO)
Indamer Company Pvt Ltd, Mumbai
Arrow Aviation Services Private Limited
Cochin International Aviation Services (CIASL), Kochi
Eaton Aerospace, Pune
Jet Airways
Blue Dart Aviation Limited
Deccan Aviation
Eaton Aerospace
 Lufthansa-Technical of Germany with GMR group
Boeing and Air India
Thales International
Taneja Aerospace & Aviation Ltd
TAAL
Sabena technics of TAT Group, France
Airbus
SIA engineering of Singapore with Wadia group
HAL and Pratt and Whitney Canada (P&WC)
Pipavav Defence and Offshore Engineering Co. Ltd

MROs in India currently provide only primary level of services. For instance, Max aerospace is the biggest MRO in India but will not provide advanced overhauls and services. Commercial airlines use either Dubai or UK for secondary and tertiary level services. The commercial aviation MRO market in India is largely untapped, as there are hardly any third-party service providers with the ability to address the needs of the existing fleet.

To meet the demand in advanced services, several domestic and overseas aviation players are entering MRO industry even with JV and partnership with Indian Companies.

Joint Ventures/Partnerships: With the increase in the number of civil and military aircrafts, more and more global MRO companies are planning to offer engineering services by forming joint ventures with Indian firms. For instance, GMR Hyderabad International Airport (GHIAL), and MAS Aerospace Engineering (MAE), a wholly-owned subsidiary of Malaysia Airlines, have set up a 50:50 joint venture airframe MRO company in Hyderabad.  The company would make an initial investment of US$ 50 million. Another 1,000-acre MRO and aerospace park will be developed near the international airport at Devanahalli. Also, Jupiter Aviation and HAL have already acquired land for MRO purpose in Karnataka. Other JVs are:

•  Boeing with Air India
•  Airbus with Air India
•  Sabena Technics of TAT Group, France with TAAL
•  Timco Aviation Services with HAL
•  MAS Aerospace Engineering (MAE) with GMR Hyderabad
•  EADS with Air India and Jupiter Aviation & Logistics
•  Eurocopter with Pawan Hans Helicopters for Dauphin fleet
•  Concor with HAL
•  SIA Engineering of Singapore with Wadia group
•  Pratt and Whitney with HAL (engines)
•  GE Aviation with Air India (engines)
•  Air France Industries KLM with Max Aerospace
•  Rosoboronexport of Russia and India's Krasny Marine Services for Russian fleet
•  Taneja Aerospace with Air Works Commercial MRO Services Pvt Ltd for maintenance, repair and overhaul (MRO).
• GMR with Lufthansa Technik for first foreign-owned, airport maintenance facility in India.
• EADS with Indian Aero Ventures for airport development and operation, MRO services for aircraft and engines, Aviation training academy and manufacture of trainer aircraft and aircraft interiors.
• Max Aerospace with Air France-KLM for maintenance, repair and overhaul (MRO) facility for aircraft components in India.
• Maini Global Aerospace Pvt. Ltd (MGA) with GE Aviation.
• GMR Hyderabad International Airport Ltd. (GHIAL), a subsidiary of GMR Infrastructure and Malaysian Aerospace Engineering (MAE) has formed a joint venture MAS-GMR Aerospace Engineering Company (MGAE). The joint venture is a third party airframe MRO facility.
• Pipavav Defence and Offshore Engineering Co. Ltd and Airbus SAS have agreed to jointly start an aircraft maintenance, repair and overhaul (MRO) unit in India.
Note: Although a number of JVs/agreements have been signed many are yet to take off

Conclusion
The landscape of the maintenance industry is evolving rapidly, and the stakes are high. Establishing MRO facilities in India will enable operators to achieve quicker service time, savings in operating costs and a decline of foreign exchange outflows. To support the fast-growing aviation industry, a robust MRO is needed, which will not only create large-scale employment but also act as opportunities for the SMEs. Efficient MRO facilities would also attract work from overseas, which will result in overall lift of the economy. India should identify and establish specific segments and strive for domination within these segments. We should look at foreign participation to provide technological expertise and also financial resources. Areas such as support services, quality, customer service and turnaround time are crucial and would decide the performance and rating of an MRO.

MROs IN THE PIPELINE
 Several maintenance, repair and overhaul (MRO) projects are in the pipeline. They include:

  • Aerospace Special Economic Zone near Belgaum in Karnataka
  • Aeropark for the global aerospace and aeronautics industry for the design, manufacture and maintenance of aircraft, Tamil Nadu
  • Aerospace and precision engineering SEZ, Andhra Pradesh
  • MRO being developed by Boeing and the National Aviation Company of India Ltd (NACIL) at Nagpur
  • MRO being planned by Airbus near Delhi

Note: The conversation rate for $: INR has been kept at 1:55 for sake of uniformity and standardization with the previous figures.

Ritika Behal

Ritika Behal

3 Responses

  1. i really liked your articles, our company is market leader in c-parts management. We would like connect with Defence ProAc for such new opportunities in the market.

  2. An excellent researched article on Commercial and defence MROs.

  3. Thank you! This article is very informative. As a leading provider of EWIS testing solutions, MRO is a fantastic opportunity for us.

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