- Education And Career
- Companies & Markets
- Gadgets & Technology
- After Hours
- Banking & Finance
- Energy & Infra
- Case Study
- Web Exclusive
- Property Review
- Digital India
- Work Life Balance
- Test category by sumit
Needs A Few More Fixes
Photo Credit :
Why is that the MRO business in India has failed to take off? Last week, I met Vivek N. Gour, managing director of Airworks, a leading provider of aviation maintenance.
Airworks is the only general aviation company in India that seems to have got anywhere in the maintenance, repair and organisation space so far. They are doing line maintenance and some of the lighter checks for Jet, Kingfisher and Go Air.
As I understood it from Gour, who was the former CFO of Genpact, and a few others, there are a few reasons why India has not really got anywhere with this. One, the country is a late entrant in this business. Competition in the region is already intense, with Dubai, Jordan, Sri Lanka, Malaysia and Singapore offering similar services. Many of these players have been around for a while and enjoy the trust of Indian and foreign carriers in the region. They offer pretty competitive rates.
Typically, airlines tend to use at least two vendors for MRO. And the nature of the business being the way it is, credibility is what counts. It is tough to attract new customers and it is a business where "old is actually gold". It is even tougher to lure existing customers from established vendors. MRO companies need required certifications (European Airline Safety Agency, for one) before they can win the trust of airlines. Many airlines will go for the more credible and known MRO vendor rather than try out a new vendor even if it offers a low rate. As safety is paramount, most airlines will not cut corners in this area. Even Indian carriers — many of whom are in financial trouble — will not easily shift loyalties. Many Indian carriers have signed long-term deals with some of the MRO vendors in the region.
Then — just like with aviation turbine fuel, or ATF — there is a taxation issue. As things stand in India, if an MRO firm imports the spare parts, it pays a hefty 30 per cent import duty, but if the airline imports the part as the owner of the aircraft, it pays no tax. None of the other countries levy such a tax on MROs. This can be quite a hassle since it means the airline imports the parts, gets them across to the MRO operator, and then they are replaced. Not only is it an unnecessary hassle, it also makes it difficult for an Indian MRO to attract foreign airlines. Who would carry their spares (what and how much one needs is not known prior to the exercise anyway) and come to an Indian MRO firm to get their aircraft serviced? If the government wants this business to take off, it definitely needs to rethink at this.
But attracting airlines from other countries is not easy for other reasons as well. This is because where land is available to set up the facility, customs and immigration clearance is not available, and where customs and immigration clearance is available, there is just no space. Airworks, for instance, is trying to get customs and immigration clearance at Hosur near Bangalore where the company has its hangar for A320s, B737s and ATRs. As it does not have customs and immigration facilities, aircraft cannot land and be cleared. The company is trying its best to get this done, but till it does, attracting foreign airlines will remain a pie in the sky. (Airworks' MRO business for jets remains just 10 per cent of its total turnover as of now, although it has plans to expand it by adding facilities for Embraer and Bombardier.)
Rules and regulations in India, in any case, do not allow speedy resolutions of problems. The government does not encourage setting up of forward stocking locations. So sometimes, if an aircraft develops a snag and needs some parts, it may have to be brought in from Europe or the US. It will take several days before the aircraft can be put to use again.
Recently, a Continental carrier flying out of Delhi waited for almost three days — that too after boarding — before some parts it needed arrived from the US.
Moving parts within the country is no easier. Industry representatives say sometimes it is easier to bring in a part from, say, Germany rather than move it through the Octroi Naka of Mumbai!
(This story was published in Businessworld Issue Dated 19-12-2011)