Air India eyes giant MRO facility at Nagpur to garner revenue

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New Delhi: Air India is eyeing a Rs.1,000 crore ($161 million) maintenance repair and overhaul (MRO) opportunity in the country, which it intends to garner from its soon to be completed facility at Nagpur. To be handed over to the flag carrier by Boeing, this will be Asia’s largest MRO facility and is expected to be completed by mid-2015.

“Civil work is progressing fast at the facility and state-of-the-art machinery is being installed. The facility should be operational by mid-2015,” Air India chairman and managing director Rohit Nandan told IANS.

“The facility will be used for in-house as well as third-party work to generate additional revenue,” he added.

The MRO project, adjacent to the Nagpur airport, is being erected as a contractual offset for Air India’s mega order for 68 Boeing aircraft placed in 2006. The facility will be handed over by Larsen and Toubro (L&T), which has been contracted by Boeing, after the commissioning of key facilities and equipment like water, electricity and pressurised systems.

The facility, spread over 50 acres, will have two hangars. It has been designed to offer maintenance and overhauling services to 300 aircraft a year. The hangars can house three B-787s or one B-777 at a time.

Air India plans to use the MRO as a separate profit-making subsidiary of its engineering division – the Air India Engineering Services Limited (AIESL) – which was envisaged as part of the airline’s turnaround and financial restructuring plans.

Nearly 7,000 employees of Air India have been assigned to move to AIESL.

Nandan said that apart from the Nagpur facility, the company will also be commissioning its Thiruvananthapuram MRO that will service Boeing-737 aircraft.

The airline has a separate contract with General Electric for a $89 million engine MRO for in-house and third-party maintenance work.

The airline had been earlier handling maintenance work for airlines like Bhutan’s Druk Air.

Even the civil aviation ministry, in its draft aviation policy, has attempted to boost a sector facing stiff competition, as closeby destinations like Singapore, Dubai or Colombo offer 30-40 percent cheaper facilities to Indian aircraft.

India’s aircraft maintenance sector has for long been hampered by regulatory and tax hurdles, as an attempt to encourage domestic production of aircraft spares led to higher import duties and other restrictions.

This jacked-up the overall cost of aircraft maintenance in India. The country, which currently has around 400 aircraft, is set to increase its fleet size by several times till 2020 and beyond.

In the last two budgets, the finance ministry eased taxation on imported spare parts and the time period under which they have to be used. This is expected to continue or get additional support from the ministry.

Additional support to the sector might emerge from the government’s flagship ‘Make in India’ initiative, under which global areospace majors are being attracted to set up manufacturing facilities in India under joint ventures (JVs) with Indian companies.

According to a civil aviation ministry report last year, the Indian MRO industry is expected to triple from Rs.2,250 crore in 2010 to Rs.7,000 crore by 2020.

This is however minuscule when compared to the MRO business per annum in the UAE ($1,565 million) and China ($1,956 million).

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