The Hindu Business Line : Needed, overhaul of aircraft maintenance policy

THE rapid growth of Indian aviation has been hailed by all, as competition has pushed fares down, to the benefit of passengers. But as airlines acquire more and more aircraft, there has hardly been a corresponding growth in maintenance and repair facilities.

Industry-watchers fear that the lack of engineering facilities to support the current boom may mar the growth in domestic aviation in the long term. Unfortunately, the private entrepreneurs who have set up maintenance facilities are unable to exploit the opportunities.

Industry players caution that inadequate maintenance facilities could undermine the growth of the industry. They have sought a review of the prevailing government policies, so that more players enter the market and adequate capacity for maintenance and repair work is set up in the country. Given the right impetus, MROs — or maintenance and repair organisations — could emerge as crucial revenue generators for the country.

A study by Frost & Sullivan estimates that the global market for MROs is valued at $37 billion. Asia accounts for an eight per cent share of this market, at $8.1 billion. But the Indian MRO business is pegged at just 7.6 per cent of the Asian market, at $615.3 million, the report says.

The Indian maintenance and repair segment presents a fractured picture. While the two public sector airlines, Air-India and Indian Airlines, have full-fledged maintenance and repair arms, these facilities have just enough capacity to meet their own needs.

Jet Airways and, to a lesser extent, Blue Dart Aviation, are the only private carriers that have developed their own maintenance and engineering facilities. The new breed of private airlines has tied up with foreign MROs to meet their maintenance requirements. This appears to be at the cost of domestic dedicated maintenance and repair organisations. Thanks to the government policies, these home-grown operators are unable to take advantage of the new opportunities.

Local repair cos at disadvantage

Air-India and Indian Airlines have developed full-fledged facilities for line maintenance (day-to-day servicing) as well as the mandatory periodic checks (C and D checks). However, their capacity for such maintenance work is limited to their fleet requirement alone. According to an official, even these facilities would prove insufficient when the airlines take delivery of their new fleet of aircraft.

Jet Airways, on the other hand, has one hangar (leased from Hindustan Aeronautics Ltd) in Bangalore. And, following the allocation of a plot of land at Mumbai, the airline has now set up a two-bay hangar in Mumbai, where it will shift much of its maintenance and repair work.

The private maintenance and repair organisations, such as Air Works India and Max AeroSpace & Aviation Ltd, point out that they operate at a disadvantage, with the existing tax structure, land allotment, and policies relating to Customs duties and foreign direct investment all loaded against them.

Max AeroSpace & Aviation, which was allocated land at the Juhu aerodrome (in suburban Mumbai), says its location precludes it from taking on maintenance work for larger aircraft. Larger passenger aircraft cannot land at the small airstrip at Juhu, which means the company can only carry out small maintenance and repair work that the big MROs are not be interested in.

Apart from their locational disadvantage, the private MROs point out that they are not allowed to develop larger hangar facilities, which also prevent them from working on larger aircraft.

Mr Bharat Malkani, Chairman, Max AeroSpace, points out that the services of Indian MROs attract a service tax of 10.2 per cent and a value added tax of 8 per cent. Considering that the cost of spares and labour are on a par at home and abroad, MROs based abroad have a 11 per cent benefit.

And while the Indian MROs are subject to these taxes, the services of those based abroad are exempt from Customs duty, he says.

Shortage of engineers

Another problem triggered by the sharp growth of aviation in the country has been the sudden demand for trained engineers and technicians. Under the circumstances, these organisations have to deal with a high level of poaching by competitors, who lure trained technicians and engineers with the promise of better financial packages.

Mr Ravi Menon, Director, Air Works India, suggests that one way to meet the demand would be to hold the DGCA's (Director General of Civil Aviation) qualifying exam more frequently. He proposes that this work could even be outsourced to an IT firm.

Further, he calls for a more investor-friendly environment. The policy framework governing the sector should be reviewed and the uncertainties dogging the industry removed. For instance, if lease rentals are hiked with retrospective effect, the service provider has to take a huge hit, he says.

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