Massive aircraft orders propel $5 billion MRO opportunity in India

Air India, Indigo, and Akasa Air have collectively placed orders for approximately 1,200 aircraft to be delivered in the coming years, creating a $5 billion opportunity for India's aircraft maintenance industry.

At AAR-Indamer's Nagpur facility, each aircraft undergoes a comprehensive maintenance procedure known as a C check once every three years. With over 700 aircraft currently in service, at least 200 of them will require heavy maintenance annually, presenting a significant opportunity for the domestic Maintenance, Repair, and Overhaul (MRO) industry.

Jyotiraditya Scindia, Minister of Civil Aviation, emphasized the potential for India to become a hub for MRO services, not only for Indian airlines but also for international carriers. He stated, “In the days to come with Asia becoming the centre for international traffic, I believe the epicentre for Asia is India, and therefore India is going to become a service centre from an MRO perspective not only for Indian airlines but for international airlines."

A C check typically grounds an aircraft for 4 to 5 days. Utilizing domestic MROs not only proves cost-effective for airlines but also ensures a quicker turnaround compared to outsourcing to foreign facilities.

Pieter Elbers, CEO of IndiGo, highlighted the advantages of avoiding ferrying planes abroad, emphasizing the cost-effectiveness and efficiency gained by relying on domestic MRO facilities.

However, the AAR-Indamer facility currently focuses on airframe checks, representing only 10 to 15% of the overall maintenance process. The remaining 85% involves overseas MROs, covering critical components such as engines, aircraft landing gears, thrust reverse systems, and radomes—areas that domestic players are aiming to address.

Rahul Shah of AAR Corporation outlined plans for expansion, including the construction of a 15-acre facility with additional hangars and capabilities for more extensive repairs.

He stated, “If you look at our business plan, once this joint venture turns profitable, we will build another 15-acre facility which may have another 7 hangars with component capability or more extensive repairs done in-house. The objective is to do everything in India, not send anything abroad."

The cost breakdown of MRO services indicates potential savings for airlines using Indian facilities, particularly due to the lower cost of skilled labour. Industry estimates suggest that skilled labour, which may cost $80 per hour in the US, can be obtained for approximately $30 per hour in India.

The Indian government's support is evident in eased regulations, including a reduction in GST on MRO services from 18% to 5%, zero import duty on specific components, and an extended duration of six months for foreign aircraft undergoing MRO work in India.

Experts believe that with these favourable conditions, India has the necessary elements to establish itself as a global hub for aircraft maintenance.