MRO Opportunities and Challenges – India

Maintenance Repair and Overhaul (MRO) includes all those activities that are undertaken by aircraft owners to keep their aircraft airworthy. Usually, all MRO job works are not done in-house by airlines so that they can concentrate on their core domain of generating revenues by flying passengers and cargo. Individual aircraft owners, on the other hand, lack the economic and technical resources needed to carry out the MRO activities themselves. Hence, clusters of MRO Companies that offer repair services organically come up where there is a high throughput of aircraft to offer aviation MRO services to airlines and private jet owners.

Singapore and Dubai are the major MRO hubs in Asia. India lies roughly between them and offers a great MRO opportunity due to its geographical location, proximity to the international shipping lines and its own massive intrinsic aircraft fleet. As per the Handbook (Aviation) 2018-19 released by the Directorate General of Civil Aviation (DGCA) on its website, India has 1,940 flying machines registered with them. These include both public and private aircraft of all types. Hence India’s intrinsic inventory of aircraft is colossal and can support a vibrant MRO Industry. However, the Indian MRO industry faces some challenges in providing MRO services to the vast number of aircraft due to technical, human, legislative and financial reasons. Nonetheless, every challenge can be an economic opportunity if properly exploited.

CHALLENGES

MRO Hubs: MRO hubs are concentrated in Hyderabad, Bengaluru, Mumbai and Nagpur. These airports have a high passenger throughput. As a result, the airport parking space being scarce making it expensive for an aircraft coming for overhaul. This raises the cost of repairs. Since there are several MRO companies at one place, they try to pull the limited pool of trained technicians towards them resulting in high employee turnover and higher wages. Since the number of aircraft being serviced at one airport is large, the need to stock spares and inventory also goes up raising warehousing and inventory holding costs. Consequently, the high concentration of MRO companies at these places makes them uneconomical. It results in an inequitable distribution of job opportunities in the country and migration of technical labour.

Taxation: In India, the MRO industry attracts a GST of 18 per cent, whereas, Sri Lanka charges zero tax. Malaysia and Singapore charge seven per cent tax. Thus, it is quite likely that Indian aviation companies may like to deploy their aircraft in such a way that they undertake or satiate their MRO needs overseas in order to enjoy the arbitrages of taxation, cheaper spares and economies of scale. It is quite possible that small jet owners and local aircraft operators may not be able to plan their itineraries with such meticulousness. They will perforce patronise Indian MRO companies and pay higher taxes.

India’s intrinsic inventory of aircraft is colossal and can support a vibrant MRO Industry

Spares: During the survey, it was found that the aircraft manufacturers expect that the MRO companies replace components from the same companies which manufactured the aircraft. So, even if there are other companies who offer similar components that have been approved for the aviation sector by the aircraft Original Equipment Manufacturers (OEM), the MRO companies prefer to use components from companies that were used in the initial manufacture of the aircraft. There is a need for the Indian aviation sector quality assurance agencies to take a proactive step in this direction by assuring the stakeholders about the fitness of such replacement components manufactured by companies whose products were not used by the OEMs.

Forensic Trail of Pre-used Parts: There is a high possibility of using pre-used spares. This is only possible if the usage, serviceability train or record of each component is diligently captured and it should be independently verifiable through forensic science. Thus, MRO companies will only use those parts that have genuine, verifiable residual life. The forensic tests will include an audit of the genuineness of the component. In addition, state-of-the-art test-benches are needed to check the metallurgy and the residual performance capability of the components as they age. Employment of big data, component calibration charts that can be prepared by the OEM and test labs, will enable the MRO companies to estimate the residual life of the components so that the cost of MRO can be reduced.

Equipment Life Calculation: Most aircraft manufacturers are based in areas that have cold weather. Thus, they are free of dust, loose sand and excessive humidity. Consequently, the life of aircraft and components is calculated as per the manufacturer’s weather and environmental conditions. When these machines operate in the tropical environments such as India, their performance and useful life gets reduced. Hence there is a need to predict the performance parameters of these components based on the tropical conditions. It is a well-known fact that a rise in temperature causes enhanced wear and tear of moving components. Even the lubricants lose their viscosity when mixed with sand, dust and moisture leading to premature failure or reduced life of components.

Maintenance work at GMR Aero Technic

Prediction of Next Overhaul Requirements: Today, the aircraft OEMs have a huge database and statistics of the current state of usefulness of aircraft components. Consequently, they can predict the likely date of component overhaul or replacement. This data, however, is only with the aircraft manufacturers or those OEM suppliers who have invested in Research and Development in this field. Large-sized MRO companies can predict this data using specific algorithms. Consequently, they can estimate and negotiate a component’s delivery using the Just In Time (JIT) concept. This way they will reduce their inventory holding costs and offer cheaper MRO services. However, smaller MRO companies cannot have access to such technologies and they will not be able to offer services at competitive prices. They will eventually be driven out of business. Nonetheless, all these challenges offer new opportunities to the Indian MRO companies.

OPPORTUNITIES

Balanced National Growth by Regional Hubs: The National UDAN project connects to remote parts of the country through the hub-and-spoke model. The hub airports of this scheme now need to be developed as MRO services providing centres. Low-end MRO tasks can be carried out here and the parking space is cheap. This will encourage the local aviation sector technicians to stay nearer their homes and even settle for lower salaries. Lower overall costs will induce MRO companies to relocate to remote locations. The state government’s revenues too will go up due to the State’s GST and also lead to better regional development. Such decentralisation of MRO services will lead to better economic development of the fringe areas of the nation.

The MRO industry in India is sitting on the cusp of a great economic opportunity

Taxation: The Government has to reduce the tax on MRO activities. In fact, if it is on a par with Sri Lanka, it will wean other foreign aircraft owners to patronise Indian MRO companies. This will enhance employment opportunities for trained Indian engineers, scientists, management and ITI graduates and ITI graduates. The loss to the state coffers due to reduced taxation may bring more gain to the masses by generating employment. This can be proved by a Social Cost Benefit Analysis.

Local Spares: There is a huge potential for MRO companies to set up credible testing facilities. They can be used to prove to the aircraft owners that locally manufactured aircraft components are on a par with what the OEM has used. Once faith in the test lab certification is established then import substitution will take place. This will swing the balance of payments in India’s favour.

Forensic Labs: Just like Aviation Law is a subject by itself, there exists a great opportunity to set up Forensic Labs that offer specialised services to the aviation MRO sector. These labs will have a document section to ascertain the integrity of the documentary evidence that accompanies a component in terms of its age, wear and tear, repair and residual life data. The mechanical section will check a component’s physical condition against wear and tear graphs that need to be created if not already available. The chemical section will check the residual life of the aviation fluids. The sections together will be able to predict the expiry date and the residual life of aircraft components and accordingly, optimise the MRO bill.

Usage Prediction: Today, it is possible to integrate 5G technologies to transmit big data generated about the performance parameters of critical aviation components using embedded systems or machine learning. This data is then crunched by Artificial Intelligence programmes and the component effectiveness can be predicted. Based on the latter, demand for replacement components and technical manpower can be placed along with the repair bay space-cum-time slot. This will holistically minimise the MRO costs. The combination of these tools will help the companies to optimally bid for and win tenders.

This facet will enable IT engineers to set up shop even away from the MRO hub. All they need to do is to buy this data from the aircraft OEMs and operators to predict the demand and sell the analysed output to smaller MRO operators who cannot afford to generate such commercial leads in-house. The MRO industry in India is sitting on the cusp of a great economic opportunity; it has to harness its technical manpower, employ new emerging technologies such as embedded systems, and reduce taxation to earn handsome profits by providing MRO services globally.