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MRO Strategy for the Airline In-House or Outsource 17 th March 2011.

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Presentation on theme: "MRO Strategy for the Airline In-House or Outsource 17 th March 2011."— Presentation transcript:

1 MRO Strategy for the Airline In-House or Outsource 17 th March 2011

2 Agenda Indian Aviation Growth MRO Market (World and India) Airline Cost – E&M E&M Activites – India In-house vs. Outsourcing (Factor to consider) Reasons for current E&M activities in India Comparison of In-house vs. Outsource

3 Domestic & International air traffic growth – India Passengers in Millions Source: Published data, research estimates CAGR FY 06 – FY 10 : 17 % CAGR FY 06 – FY 10 : 20 % Domestic passenger growth International passenger growth

4 Domestic traffic volume Forecast Source :Airbus GMF2010

5 India fleet Source : MRO Prospector Total commercial fleet size :411

6 Forecast – South Asia & India Source : Boeing CM Source : MRO Prospector No: of aircrafts

7 MRO Market forecast Source : MRO Prospector USD Billions

8 MRO value by activities Source : MRO Prospector India s MRO market is approximately USD 620 million

9 Value of MRO market in India Source : MRO Prospector USD M illions Source : MRO Prospector

10 Typical – Airline major costs The major cost contributors for the airline are –Fuel –Personnel –Acquisition Cost –Airport related cost –E&M Cost

11 E&M Activities E&M ActivitesLaborMaterialTypical Line MaintenanceHighLowIn-house Light Scheduled ChecksHighLowIn-house Heavy Scheduled ChecksHighLowOutsourced EngineLowHighOutsourced ComponentsLowHighOutsourced APULowHighOutsourced Landing GearLowHighOutsourced

12 Current Indian MRO market & Outsourcing locations Outsourcing locations Malaysia Singapore UAE Jordan China France Germany Source : ACAS % of Work

13 In house or Outsource The Major factors that dictate the decision to Outsource MRO activity In house vs. Outsource are:- Maintenance Philosophy Economy of scale / sufficient volume Available resource / – skilled manpower, facility (or build and plan) Regulatory Economic feasibility Tax impacts Favorable policies / schemes Geographic location Existing Service Providers (in-country and regional) Each of E&M Activities needs to be evaluated E&M strategy has to be periodically reviewed

14 E&M Activities Line Maintenance / Light Maintenance Checks –Does not require facility (done within the operating network) –More labor intense, less downtime and lower skills Currently it is better to do in-house Heavy Scheduled Checks (Base Maintenance) –Mostly outsourced due to shortage of facilities –Requires facility –More labor intensive, higher ground time and higher skills –Has good potential for in-country MROs but there are service tax, sales tax, VAT, customs duty Collaboration model coupled with SEZ benefits. Engines / APU / Components / Landing Gear –Outsourced (out of country) –Requires sufficient volume for overhaul shops –More material intensive, high skill –Withholding tax Collaboration model coupled with SEZ benefits for some selective types

15 In-house vs. Outsourcing In-house –Sufficient volume –Complete control –Proactive for uncertainty –Third party revenue –Long lead time –Investment Cost –Inflexible to fleet changes – Downsizing –Inflexible to cater to mix fleet Outsource –Quick startup –Predictable cost (PBTH model) –Contracts – Performance & Penalty –Flexible to fleet changes –Airlines can have mix fleet –Reactive to uncertainty –Could have exit penalties –Taxes: withholding, sales tax,

16 Thank you Contact: Haris M. Ansari General Manager - Corporate Projects Planning Jet Airways (India) Limited Mobile: Direct (Tel): Website:

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