MRO - INDIA : Challenges Ashwani Sharma Quality Manager – Air India Express Ashwani Sharma Quality Manager – AI Express

Hurdles being faced by Existing and prospective MRO operators. MRO - India Hurdles being faced by Existing and prospective MRO operators. Ashwani Sharma Quality Manager – AI Express

Quality Manager – AI Express MRO – Opportunities started in 2005 at Paris Air Show Between 2005 and 2007, Airlines operating in India stunned the world of aviation by placing orders for hundreds of aircraft worth Billions of dollars. Analysts were surprised by the sheer audacity of new start up carriers placing large orders (100s of aircraft). Ashwani Sharma Quality Manager – AI Express

Quality Manager – AI Express Airline Orders* Value USD AIR INDIA (AI, IC, AICL, Alliance) 111 (27 B787 + 23 B777 + 18 B737 + 43 A320 Family) 11.0 Kingfisher 50 (20 A320 + 10 A330 + 5 A340 + 15 A350XWB) 10.0 INDIGO 100 A320 8.0 GO Air 10 1.0 Jet Airways 66 (18 A330 + 29 B737 + 9 B777 + 10 B787) Spice Jet 20 B737 2.0 TOTAL 357 42.0 BILLION Ashwani Sharma Quality Manager – AI Express

Quality Manager – AI Express Sensing the tremendous opportunity. Many established players scrambled to set up shop to make huge profits that beckoned enticingly. Air India – Nagpur Air India – New Delhi Lufthansa Tecknik – Hyderabad Jet Airways, Paramount, etc Ashwani Sharma Quality Manager – AI Express

Quality Manager – AI Express MRO – India Analysts predicted that starting with a modest USD 250 Million, the Indian MRO market was set for an exponential growth as below : USD $1.17 billion in 2010 USD $2.60 billion by 2020 -Frost & Sullivan Source Aeronautical Soceity of India Ashwani Sharma Quality Manager – AI Express

Quality Manager – AI Express MRO – India The global MRO market was estimated to be worth between $25 billion to $30 billion a year . Inventory in the airline industry’s supply chain was projected to be excess of $50 billion. (Source : FAA Report 2003) Ashwani Sharma Quality Manager – AI Express

Quality Manager – AI Express MRO – India One of the major factors that influenced the decision of established players to set up MROs in India was, of course, abundant supply of highly skilled, English language proficient and eminently competitive manpower. Ashwani Sharma Quality Manager – AI Express

Quality Manager – AI Express PRESENT STATUS Of the dozen odd prospective MRO projects only 3-4 have materialized as below AIR INDIA – Boeing at Nagpur GMR – MAS at Hyderabad CIAL at Kochi AIR WORKS at Hosur Ashwani Sharma Quality Manager – AI Express

Quality Manager – AI Express As a result of these large a/c orders placed in 2005-2007, commercial scheduled airline fleet size was to treble from 200-250 in 2005 to approx 650-700 in 2011. By a conservative estimate, approximately 500 narrow body aircraft would clock close to 2 million hours annually resulting in 200 ‘C’ checks per year. NOTE : Data does not include ATRs. Ashwani Sharma Quality Manager – AI Express

%age of ‘C’ checks done at MROs outside India. Presently almost 60 % of all ‘C’ checks on narrow body fleet are being outsourced to MROs located outside India. Only two of the five big operators have in-house capability to accomplish ‘C’ checks. NOTE : Data does not include ATRs. Ashwani Sharma Quality Manager – AI Express

Flight of Foreign Exchange Estimated cost of ‘C’ check = USD100,000 Total outgo for 160 ‘C’ checks outsourced would be an astronomical sum of USD 16 Million per annum. Ashwani Sharma Quality Manager – AI Express

Quality Manager – AI Express MRO – Challenges Government Issues – Taxation problem Lack of space – Prohibitive cost - Metro Airports Lack of Infrastructure – Non-metro Airports Vendor absence from India Regulatory Issues Ashwani Sharma Quality Manager – AI Express

Quality Manager – AI Express MRO – Challenges Government issues – Service tax Customs duty Value Added Tax Taxes and other duties would escalate the cost of a ‘C’ check by 43% Ashwani Sharma Quality Manager – AI Express

Quality Manager – AI Express MRO – Challenges Metro Airports Property Issues – Scarce land High aircraft handling charges Highest landing fees Proposed ATR shifted from Nagpur to Singapore Ashwani Sharma Quality Manager – AI Express

Quality Manager – AI Express MRO – Challenges Non – Metro Airports Lack of Infrastructure No direct flights from USA or Europe Ashwani Sharma Quality Manager – AI Express

Quality Manager – AI Express MRO – Challenges VENDORS - OEM – Back Shop Support Negligible Vendor or OEM presence in India Increased cost of spare part acquisition High probability of time penalties while undertaking contract work Ashwani Sharma Quality Manager – AI Express

Quality Manager – AI Express MRO – Challenges Regulatory Issues FAA /EASA DAR/DER’s or their DGCA equivalent not available India Probable logistic challenge Information flow hurdle Ashwani Sharma Quality Manager – AI Express

Quality Manager – AI Express MRO – Challenges Infrastructure Lack of specialised infrastructure (Eg : Dedicated painting hangars, L/G Retraction Check Bays etc.) Cost / Turn-around time overruns Reduction in capability scope Ashwani Sharma Quality Manager – AI Express

Quality Manager – AI Express MRO – Challenges Infrastructure Congestion of space in Front line airports Lack of proper infrastructure in secondary airports Increase in cost Ashwani Sharma Quality Manager – AI Express

Quality Manager – AI Express MRO – Challenges Competition Many players entering the market Many short term challenges while setting up facilities Ashwani Sharma Quality Manager – AI Express

Quality Manager – AI Express MRO – Challenges Competition - OPPORTUNITY Many players will stimulate growth Increased chances of synergy Healthy competition will energise the market Ashwani Sharma Quality Manager – AI Express

Quality Manager – AI Express THANK YOU – QUESTIONS? Ashwani Sharma Quality Manager – AI Express