Wednesday, May 29, 2024

Indian MROs Making a Strong Comeback Post-Pandemic, But is it Enough to Meet Demands?

By Swati Ketkar

India is on a cusp of an aviation revolution in 2024, with record-breaking numbers hitting the passenger traffic charts every passing day, India’s domestic traffic has crossed the pre-pandemic levels a long time back. With passenger demand in full-swing, airlines are happily making profits and government is on roll with new policies and airport expansion and modernization spree, the third arm of aviation, Maintenance, Repair and Overhaul (MRO) sector is making a strong come-back in India post-pandemic.

India’s MRO projections indicate a potential revenue of $40-55 billion, up from around $18 billion, towards the turn of this decade, according to CRISIL. This forecast is in sync with India’s growth story emerging as the third largest aviation market globally which will in turn drive the expansion and growth of MRO services to meet the ever-rising demand.

IATA predicts that India will surpass UK to become the world’s third-largest aviation market by 2026, and as the domestic fleet size increases to meet the demands, India will witness a surge in MRO demand as it is a crucial support for any airline’s operations and safety.

The global aviation landscape is shifting towards Asia with India at the forefront of this transition. With the increase in aircraft influx by domestic carriers naturally, the demand for MRO services is bound to increase at an exponential rate, as hundreds of significant maintenance checks will be clocked annually. This includes not just the MRO requirements but also the maintenance needs of ageing fleet, exploring the teardown market and expanding India’s defence purchases. Let us dive deeper into the needs and demands of Indian MRO sector, where it lack in comparison to its foreign counterparts and how can it be rectified…

Will foreign OEMs help third-party MRO business in India?

Almost every day we hear the news of some new MRO facility opening in the country, some new aerospace manufacturing contract being signed or a new aircraft maintenance engineering school (AME) school opening in India. The last few days have witnessed a surge of aerospace and MRO news starting with Safran’s plans of opening its largest LEAP MRO facility in Hyderabad in 2022. Soon after Safran various foreign OEMs like Thales, GE Aerospace and Rolls-Royce are exploring their options of expanding their MRO business in India.

Although this seems like a very attractive prospect for India from a global front, the question arises will this investment help foster the third-party MROs in India? Or will it kill their business and drive the third-party MROs out of competition? It is true that global OEMs establishing multi-million facilities in India will definitely help in building a strong ecosystem for the country’s aviation sector and create jobs, but any likely benefits accruing to indigenous third-party MROs and helping them move up the global MRO value chain remain to be seen, says D Anand Bhaskar, MD & CEO, Air Works Group. It will have 50% of the expected benefit, says Yogendra Kumar, Vice President, Planning and Logistics at AAR-Indamer Technics. He further goes on to say that India’s workforce will become skilled with knowledge transfer and it will generate employment but it will not lead to technology transfer, still it will remain with them.

However, Ashok Gopinath, President of GMR Aero Technic differs in his opinion. Gopinath feels that OEMs establishment in India can potentially benefit Indian third-party MROs in terms of increased business opportunities like a surge in the number of aircraft in operation, creating more opportunities for MRO services and contracts related to maintenance, component repair, and overhaul services for engines and other aircraft parts. OEMs typically have complex and extensive supply chains. Local MROs can become part of these supply chains, leading to improved logistics and cost efficiencies,” adds Gopinath. “Integration with OEM supply chains can result in better access to spare parts, tools, and equipment, reducing lead times for MRO services,” he further adds.

With this, Indian MROs can become last-mile connectivity supporting international OEMs.

Are OEMs engaged in Indian MROs capability development?

If we look at aerospace manufacturing sector, we see an investment from major international OEMs such as Airbus, Boeing and Lockheed Martin. “These production hubs are becoming sourcing centers for their global assembling and production facilities,” says Gopinath.  Gradually, OEMs are investing in capability development in India by increasing their supply chain footprint in India.

In the case of MROs, Safran is setting up one of the biggest Leap Engine MRO shops in Hyderabad, India to commence operations later in 2025. This will meet the Engine MRO requirement largely in the commercial airline industry. Component OEMs such as Thales are also setting up MRO shops in India while some others are exploring the market. Gopinath feels that Indian MRO industry needs more investment in this vertical. Yogendra Kumar too feels that OEMs are contributing their bit to the capability development by hiring and training Indian talent pool.

So far, engine overhaul facilities are being established in India.  Besides that, number of component OEMs are also exploring possibilities.  Sharad Agarwal, CEO of AI Engineering Services sums up the discussion by stating, “With exponential increase in Indian aviation space, many OEMs shall find it profitable to setup shop in India.”

Technology transfer in civil MROs – the bitter pill

Just recently Safran has expressed his willingness for 100% technology transfer of a jet engine to India for powering India’s fifth-generation stealth fighter aircraft with a primary focus of aligning the engine specifications with India’s future fighter jet requirements. Sharing of technology is an integral part of any collaborative effort regardless of civil and/or defense MRO. Of course, the sharing can take various formats as long as at the end of the day, the IPs remain protected. And India has certainly come a long way in the past decade with respect to IP protection.

According to Gopinath such deals will not just benefit both the civil and defence MRO industry but will also help in meeting the long-term requirements of the industry and support the anticipated growth.

Given the growing demand in India, there is a very high potential, which will encourage OEMs to invest in India using transfer of technology. Echoing Gopinath’s views, Agarwal adds, “By overhauling engines in India, entire ecosystem is created for the MRO, and lots of marginal jobs are available for local third-party MRO to thrive on them.”

Bhaskar however feels that it depends on the OEMs to evaluate the business case for technology transfer. “Although it is clear that the ones who move first and fast, stand to gain the most,” he adds.

When we look at the technology transfer in civil MRO through a different lens, it is too little and too late, says Kumar. “Today if we want to make drone, aeroplane we don’t have the technology. Even small components like rivets and washers are also sourced from outside the country,”

Industry experts and MRO stakeholders in India feel that this picture should change and fast. Government has already stepped up the process by establishing a final assembly line for Helicopters in India in collaboration with Airbus. Now its just a matter of time before other manufacturers follow suit…Or is it?

From India’s point of view, the business case, the market and the ensuing growth are all there. The industry and the government have made the ask clear several times. Bhaskar points out that, “It is now up to the aircraft manufacturers to respond to the country’s attractiveness with a strategy that lets them access and partner this growth for their own future.” Gopinath asserts that with this significant development, India’s recognition as a strategically important nation in the aerospace sector and as India continues to evolve, further developments and initiatives from other aircraft manufacturers such as Boeing and Lockheed Martin may become intense

With the major aircraft orders tilting towards India, M. P Sajumon, Head, CAMO at AirAsia India says it is but natural for other OEMs to also follow suit. “What one must ponder is are we organized to accept these kind of behemoth orders in the future too in terms of Skillset availability,” he asks questioning the current MRO ecosystem in the country. Agarwal too feels that at least 3-4 assembly lines are needed globally just to meet the aircraft demand from India. “I am looking forward to see at least one big player setting up its assembly line in India,” Agarwal adds.

Almost 80% of domestic airlines’ MRO requirements are met outside India, when will this change?

 New MRO joint ventures are being signed in India; new MRO hangars are being established at major airports to meet growing demand. Many state governments have introduced reformed aerospace policies to attract more MROs and aerospace companies to establish bases in different pockets of the country. The key question here is, in spite of this change, domestic airlines send their aircraft to neighboring nations like Singapore, Myanmar, Vietnam, etc for maintenance needs. For this to change, capacities have to be set up in the country in partnership with Indian entities to ensure that Indian MROs can graduate up the global aviation value chain, exclaims Bhaskar. “For a significant percentage of Indian MROs, this is impossible without the OEMs support, given that aviation has global ecosystems that also require inordinately heavy financial commitments,” Bhaskar further adds.

Bhaskar further urges the government to bolster access to and reduce the cost of funds for such investments to take shape in building the infrastructure which MRO Hub requires.

Non-rationalization of tax and duty structures with regional aviation markets is also a handicap that Indian MROs are having to battle.

Gopinath states that this situation will now change with OEMs starting to invest in India. “Safran MRO will support the maintenance of leap engines which otherwise is a service to be imported from other countries. Still, Investment in component MRO is required as it is the major segment, which is being sought in the industry by customers after Engine MRO,” Gopinath adds.

Prima facie India has MROs in HYD, Hosur, COK, Del and Nagpur. With the enormous aircraft orders for Indian market, this is definitely not sufficient to cater for the MRO requirement in the next 4-5 years’ timeframe. “Hence a need for additional MRO is definitely given,” adds Sajumon. He further echoes Bhaskar’s view by stating that in terms of volume, it is not the airframe MRO requirement which is mostly going outside the country, but the elephant in the room is component MRO requirement. This is where the next level of investment and focus needs to be built. 

Agarwal points out at lack of investment push for component and engine MROs in India. He says, “For the Indian MRO jobs to be retained within India, major investment push to setup engine and component overhaul facility within India and this may take many years.”

Yogendra Kumar points out the root cause of this issue as ‘lack of technology transfer.’ He says, “Indian MROs are doing their best. Indians are very disciplined and punctual. But we haven’t got into component and engine MROs yet due to zero technology transfer.”

Indian MROs versus Foreign MROs – Where do we lack?

Indian MROs are at par with their foreign counterparts in terms of aerostructures. Almost all of the airframe maintenance work for domestic as well as some foreign airlines is being carried out in India. The presence of high-quality infrastructure is a critical factor in attracting both domestic and international clients. Well-equipped facilities contribute to the overall competitiveness of Indian MROs. The fact that the Indian MRO market is attracting international airlines from regions like the Middle East and Southeast Asia suggests a growing reputation for quality services.

“GMR Aero Technic’s has demonstrated these abilities strongly which led to the majority of the regional carriers to opt for it as their preferred MRO,” says Gopinath.

But the MRO progress is stalled on component and engine MRO front. “These segments are bundled with OEM-denominated approvals with heavy capex and Ips,” pinpoints Bhaskar. “These are proving to be entry barriers and need to be addressed,” he adds. Adding to this point, Gopinath says that even though Safran MRO will serve the requirements of engine MRO market in India, there is a need for the development of component MRO facilities in India, which may take over a decade to mature.

Agarwal too feels that India is far behind in this space (component MRO) and it might take years and lot of investment for India to be self-sufficient in these terms.

Interestingly component MRO and Engine MRO also happen to be same areas that are poised to register a bigger chunk of growth in the coming years, as per industry experts and reports.

India has an abundance of labor, but is it skilled?

Airbus has predicted that India will need about 47,000 technical staff over the next two decades to meet the growing demand. But for India to become sufficient in skilled labor for aviation maintenance, the perception of this profile and work needs significant improvement in order to attract passionate resources, says Bhaskar. Gopinath further stresses this point with an example. “We have students who are interested in pursuing a career in Aerospace Engineering. However, there is a deficit of skill-based training and expert faculty in the domain which impacts industry readiness to have an AME workforce.”

Due to this deficit of skilled talent, whenever there is a churn in manpower, it is the same set of the leadership team that donnes a new badge, says MP Sajumon. “Reason being a) lack of experienced senior professionals to take over at the next level.  b) Dearth of industry-led training programs to groom the next level of professionals at every level,” he further states.

To solve this problem at the grassroot level, GMR Aero Technic has started a Centre of Excellence for Aircraft Maintenance Engineering with two parallel AME Licensing certifications (DGCA and EASA). The GMR School of Aviation has partnered with industry experts such as Airbus and other OEMs and will play a pivotal role in developing a skilled workforce with practical on the job training to fill the gap in the talent pool of the MRO sector as they will be immediately employable.

AIESL has also ventured forward to fill this gap by starting a scheme for ‘finishing school’ in collaboration with Boeing for further skilling manpower. 

The above schools will cater to the engineers and technician populace to fill in the basic MRO needs in the future.  “But there is another key area where there is dearth of skilled manpower – CAMO, support function, Quality or Contracts,” highlights Sajumon. He further feels that aviation and aerospace schools should focus to build over a pool of professionals to take over the senior leadership job roles and responsibilities as India grows to be the third largest aviation markets in the world.

Bringing forth the cost factor, Bhaskar says, “The cost of trainings and certifications must be reduced from their current exorbitant dollar denominated levels, our indigenous regulatory framework must become identified on par (level playing field) with international ones (such as EASA) for incremental efficiencies.”

India churns out at least 5000 aircraft technicians from basic 147 schools every year.  To further skill them, requires experience within an MRO so as to qualify them for AME license or shop certifying staff

 I am sure, India has a beautiful pool of highly skilled manpower for aircraft maintenance needs,” Agarwal concludes.

Swati Ketkar is an aviation journalist and writer, currently freelancing for various domestic and international publications. Although she covers stories across the aviation spectrum her main focus and area of expertise is MRO.

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