Emerging Possibilities of Small & Medium MRO’s in India

India is expected to be the 3rd largest aviation market by 2020, rising from its present 9th position with a size of around USD 16 billion. According to data released in 2016 by the International Air Transport Association (IATA), the Indian aviation market grew by 27.4% in 2015-16 over 2014-15 taking the total passenger put at 184 million, making it the fastest-growing aviation market in the world. The Government of India (GoI) is aggressively enabling ‘Make in India’ initiative, with focus on defense equipment and aeronautics sector occupying larger space.

Indian Defense Aviation is also growing at a rapid pace with more western aircraft joining the defense forces, compared to the earlier pattern of Russian equipment.

When it comes to aircraft/helicopter component repairs, especially Avionics items, India is still heavily depending on the USA or Europe. Though “Offsets” has become the buzzword of Indian Defense Manufacturing in India for few years private players are yet to play a big role in the repair or overhaul of the aircraft components in both Commercial & Defense Aviation.

On an average India exports more than 100,000 aircraft components in a year outside for testing, repair, overhaul, exchange or modification. The average turnaround time for these components varies from 15 days to 21 days. Most of the Business & General Aviation operators prefer to go for an exchange option at much higher cost due to the time is taken to return their components and to avoid grounding of their aircraft. The number of SME MRO’s in India doesn’t exceed single digits as of today, whereas in matured aviation markets we can locate a handful of them in each city.

Make in India is one of the dream project of Indian Prime Minister Narendra Modi to showcase India as a manufacturing hub to the world. India currently has a very strong & competitive Service Industry with major foreign exchange coming from IT & IT related Services. When it is coming to Aviation manufacturing & MRO’s India is yet to come out of the infancy stage. Commercial & General Aviation is still depending heavily on USA & Europe for their component repair and overhaul requirements. This is currently done through direct exchanges or PBH (Power By Hour Programs) or Global Pool Accesses. The story in Defense Aviation is also not much different, as lots of components are still traveling outside directly or indirectly for Repair or Overhaul. Though Indian Defense Aviation advanced in the much stronger ratio in self-sustaining modalities, the statistics indicate that a lion’s share of aircraft components are still imported either directly or indirectly through supporting channels.

Analyzing the above situations, there is a large potential for Small & Medium MRO’s to set shops in India. I do agree that India still has taxation & bureaucratic challenges in customs regulations for supporting an industry like aviation, where faster deliverables are of utmost significance.  But the implementation of GST has cleared a lot of roadblocks in this space. Availability of skilled manpower at the most competitive costs is something India can boast for few more years, compared to western world. Technological advances, geographical convenience, and competitive pricing will definitely make this opportunity attractive for Southeast Asian countries as well. We should remember the technological advancements Indian Space Research Organization (ISRO) achieved in aerospace & satellite technologies in the last 20 years.

The Road Ahead: The safety records of Indian Aviation are much higher compared to other ICAO countries. Of course, the credit goes to Directorate General of Civil Aviation (DGCA) for strict & cumbersome compliance matrices. This also comes as a roadblock for at least few to enter into the field. India should admit that getting an approval for a small MRO is not easy for an SME (Small & Medium Enterprise) due to the vast regulatory requirements laid out by the regulators. Regulators in India should work along with entrepreneurs to develop new entrants with open & vast outlook.  This is not to dilute the safety standards or compliance levels rather facilitate the upcoming of new entrants.

Possible Joint Ventures for Initial Hand holding: SME’s should look at the possibility of Joint Ventures and Technology transfers initially for establishing themselves. I am sure that a number of shops in USA & Europe are eagerly looking to partner with Indian enterprises to set their footsteps in India.

The steady growth of passenger traffic in the aviation industry, industry-friendly regulatory support, technical expertise, and infrastructure at a reasonable cost & sustainable tax structures are all that required for an SME to enter into this field. I feel the time is ripe for entrepreneurs to explore this opportunity. When India poises its growth to the 3rd largest aviation market, this supporting system will give a massive opportunity to the aviation industry in a cost-effective and time-bound MRO support solutions.

About the Author

Eldo Iype is the Commercial Director at Tentacle. With a goal to support the growing requirements of the dynamic aviation industry, Tentacle Aerologistix Pvt Ltd was established in 2008 to provide a reliable and consistent support system for the market demands in South East Asia and the Middle East.

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