The Aviation MRO

opportunity in India
India is at the cusp of an aviation boom. Not additional 50 airports, waterdromes and heliports
simply commercial aircraft and passenger travel in addition to the 200 already in operation, under
but military and drones as well. India currently construction and planned, 33 new domestic
has 713 civilian aircraft in operation and another cargo terminals, 15 new flight training schools
1522 aircraft awaiting delivery by 2031. This alone for pilots and increase focus on the drone and
would make India the third largest market for helicopter sector. Add to that the aviation
commercial planes after the US and China. development programs of the Government of
India UDAN and Krishi UDAN schemes and you
However, the Government of India is determined have a much larger story unfolding of increased
to expand access to air travel and air transport logistics connectivity, additional transportation
to currently unserved regions of India and has infrastructure coming up outside of the metros,
recently announced investments of around $12 more jobs, more regional industrial hubs, better
billion by 2025 to boost regional connectivity. connectivity for entrepreneurs, farmers and
This translates to more airports, aircraft, new citizens in general in India’s more remote regions.
flying schools, recruitment of specialized staff,
pilots, regulators and air traffic controllers all to This also means a boost in MRO as all of
meet the booming demand for air travel. India’s these commercial passenger and cargo planes,
plan is not just for passenger travel, but for cargo helicopters and drones will need constant
as well, both perishable and non-perishable. maintenance, repair and overhaul also known
Currently Ministry statistics indicate that only as MRO. MRO in India is at a nascent stage
4% of the population have ever travelled by air. with 80% of all MRO for current commercial
With the current set of schemes to increase aircraft being conducted outside the country.
regional connectivity in Tier 1 and 2 cities, that India needs to build its own MRO capacities
percentage is set to dramatically increase. at pace with the increase in its aircraft. Recent
mega deals in civilian and military aircraft have
It is estimated that India will need 31,000 pilots come with a Make in India requirement that
and some 26,000 mechanics over the next will now allow the Indian private sector to begin
20 years. The government has announced an manufacturing aircraft domestically. Developing

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this ecosystem will need foreign Original To begin addressing these issues and develop
Equipment Manufacturers (OEMs) to also set up a domestic MRO ecosystem, the government
shop in India either through independent set ups, announced an MRO policy in 2021 that was
alliances or collaborations. This too benefits the aimed at bringing India’s MRO sector at par with
MRO space as many of the components needed the global markets. Policies like:
could now be manufactured in India. • Lowering the GST on domestic MRO services
from 18% to 5% with full input tax credit from
MRO is the second largest cost for airlines, 1st April 2020
coming in at 12-15% of overall revenues. • Treating transactions sub-contracted by
According to a report by NITI Aayog, the MRO foreign OEMs and MRO companies to
cost of an aircraft can be broken down into line domestic MROs as exports with zero-rated
maintenance (8% of total costs) components GST
(22% of total costs), base maintenance (10% of • Waiving custom duty on tools, toolkits and
total cost) and engines and auxiliary power units spares imported by MROs and
(60% of total costs). Most MRO outside of the • Permitting 100% foreign direct investment
US and Europe, occurs in Singapore, the UAE, through the automatic route
Malaysia and Turkey. This is for a variety of • Exempting MRO service companies from
reasons that are now being addresses, some of airport royalty and extra costs for 5 years
which include an increased OEM or manufacture • Extending duty free component imports for
presence in the aftermarket space that restricts MRO from one to three years
independent MRO players from diversifying, • Permitting foreign aircrafts to visit India for
raises rates for key parts, restricting access to MRO for a six month period rather than a 15
data and maintenance manuals. There are also day period
issues at a contractual stage and offset clauses • Offering land allotments for MRO facilities for
while purchasing or leasing the aircraft that 30 years rather than 3-5 years
can mandate airline operators to using only
designated MRO affiliates. As most of these are All of these are targeted at integrating Indian
outside India, independent Indian MRO players MRO with the global value chain, but it will be
often cannot access key parts without incurring a long process. The first steps are joint ventures
prohibitive costs. Despite having offset clauses with established MRO players. Indian SMEs with
at the time of purchase, these are often not a focus on MRO can aim for segments with lower
implemented and the training and technological IP control like electrical and electronics, avionics,
capacity of the MRO players in India remains structural repair etc and gradually shift to the
restricted. higher end of the MRO value chain ie engines
and landing gear.
Countries like China manage this by mandating
that the aircraft, engine and component OEMs Most importantly, this needs to be developed
establish their supply chain, manufacturing units as a sustainable end-to-end ecosystem for
and MRO establishments within the country commercial, general and military MRO.
at the contractual stage to ensure long term According to MRO Business Today the aviation
strategic creation of an ecosystem for domestic MRO market globally was valued at $79.2bn
sustainability. Land availability near airports, in 2022 and is estimated to reach $133.69bn
taxes, royalty charged by airports, access to by 2030. Given India’s plan for increasing
credit, issues in the compatibility of licensing regional transportation, including air travel in
and certification framework at the DGCA with improving the movement of perishables across
the FAA or EASA are other issues that hinder the country, using drones and smaller aircrafts
development of the MRO sector in India. and helicopters for the development of tourism

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in hard-to-reach terrain and modernizing its seeing several taking shape like Safran-HAL,
defence aircraft, India’s MRO requirements Boeing-GMR Aero Technic, GE Aviation-Air
will likely be considerably higher, making it India, Air India Engineering Services Lts – Pratt
imperative to develop an indigenous MRO & Whitney, Spirit AeroSystems – GMR Aero
sector to support a growing commercial and Technic, Wadia Group -SIA Engineering Co to
defence sector. While low level checks are done name a few.
inhouse by Indian airlines, the more intense and • The pandemic also saw private airline players
expensive C and D checks are outsourced to 3rd chose to service their aircraft within the country
party MRO players usually connected with the and the MRO players coming together and
OEMs. ensuring quality delivery of work.
• Drones are a previously untapped resource for
Fortunately, there are several trends that are the MRO sector in India, but with increased
working in India’s favor: usage they offer a growing opportunity.
• Post the pandemic and the strides taken in • Availability of a large and diverse pool of tech
India in digitalization, investments on focused savvy, English speaking engineers
initiatives around predictive maintenance, • Prevalent sale and lease back model followed
paperless MRO, planning and scheduling by airlines in India, offers a large scope for
optimizations to control costs and improve redelivery maintenance services particularly to
efficiencies are now being brought forward. meet the lessor’s MRO requirements.
With a rich start up ecosystem, various
innovations in 5G, mobile technology, IoT, With the OEM’s and global MRO players moving
wearables etc, digitalization of MRO is quickly into India and the Indian government coming out
being taken up by Indian players. with a slew of initiatives to bring outsourced MRO
• The Government of India putting in place back into India and increase regional access to air
policies conducive to attracting global OEMs travel, the opportunity that the Indian MRO space
to set up MRO services independently or in offers over the next few years is one that certainly
association with local MRO players, we are cannot be ignored.

Kim Collaco
Executive Partner
International Affairs, ASA

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