Market Research India - MRO Market in India 2009

7/31/2019 Market Research India - MRO Market in India 2009

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July2009
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ExecutiveSummary

Market

Airlinesmaintenance,

repair

and

overhaul

(MRO)

market

valued

at

USD

970

mn

in

2008;

Expected

toreachUSD1.17bnby2010

IndiaisemergingastheglobalMROhubduetoitslowcostandfavorablegeographicallocation

Drivers &

OnlylinemaintenanceandsomeotherbasicchecksaredoneinIndia

Drivers:

Growthinairtraffic

Challenges:

Hightaxregimeandregulatorylimitations

Challenges Manpowercostarbitrage Increasingfleetsize

GovernmentInitiatives

Shortageoflandandskilledmanpower

Governmentpolicies&initiatives

100%FDIisallowedforgreenfieldMROprojectsthroughautomaticroute

Importedsparepartsattracthighcustomsduty

StatelevelinitiativesbyvariousstategovernmentstoencourageinvestorstosetupMROcenters

Competition

MROmar etisinanascentstageatpresent, utitis astemergingasacompetitivesegment

MajordomesticplayersincludeAirWorksIndiaEngineeringPvt.Ltd,MaxAerospace&Aviation

Ltd,HyderabadAircraftMaintenanceCompany

ForeignplayerslikeLufthansaTechnik,PrattandWhitney,SingaporeTechnologiesAerospace,Gulf

2MROMARKET INDIA.PPT

.

centresin

India


3/28

ar e verv ew

Drivers&

Challenges

GovernmentPolicies&Initiatives

Competition

JointVentures

Ke

Develo ments



4/28

InternationalMROfacilitiesarerunningatovercapacityand

lookingforlowcostdestinationstooffloadwork

Southern

CaliforniaCentral

USA

South

UK

France

Germany

EasternEurope

North

FloridaMexicoAfrica

UAE

n a astern

China

Sin a ore

Establishedhubs

Indiancarriersgoto

SingaporeorWestern

EuropeforMRO

Emerginghubs



5/28

MROmarketinIndiaisatnascentstagewiththepotentialto

becomeMROhub

MRO market estimated to reach USD 1.17 bn 2010

Many new players, both domestic and international,

Marketoverview Market

size

&

growth

USD mn

are entering this fast emerging market in India

By 2020, India will be having the potential to service

a fleet of 1,000 commercial planes and 500 general

aviation aircraft

1,1701,067

9701,000

1,500+ %

Marketshare

by

activities

par rom commerc a a r nes, serv ce

providers also provide services to the operators of

chartered aircraft and corporateowned aircraft0

20092008 2010

SegmentMarket

Share

Description

LineMaintenance(ACheck) 16% Performedonceinevery35daysanddoneovernightatanairportgate

Com onents

BCheck 12% Performed

once

in

ever

8months

and

done

overni ht

at

an

air ort

ate

EngineMaintenance(C Check) 44% Performedonceinevery1218monthsatamaintenancebaseinahangar

HeavyMaintenance(D Check) 20% Performedonceinevery45yearsataspecializedfacility

Modifications 8% Modificationsofinteriors,cabinelectronics,avionicsandpaintaredone


w enrequ re


6/28

Currentlylinemaintenanceandsomeotherbasicchecksare

doneinIndia

Entryoflowcostairlineshasledtoincreasein

outsourcing/offshoringofMROrelatedactivities

MROOutsourcing/Offshoring

overview MRO

Activity

by

Indian

carriers

Majorportionof

the offshored CurrentlyalotofMROworkisoffshoredtoservice

providersinSingaporeandEurope

Onlyline

maintenance

and

some

other

basic

checks

aredoneinIndia

30%

activityincludesC

andDchecks

n a s oo e a as e u ure u or ac v es

andhugeinvestmentshavebeenmadeinthissector

inthepastfewyears

ActivitybasedOutsourcingbyIndiancarriers

Outsourced/Offshored

MaintenanceCostinairlines

13%

MaintenanceOutsourcingMRO

servicesreduces2

3%ofmaintenance

90%

10%

Linemaintenance

(Acheck)

40%Components

87%

c ec

30%

70%

Enginemaintenance

(Ccheck)

55%Heavymaintenance Inhouse


Otherscosts

Outsourced


7/28

ar e verv ew

Drivers&

Challenges


Competition

JointVentures

Ke

Develo ments



8/28

Drivers&Challenges

Drivers

Growth

in

Air

Traffic

Challenges

HighTaxRegimeandRegulatory

Limitations

Manpower CostArbitrage

IncreasingFleetSize

ShortageofLandandSkilled

Manpower

GovernmentInitiatives



9/28

IncreaseinairtraffichasleadtotheestablishmentofMRO

facilities

Emergenceoflowcostcarriershasledtogrowthinpassengertrafficandfreightmovement

Boominaviationsectorcoupledwithbettercapacityutilizationhasincreasedthedemandfor

Growthin

air

traffic

Impact

MROservices

Aircraftmovementwitnessedgrowthof11%p.a.from200609

Passengertrafficrecordedgrowthof7%p.a.from200609whilefreighttrafficgrewby4%p.a.duringthe

sameperiod

PassengerGrowthinIndia FreightTrafficgrowthinIndia

+4%000 tonnes+7%mn

141146137127

100

150

8.9910.06

9.36

7.33

10

12

6

8

0

50

2006 2007 2008 20092006 2007 2008 2009

2

4



10/28

AvailabilityoflowcostmanpowerisdrivingtheMROsegmentin

India

Increaseincompetitionwiththeemergenceoflowcostairlinestoservicethefleetlocallyat

reducedcostshasgivenIndianMROsegmentacostadvantage

Manpowercost

arbitrage Impact

SinceIndiacanofferMROservicesatattractiveratesduetoitslowlabourcosts,manythird

partyMROserviceprovidersaretryingtosetuptheirbaseinIndia

Manpowercostacrossgeographies

30

38

3035

40

USD/hr

15

19

10

15

20

25

-19%

-50%-

0

5

Europe USA APAC India



11/28

LargefleetordersplacedbyIndiancarriersisattracting

investmentsinMROsegment

Withthegrowthinglobalaviationindustryandincreaseinworldfleetsize,thedemandfor

MROservicesisalsoexpectedtospur

Increasingfleet

size Impact

Indiancarriershaveplacedordersfor344additionalaircraftsinordertoincreasetheirfleetsize

Bythe

end

of

2010,

Indias

fleet

size

is

expected

to

reach

500

550

aircrafts

ManyOEMplayershaveplanstoenterIndianMROmarket

Carrier Fleetsize(2009) Orders

FleetSizeandOrdersofIndianCarriers

NewOrders

WorldFleetSizeandNewOrders

NACIL 149 63

JetAirways 85 44

Kingfisher 74 136

ze eets ze20092028

Large 870 740

TwinAisle 3,510 6,700

Spicejet 21 9

Indigo 21 75

GoAir 7 7

Paramount 5 10

, ,

RegionalJets 3,060 2,100

Total 18,800 29,000


Total 362 344


12/28

Variousinitiativestakenbythegovernmentispromotingthe

developmentofIndianMROsegment

Thegovernmentisplanningtoallocatelandatfairleaserentalstoencouragethecreationof

MROhubsinthecountry

GovernmentInitiatives Impact

TheDGCAhadalsobroughtinregulatorychangesbyallowinggraduateengineersanddiploma

holderstobeemployedinMROfacilities

Majorgreenfieldinternationalairportprojectsareundertakenanddevelopmentsarebeing

madeinotherdomesticairportsaswell

Overthenext5yearsAAIhasplannedamassiveinvestmentofINR153.5 bn

43%ofthisinvestmentwillbeforthreemetroairportsinKolkata,ChennaiandTrivandrum,andtherestwill

gointoupgradingothernonmetroairportsandmodernizingtheexistingaeronauticalfacilities



13/28

Taxstructureandregulatorylimitationsarethemajorchallenges

facedbyMROsegment

ManyforeignplayershaveputonholdtheirplanstoenterIndianmarketashighimportduties

andadditionalservicetaxescalatesthecostoftheventurebyalmost50%

Hightax

regime

and

regulatory

limitations Impact

CostofrunningoperationsatMROhubslikeNagpur,Bangalore,HyderabadandDelhiishigher

comparedtointernationallocationslikeDubaiandSingapore

Amandatory

C

check

,done

every

12

18

months,

costs

around

INR

30

mn

in

India

compared

to

INR20mnabroad

mpor u yonspares sexemp e rom ax ora r nes u no or prov ers

Importofengineeringservicesisfreeofcustomsduty,hencealldomesticairlinecarriershire

foreignbasedcompaniesfortheirengineeringneedsthoughthesameworkcanbecarriedout

inIndia

but

attracts

service

tax

and

value

added

tax

Description Tax

Servicetax 12.5%

axs ruc ure or spares an ngc arges n n a an ng

Malaysia/

Singapore300 350

Importdutyonspares 34.13%

Valueaddedtax 12.5%

Octroi 4%

700600India

Lowerestimate


Upper

estimate


14/28

Landscarcityandshortageofskilledmanpoweractingas

barrierstogrowth

MROunitsareideallylocatedclosetoairportandshortageoflandnearmajorairportsisbecoming ahindranceinthedevelopmentofMROfacilitiesinIndia

Shortageof

land

and

skilled

manpower Impact

Duetoshortageofland,therealestatepricesareextremelyhigh

0 100 200 300 400 500 600 700 800

Averagelease

rentals

in

airports

400

300

300

USD/SquaremetreKolkata

Chennai

Hyderabad

800

500

500Bangalore

Delhi

Mumbai

Apartfromlandshortage,MROplayersarealsofacingshortageofskilledmanpowertosetupMROoperationsinIndia

AfullfledgedMROunitdoingalltypesofchecksrequiresaround35,000to45,000engineers



15/28

ar e verv ew

Drivers&

Challenges


CompetitionJointVentures

Ke

Develo ments


bl l d h k f


16/28

Favourablegovernmentpoliciesandinitiativesarethekeyfor

thefuturegrowthMROactivityinIndia

Defence

Procurement

Procedure(DPP)

Overhaul of military aircraft is entirely undertaken by government owned HindustanAeronautics Ltd. Nevertheless, DPP 2008 provides opportunities for outsourcing

maintenance operations through PPP (publicprivate partnerships). Of the projected

defense expenditure of USD100 bn in next five years, the offset opportunity for

50

100

100

20 6

USD bn

aerospace sector is significant

Providessignificant

opportunitiesforthe

aeros ace sector

0

Defence expenditure Military aircraft Offset for civil sector

FDIPolicy For

greenfield

projects,

100%

FDI

allowed

through

automatic

route

in

helicopter

and

seaplaneoperationsandestablishmentofmaintenance,repairandoverhaulfacilities

CustomDuties&

Taxes

butsubjecttosectoralregulations

34.13%customsdutyonimportedspares and12.36%servicetaxonthevalueofthe

repairserviceis encouragingairlinestosendpartsabroadforrepairsandgetthemback

Statelevel

initiatives

GujaratGovernment floatedacompany,GujaratAirportInfrastructureCompany,to

executedevelopmentworkneededforsettingupairportsandMROs

MadhyaPradeshtoprovide7000acresoflandforsettingupIndiasfirstaviationcity


t at nc u es ac t esan acargo u . ecost sexpecte to e n or

thisfacility


17/28

ar e verv ew

Drivers&

Challenges



Ke

Develo ments


I di MRO i i i i i h l


18/28

IndianMROspaceisemergingasacompetitivespacewithlarge

investmentsfrommanyforeignplayers

MROspaceinIndiaisatanascentstagewithfew

domesticplayers

Competition AircraftMaintenance

Relationships

Airline LineMaintenance

(Acheck)

Componentrepair

Manyforeignplayersareplanningtoenterthe

market

Manyprojects

in

the

pipeline

are

about

to

complete

andoperationswillstartby2011

AirIndia AirIndia AirIndia

JetAirways JAECO JAECO

Kingfisher IndianAirlines IndianAirlines r n a, e rwaysan ewo ers ave e rown

facilitiesforlinemaintenanceandbasicrepairsand

alsoofferservicetootherairlines

Domesticairlines

source

MRO

services

from

service

roviders in Sin a ore and Euro e

Spicejet Hamilton Hamilton

IndigoAir IndigoAir RockwellCollins

GoAir GoAir Sahara/AirIndia

Mostofthelinemaintenanceactivitiesarecarriedin

houseinIndiabutmajorityofCandDchecksare

doneoutsideIndia

Paramount Paramount GE

AirIndia&IndianAirlinesgotmergedandformedNACIL;SaharamergedwithJet

Airways

Outsourced/Offshored Inhouse

AirIndiagotpermissiontocarryCcheckforBoeing777in

Indiarecently

LufthansaTechnik,

PrattandWhitney

GE

JordanAircraft

SingaporeTechnologies

AerospaceLtd

SIAEngineeringCo.

IsraelAerospaceIndustriesLtd


Maintenance

Ltd Gulf

Aircraft

Maintenance

Co.


19/28

DomesticPlayers(1/3)

Company BusinessDescription

Establishedin1964

HeadquarteredinBangalorewithdivisionsinNashik,Lucknow,Hyderabad,Korwa,Koraput

n us an eronau cs

Limited(HAL)

Servicesincludelinemaintenance,overhaulandrepairservicesrelatingtoenginesegment

HALprovides

its

services

to

the

Indian

Air

force

and

Pavan

Hans

HALplanstoforayintocivilaviationsectorandrecentlyformedajointventurewithPratt&

WhitneyforsettingupanMRO,thedealiskeptonholdfortimebeing

HALplanstoturntheoldairportinBangaloretoacommercialMROforcivilaircraft.The

airporthashangars,fuellingandothernecessaryinfrastructureforanMROunit

Established

in

1951 HeadquarteredatMumbaiInternationalAirportwithadditionalfacilitiesin9airports

AirWorksIndia

EngineeringPvt.Ltd

aroundthecountry(NewDelhi,Bangalore,Chennai,Hosur,Pune,Baroda,Jakkur,Madurai,

Jaipur)

Servicesoffered includeairframemaintenance,structuralmodifications, avionicupgrades

andapaintshop

,

,

,

Honeywell

75plusaircraftundermaintenance

AirIndiaExpress,Reliance,Birla,Essararefewoftheirclients



20/28



MaxAerospace&

Establishedin1994

HeadquarteredinMumbaiandhasrepresentativeofficesinNewDelhi,GoaandBangalore ,

JetAirways,Kingfisher,Bluedart,Paramount, Spicejet,PavanHansarefewoftheirclients

Establishedin2005

LocatedinHyderabad

HyderabadAircraft

MaintenanceCompany

Servicesofferedincludeavionics,electricalwiringinspections,airframe,enginechangesandothermaintenanceservices

DevelopinganAeroZoneinHyderabadspreadacross250acres,whichwouldprovideone

stopMRO

services

IndamerCoPvt.Ltd

Establishedin1945toservethegeneralaviationindustryinIndia

LocatedinMumbai

ExclusivedistributorforRaytheonAircraft

,

,

,

.

InJan2009EuropeanAviationHoldingCo.PvtLtdacquiredIndamerPvt.Ltd. OneofthedirectorsofEuropeanAviationHoldingCo.Pvt.Ltd.isalsotheChairmanofMaxAerospace



21/28



Establishedin1994

HeadquarteredinHosur,TamilnaduandhascorporateofficeinBangalore

AviationLtd.(TAAL) .

fivehangerspaceaspartofastrategytodevelopitsprivateairfieldasanMROandaviationpark

ItalsogotDGCAMaintenanceapprovedunderCAR145formaintenanceofAircraftofdifferencetypes

JupiterAviation

&

LogisticsPvt.Ltd

OwnedbyJupiterCapital

LocatedinYelahanka,Bangalore

EnteredintoaviationprojectsincludingMROfacility,FlyingschoolandCharterairlineservice

gne anagreemen w e uropean erospacean e encegroup ose upanMROforAirbusaircrafts,alsotosetupfouraviationschoolstotrain150pilotsand1200aircraftmaintenanceengineersannually



22/28

ar e verv ew

Drivers&

Challenges



Ke

Develo ments



23/28

JointVentures(1/3)

Dateof

JV:

Yet

to

be

announced

Pratt&WhitneyCanada(P&WC)isinterestedinstartinganMROshopforaircraftenginesalong

withHALinBangalore

TheMROcentrewouldserviceabout150aircraftseveryyearandinitiallyplantostartwith50

engineers

HALalsoplannedtoinvestinaventuretomanufactureenginecomponentsatitsKoraput

divisionin

Orissa

P&WCwouldtakecareoftoolingprocessforthisventurebyprovidingtechnicalsupport

Dateof

JV:

Feb

2009

HALexpectedtogenerateUSD50mnannuallyfromthisventure

AerospaceEngineeringforsettingupastateoftheartaircraftMROfacilityintheairport

premises

TheprojectwouldcostaboutUSD100mnandandthetimeframetolaunchthefirstphaseis

18months

i.e

by

around

August

2010

Thefacilityisspreadover25acrelandandwouldbeequippedtoserviceabout60to80

aircraftsannually

GHAILisplanningtoofferaviationtraining,aerospaceengineeringandhighvalueservices,

includingdesignatthespecialeconomiczoneadjacenttotheairport


engineers


24/28

JointVentures(2/3)

Dateof

JV:

Feb

2009

BoeingtoinvestUSD185mninajointventurewithAirIndiatosetupanMROfacilityin

Nagpur

Thisisanindustrialoffsetagreementbetweenthefirms,madeinDec2005,whenAirIndia

placedoneofthelargestcommercialaviationorderinIndiawithBoeing

ConstructionoftheMROcentreatNagpurwillstartinfourthquarterof2009andexpectedto

becompleted

by

2011

TheMROwouldservicemajorlytheheavymaintenanceworkforwidebodiessuchasBoeing

accommodatingoneBoeing747

DateofJV:Oct2008

NACILandEADSsignedajointventureagreementtosetupanMROfacilityatNewDelhis

IndiraGandhiAirport

ItisafiveyearprojectwithacostofUSD40mnandtheMROwouldbeamemberofthe

r us

networ

Thecentreistoemployabout300technicalpersonnelandwouldundertakeairframe

maintenanceandrepairofNACILAirbusaircrafts

PlanstoextendMROfacilitiessubsequentlytootheraircraftmodelsandairlines



25/28

JointVentures(3/3)

Dateof

JV:

Feb

2007

JointVenturebetweenTanejaAerospaceandAviationLtd(TAAL)andSabenaTechnicsisto

developanindependentMROfacilityinHosur,KrishnagiriDistrict

The lanistotar etre ionalturbo ro aircraftlikeATR42/72intheinitialsta es

AirbusA320andBoeingB737serieswillbeaddedtotheportfolioatalaterstage

TAALhasitsownprivateairfieldinHosur,whereithasmanufacturingandaircraftmaintenance

facilitiesincluding

hangars

Date

of

JV:

Jul

2006Thejointventurehasidentifiedeightairportstoprovidelinemaintenanceservicestoaircraft

Italsoplanstoformanaerospaceacademythatcanprovidetrainingtoabout100technicians

and50engineers

TheinitialinvestmentintheMROwouldbeaboutUSD32mnwhichwillprovideservicesat

airportsinMumbai,Delhi,Chennai,Kolkata,Bangalore,Hyderabad,Ahmedabadand

TheservicesareprovidedtoGoAir(WadiaGroup)aircraftsinitiallyandlaterwouldbe

expandedtootherairlines

TheMROplanstoexpandthefacilitytoaround25to30airportsacrossthecountryby2011



26/28

ar e verv ew

Drivers&

Challenges



Ke

Develo ments



27/28

KeyDevelopments

Date DevelopmentJun2009 Deccan360signeda10yearcontractwithLufthansaTechnik,anMROcompanyofGermanaviationgroup,

forsupplyofcomponents,repairandoverhauloftheAirbusA310freighteraircraftfleet.

. . over36.5acresoflandandisexpectedtostartfunctioningwithintwoyears

Jan2009 European

Aviation

Holding

Co.

Pvt

Ltd.

Has

acquired

the

leading

Mumbai

based

MRO

firm

Indamer

Co

Pvt

Ltd.ThismovecomesasamajorconsolidationinMROsegmentinIndia.OneofthedirectorofacquirerischairmanofMaxAerospace

Jan2009 AirIndiabecomesthethirdairlineinAsiatoacquireCcheckcapabilityonBoeing 777aircraft.InhouseCcheckwouldsaveaboutUSD4mnfortheairlinesaccordingtoMr.Unni,SBUHead(Engineering),NACIL

Nov

2008 Aviation

service

provider

Air

Works

started

operations

at

its

Hosur

MRO

facility

and

is

planning

to

employ

about300aircraftengineers

Oct2008 MadhyaPradeshtoprovide7000acresoflandforsettingupIndiasfirstaviationcitythatincludesMROfacilitiesandacargohub.ThecostisexpectedtobeUSD5bnforthisfacility

Jul2008 JupiterAviationhassignedamemorandumofunderstandingwithUKbasedoperatorMarshallAerospace

forcloningitsfacilityinCambridgefortheHassanaviationcluster.JupiterAviationplanstomakeHassana

Worldclassaviationlifecycle supportcentre,builtina2,500acrefacilitywithaprojectcostofUSD600mn

Jun2008 LufthansaTechnikhavesuspendedplanstosetupMROfacilityinHyderabad.EarlieritplannedforaJVwith

GMRgrouptoinvestUSD200mnforanMROatRajivGandhiinternationalAirport,Hyderabad

Apr2008 JetAirwayssignedalandleasingagreementwiththeBangaloreInternationalAirportLimited(BIAL)for


setting

up

an

MRO

facility

for

both

wide

and

narrow

bodied

aircraft


28/28

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Market Research India - MRO Market in India 2009

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Transcript of Market Research India - MRO Market in India 2009