MRO Strategy for the Airline In-House or Outsource 17 th March 2011.
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MRO Strategy for the Airline In-House or Outsource 17 th March 2011
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Transcript of MRO Strategy for the Airline In-House or Outsource 17 th March 2011.
MRO Strategy for the AirlineIn-House or Outsource
17th March 2011
Agenda
• Indian Aviation Growth• MRO Market (World and India)• Airline Cost – E&M• E&M Activites – India• In-house vs. Outsourcing (Factor to consider)• Reasons for current E&M activities in India• Comparison of In-house vs. Outsource
Domestic & International air traffic growth – India P
as
se
ng
ers
in
Mil
lio
ns
Pa
ss
en
ge
rs
in M
illi
on
s
Source: Published data, research estimates
CAGR FY 06 – FY 10 : 17 % CAGR FY 06 – FY 10 : 20 %
Domestic passenger growth International passenger growth
Domestic traffic volume Forecast
Source :Airbus GMF2010
India fleet - 2010
Source : MRO Prospector
Total commercial fleet size :411
Forecast – South Asia & India
Source : Boeing CM0 2010 Source : MRO ProspectorN
o:
of
air
cra
fts
MRO Market forecast
World MR O market
0
2
4
6
8
10
12
14
16
18
Afric
a
Asia P
acific
China
E .E
urop
eIn
dia
L.Am
erica
M.E
ast
N.Am
erica
W.E
urop
e
2010 2015 2020Source : MRO Prospector
US
D
Bil
lio
ns
MRO value by activities
Source : MRO ProspectorIndia ‘s MRO market is approximately USD 620 million
Value of MRO market in India
Source : MRO Prospector
US
D
M i
llio
ns
Source : MRO Prospector
Typical – Airline major costs
• The major cost contributors for the airline are– Fuel– Personnel – Acquisition Cost– Airport related cost– E&M Cost
E&M Activities
E&M Activites Labor Material Typical
Line Maintenance High Low In-house
Light Scheduled Checks High Low In-house
Heavy Scheduled Checks High Low Outsourced
Engine Low High Outsourced
Components Low High Outsourced
APU Low High Outsourced
Landing Gear Low High Outsourced
Current Indian MRO market & Outsourcing locations
Outsourcing locationsMalaysiaSingaporeUAEJordanChinaFranceGermany
Source : ACAS
% o
f W
ork
In house or Outsource
The Major factors that dictate the decision to Outsource MRO activity In house vs. Outsource are:-
Maintenance Philosophy Economy of scale / sufficient volume Available resource / – skilled manpower, facility (or build and plan) Regulatory Economic feasibility Tax impacts Favorable policies / schemes Geographic location Existing Service Providers (in-country and regional)
Each of E&M Activities needs to be evaluated E&M strategy has to be periodically reviewed
E&M Activities• Line Maintenance / Light Maintenance Checks
– Does not require facility (done within the operating network)– More labor intense, less downtime and lower skills
• Currently it is better to do in-house
• Heavy Scheduled Checks (Base Maintenance)– Mostly outsourced due to shortage of facilities– Requires facility – More labor intensive, higher ground time and higher skills– Has good potential for in-country MROs but there are service tax, sales tax,
VAT, customs duty• Collaboration model coupled with SEZ benefits.
• Engines / APU / Components / Landing Gear– Outsourced (out of country)– Requires sufficient volume for overhaul shops– More material intensive, high skill– Withholding tax
• Collaboration model coupled with SEZ benefits for some selective types
In-house vs. Outsourcing
• In-house– Sufficient volume– Complete control– Proactive for uncertainty– Third party revenue
– Long lead time– Investment Cost– Inflexible to fleet
changes – Downsizing – Inflexible to cater to mix
fleet
• Outsource– Quick startup– Predictable cost (PBTH model)– Contracts – Performance &
Penalty– Flexible to fleet changes– Airlines can have mix fleet
– Reactive to uncertainty– Could have exit penalties– Taxes: withholding, sales tax,
Thank you
Contact:
Haris M. AnsariGeneral Manager - Corporate Projects PlanningJet Airways (India) Limited
Mobile: +91 9820507287Direct (Tel): +91 22 40191205Email: [email protected]: www.jetairways.com
