Indian Carriers Adapt To Evolving Aftermarket Landscape
Despite the uncertainties associated with Indian commercial aviation over the past decade, the country never loses its sense of optimism. In 2022, there is good reason for this. There have been several positive investments in recent years, and despite the pandemic, passenger traffic is taking a positive turn. The dynamics, however, are shifting from the privatization of large operations, such as Air India, to the relaunch of Jet Airways and the emergence of newer players like Akasa Air venturing into the market.
India is becoming one of the fastest- growing civil aviation markets in the world due to several factors. These include new infrastructure developments, such as the construction of more than 200 airports under the regional connectivity scheme, and increasing job opportunities in the industry in the next couple of years. The UDAN plan to upgrade underserved air routes is also making air travel affordable, and the separation of civil and defense air corridors has opened additional routes for the airlines.
Other positive factors include the realignment of flight schedules, fleet modernization, induction of fuel-efficient and sustainable aircraft and a boom in air charter services, with developing opportunities to deploy additional fleets with available slots. On the flip side, the picture is not as rosy, given the depreciating rupee, and operators are struggling to make a profit. This creates an interesting dilemma in the Indian civil aviation sector.
Changing Fleet and Maintenance Patterns
“This situation will drastically change in about a year,” says Rohit Tomar, managing partner at Indian consultancy firm Caladrius Aero. “As Tata-led Air India and IndiGo emerge as major players in the Indian market, it will bring the much-needed financial stability. Currently, IndiGo rules the roost with the largest Airbus fleet, followed by Air India.”
Eyeing untapped widebody potential, Air India has begun fleet modernization with the induction of 10 grounded Boeing 777-300 ERs by early 2023 for international routes. The airline is also in talks with Airbus over a large deal for the induction of the A350. According to Remi Maillard, president and managing director for India and South Asia at Airbus, “The A350 will trigger a tectonic shift, a change of paradigm in long-haul travel that matches the aspiration of India and its people, reviving the almost stagnant widebody in the Indian markets.” The question is: Are Indian MROs ready for the A350?
“With A350s coming to India for the first time, the clock is ticking for Indian MROs to develop the capabilities as per market demand. The process has to start today,” says Sharad Agarwal, CEO of Air India Engineering Services (AIESL). “The engineers need to be trained for type-rated processes, licenses, etc., which will take at least six months.”
Air India has already begun the groundwork for this evolution by appointing Sandeep Gupta as the chief pilot for A350s, where he will lead the airline’s Hyderabad-based training center.
Meanwhile, the massive order of 300 jets from Air India is still in the cards, and the decision for the maintenance of the new fleet remains in limbo. Air India continues to send its existing fleet to AIESL, but there is no clear picture of future maintenance needs. The airline will need a stable MRO partner, and it appears it has already begun its search. Air India’s newly appointed CEO, Campbell Wilson, and his team recently visited the Air Works Kochi facility.
However, industry insiders see it differently. “The Tatas can negotiate with AIESL to grab a very good deal and manage the maintenance of their upcoming fleet,” says Caladrius Aero’s Tomar.
Insourcing Versus Outsourcing
Indian airlines have decent in-house maintenance capabilities, and industry insiders say the MRO situation for most airlines in India is unlikely to change in the next few years. “I don’t see this picture changing significantly in the near future,” says Tomar. Regional carrier IndiaOne Air’s CEO, Arun Kumar Singh, echoes this opinion: “All operators have their own CAR 145 approvals. Engine overhauls and heavy maintenance are outsourced, depending upon the make and model of the engine. So far, I don’t see any major changes in this model.”
For operators with more than 10 to 12 aircraft, outsourcing routine maintenance is costly, and controls become difficult. As the fleet size reaches a certain threshold, airlines need to think strategically. Take, for example, IndiGo’s planned Bangalore MRO facility. “In my opinion, we are still late; we should have done it three or four years back, when we had reached the size of 200 airplanes,” says Amrish Agarwal, IndiGo’s associate vice president of planning logistics, materials and projects.
The case is reversed for airlines with a smaller scale of operations. Jet Airways previously insourced all of its maintenance work, but as it plans for expansion with a fuel-efficient fleet, the airline is more likely to follow a completely outsourced model for the first six months to a year. Experts expect that the airline will not add new liabilities during the first six months into the launch. The outsourcing model is also simple, easy to manage and change, and fits well with the gradual fleet progression.
Insourced maintenance adds to expenditures such as for staffing, resourcing, tooling, inventory and warehousing, making it very cumbersome. “With rapidly growing competition, it is best if an airline focuses its energies and funds during the initial 5-7 years—or until at least they reach a fleet of 50 aircraft—to establish and strengthen their core areas of customer acquisition and brand proposition, to achieve brand service differentiation or perhaps until they stabilize,” says Anand Bhaskar, managing director and CEO of Air Works. “We delivered significant advantages to Vistara from the time they commenced operations by our integrated or turnkey maintenance model, where the entire maintenance—both line and base—were handled by Air Works as independent engineering and maintenance experts,” he adds.
For most Indian airlines, heavy maintenance is usually outsourced. Most Indian MROs are still perceived as not being fully capable of doing certain heavy checks, which is true to an extent, but the picture is slowly changing. MRO is a capital-intensive business, but generally everything pertaining to airframe and cabin interiors can—and is—being done domestically at a level equivalent to global standards.
Bhaskar says Air Works has “been delivering enhanced efficiency and turnaround times to customers” compared to well-known global MROs in certain maintenance aspects. “For example, we’re delivering as much as 30% less turnaround time than global peers in aircraft painting. This is in addition to commercial advantages,” he says. “At the same time, Air Works and some other key Indian players have also ramped up investment in digitization to embrace and deploy technologies such as RFIDs, artificial intelligence, virtual reality and blockchain with the intent to deliver cutting-edge solutions,”
Next come component repairs, which are completely outsourced. “There is no point in doing component repair in-house,” says IndiGo’s Agarwal. “Our components run on a different model. We run on a fly-by-hour basis, which is a different commercial module, so there is no point in having a component facility.” Most Indian operators use this model for component MRO.
Reacting to Agarwal’s perspective on component repairs, Bhaskar says: “With airlines already invested in power-by-the-hour contracts, which they are not keen to change, opportunities in this area are limited. For components and engines, OEMs either have pre-installed capability abroad or [intellectual property rights] that they are unwilling to share, restricting the ability of Indian MROs to expand.”
Bhaskar adds that there are still some barriers to growth prevalent in India. “There are still changes pending at the policy level with respect to taxation, which also act as impediments to creating an indigenous MRO ecosystem, despite talent and capabilities being readily available,” he says. “While reports outline component MRO to be a significant growth category in the time to come, it will only happen if the country focuses on it collectively. But unless such transformative changes, including insisting on maintaining in India, are not taken, India’s ambition to become an MRO hub in the times to come may need to be redefined.”
Taking on new suppliers is an ongoing task. Airlines typically review at least three vendors during the selection process. They must consider the costs of engine overhaul and sending the engine to a bigger facility for performance restoration. The operator then takes quotes from each facility and selects the one that best fits its needs.
Insourced versus outsourced maintenance requires a minimum scale to make sense economically. This is one of the reasons why IndiGo decided to enter base maintenance only after it had a significantly sized fleet, providing the opportunity to move from outsourced to insourced. However, this will not be the case with every airline, and each will have to decide which option is better.
Some larger airlines, such as Ryan-air, have about 400 aircraft, so they have balanced their MRO and opted for a hybrid model. An insourced model gives an airline better control over maintenance, saves time and eliminates many problems. The current Indian MRO scenario is usually based on a hybrid model. This model works with the operator’s requirements based on what is available locally and the lease agreement and gives a holistic approach to the complete fleet’s MRO.
The independent MRO picture in India is slowly changing. Apart from structural repair capabilities, MROs have been taking up redelivery checks for the last couple of years. Such projects are more viable from an MRO perspective, since the amount of work is huge as the entire aircraft is restored. The cash inflow for MRO providers is four times more than for normal C checks, making it more profitable.
For airlines, this is a costly process. As trends change, more Indian operators are using bulk slot booking for such checks. This makes it easier for MROs when it comes to staffing and forecasting. On the other hand, airlines are also assured of their turnaround times, thus giving both the airlines and MROs greater certainty and improving the whole ecosystem.
India’s civil aviation industry is showing signs of maturing, with strengthening relationships between airlines and MROs gradually evolving into a more strategic value proposition. The MRO world has started viewing India with interest. As more overseas OEMs such as Pratt & Whitney, Rolls-Royce and Safran establish bases in India, more players will likely emerge in the future.