Air India Engineering Services Ltd (AIESL) is India’s biggest DGCA approved MRO having Pan-India presence. The MRO caters to majority of the needs of Indian carriers as well as few foreign carriers. In an exclusive interview, Sharad Agarwal, CEO, AIESL speaks with Vishal Kashyap, Managing Editor, Aviation World about the projects they handle, future plans looking into the growth potential, taxation and insights on building a robust MRO ecosystem in India. Sharing the excerpts…
What is the current status of AIESL and type of projects you cater to and what are the plans ahead?
A: AIESL is the only MRO in India which is in all four MRO segments. At present, we have been supporting Air India and other airlines for aircraft right from ATR-72, the A320s, Boeing 737, 777 and 787 and also 747. In last, as the country is getting MAX aircraft in a big way, we have enhanced our capability and today we are capable of even doing 12-year check on MAX aircraft.
In future, first of all, we are concentrating on engines. We intend to doing some job on the biggest engine which is coming into India.
There is an supply chain issue with engines worldwide and the pressure is much on the MRO side as well. So, how you are managing this situation?
A: First of all, we cannot do any engine job without an OEM giving us a support. So OEM has to support us with the manuals, the spares, and if it is the first time we are doing a job, the training of some of the people. We are in touch and we have identified some problem areas which are a pain point for the both engine manufacturer and also the airlines. We are concentrating on supporting the OEMs to give airlines a quick turnaround time and we are very sure that we will be succeeding in that.
At present, can you name some of the airlines that is under your umbrella for which maintenance AIESL does?
A: In fact, within India every single major airlines, we have done some work or other. Besides that, last year there was a big news about Kuwait Airlines. We did a number of base checks on those aircraft. We are in touch with different airlines all over India, all over the world and we are keen to do it.
Till about two years back, the biggest bottleneck we were having was that we were only having DGCA approval. So in the last couple of years, I have ensured that at least we get FAA approval for almost all aircraft at different locations so as to provide airlines a confidence that we stand to an international level and we have succeeded in that. So, this order book is growing.
Indian Aviation is growing with so many aircraft orders are under the line. How you are prepared and further enhancing your capability to look into those upcoming works?
A: First of all, see what was our pain points? Our hangars were over-booked and were over-flowing. Why? Because a lot of checks which can be done on tarmac, we had qualified them as base maintenance check.
The first target was to enhance the line maintenance capability so that the jobs can be carried out on the tarmac. Once, we have achieved it, for almost every single aircraft, we have enhanced the line maintenance capabilities. Now, hangars will be there only for big checks, which are typically 6,000 hour check or higher. So none of the aircraft needs to visit the hangar before two years. This creates hangar space for us or the existing hangar space is being effectively utilized. Next, till may be three years back, we were using hangars only eight hours a day, five days a week. Atleast now, all our major hangars are working 16 hours a day, for seven days. Whenever we have a forecasted drop for the night, we are just staggering the shifts in such a way that someone is available for the night so that aircraft remains in the hangar overnight and flies away. So with this, the same hangars, the utilization has increased.
With these two initiatives, I am very sure that Indian industry can handle even those 1,000 more aircraft which are coming in, in next five to ten years, with the existing hangars.
Any plan for opening of new hangar in recent, down the line?
A: You know that some greenfield airports are coming in and definitely we will target them.
Recently the government has in fact supported the industry by waiving off the taxes. So how this is going to be helpful in the development of the sector?
A: Not waiving off but rationalizing and it was a long demand from the industry. See, now what’s happening was, earlier in case we are buying the spares for an airline and we end up paying let us say 18% or 28% duty. We cannot bill the airlines for it because airlines is expecting us to take the Input credit in GST.
Which, once we have paid 28% is 5% rate and for any component, see for line, for base maintenance maybe the spares was just about 10%. But when it comes to engine or component maintenance, the ratio is opposite. At least 90% is the material cost and just 10% is the labor cost. Now in case of 90% I end up paying 28% custom duty. That’s our GST. I cannot and there is no way to absorb that. This was making the entire business unbiased. This 5% on the aircraft, its components and its sub-components at least we are paying the labor.
Are there any particular issues that you think that government need to address as of now?
A: See one of the pain points which all MROs are facing is, especially for base maintenance.Each airlines will like it to be at an airport which is a major base for that airlines. Now there comes the tussle. The major airports are also busy airports. The base maintenance MRO needs a lot of space but in case the airport operators ask for some big rental for that, the entire business becomes unviable.
So we would definitely like to have some support from them so that the MRO industry is treated as infrastructure industry, which is required to make the aircraft fly and rationalize the rentals.
How you would like to address the current aviation industry of India?
A: It’s very-very interesting now because no one had thought that these many aircraft will be coming into India. No one knew about four years back when we were stuck with the COVID and the airlines were shutting down. No one thought that it’s going to bounce back so fast and with so much of force. So it’s very, very interesting.
There are many startups that’s coming into this particular segment. What’s your views on this?
A: For younger generation MRO is not a quick money business.You have to be having deep pockets, have to invest big so as to create an ecosystem around you to survive. It may take five years before you even get some money.
