Airbus looks at MRO in India with IndiGo bonanza

Bengaluru: Airbus SAS is planning an aircraft maintenance and repair overhaul (MRO) facility in India on the back of its biggest order of 250 passenger jets from IndiGo, run by InterGlobe Aviation.

On August 15, IndiGo had said it would buy 250 Airbus A320 neo single-aisle passenger jets to drive growth. With this, IndiGo has ordered a total of 530 A320 planes, of which 100 aircraft have been delivered by Airbus.

The European aircraft maker has a dominant position in India’s airline fleet with nearly three-fourths of single aisle A 320 planes with airlines such as Vistara, GoAir and Air India. But its biggest customer in India is IndiGo, with a fleet of 96 planes.

“We are looking at it (MRO),” said Dwarakanath Srinivasan, managing director of Airbus India. He said the firm would take a call on either to go alone or with a partner for the facility.

In 2014, Airbus walked out of talks with GMR to buy a stake in its MRO in Hyderabad. Since then, the firm has partnered with AirWorks in Mumbai, which services planes for maintenance of Vistara.

India’s current MRO market size is estimated at $700 million, according to a March 2014 study by KPMG. It said the total Indian fleet would double by 2020, making it critical to have a strong domestic MRO industry.

“According to sources, merely 5-10 per cent of the MRO work for domestic scheduled carriers is carried out in India, while most of the maintenance activities are outsourced to third-party service providers outside the country. This is a classic case of scoring self-goals,” KPMG said in the report.

Airbus rival Boeing Co of the US recently handed over the MRO facility in Nagpur, which it had set up as part of its offset commitments for planes bought by Air India, to the public sector carrier.

Airbus, while exploring a maintenance unit to service local customers, is also planning to source more engineering design and components and systems from Indian customers.

The firm plans to source annually $400 million (Rs 2,560 crore) worth of designs, components and systems and software from Indian vendors such as Aequs, Tech Mahindra and Dynamatic Technologies.

So far, the value of outsourcing from 10-12 vendors, including Hindustan Aeronautics was around $100 million a year. In April, Airbus during Prime Minister Narendra Modi’s visit to Paris had assured it would source $2 billion worth of equipment and services from India by 2020. Airbus also runs an engineering unit in Bengaluru that provides design help in all Airbus plane projects.

“A lot of European tier-I vendors have operations in India. We work with them as well as Indian vendors to source goods and services from here,” said Bernard Richardot, vice-president and head of product development and general procurement for Airbus.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.