Indian aviation news nov dec 2013

www.indianaviationnews.com - India’s only website for Civil and Military Aviation news XXVII

Nov-dec 2013

November 2015

MRO India 2013 concludes on a high note SPECIAL REPORT

MTDC launches seaplane

SPECIAL REPORT

KPMG launches background paper on MRO

EDITORIAL www.indianaviationnews.com Founder Late ALKA SEN

MRO India builds civil-military bridge

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M

RO India 2013 concluded on a high note. The event provided an ideal platform for civil-military cooperation in the field of MRO. This year’s event was inaugurated

by Air Marshal P. Kanankaraj, Air Officer Commanding in Chief, Maintenance Command, Indian Air Force, who also delivered the keynote address to the gathering.

The Air Marshal bought out the areas where there could be an ample synergy between the civil MROs and the IAF’s Maintenance Command units. He said there are many areas where civil MROs could contribute to IAF’s repair depots.

The areas could be outsourcing of specific overhauling tasks, life extension studies, repair and refurbishment MRO India 2013 activity, supply chain management, packaging technology, concludes on a warehousing, annual maintenance activities, etc. high note IAF to tie over the perennial slow supply chain of spares from OEMs is looking at options of indigenization. In this regards the BRDs have already developed adequate suppliers to provide indigenous products enabling them to meet the production targets. There is always a scope for further growth in this vendor base, he said and invited MROs to look at this option too.

The other area of civil-military cooperation in the field of MRO, the Air Marshal said was the huge repository of high-trained and disciplined Air Worriers. “The IAF personnel are welltrained, experienced and exhibit high sense of discipline which is a huge potential for the civil MRO industry. These personnel after completion of their prescribed period of service with IAF would undoubtedly be an asset to the civil MRO industry,” Air Marshal Kanakaraj said.

MRO India 2013, once again, had the support of Air India Engineering Services Ltd. at the Title Partner. UK Trade & Investment lent support as the Partner Country and Gujurat was the Partner State through GUJSAIL. The MRO and the airline industries were well represented at India’s Only MRO Exhibition and Conference. The Ministry of Civil Aviation too lent its whole-hearted support to the event.

KPMG, the Knowledge Partner to MRO India released a Background Paper on the State of Indian MRO Industry, which is published in this issue.

It has been decided that after holding MRO India from 2011 every year, the next edition will be held in 2015 in a much bigger way. Meanwhile, MRO Association of India is spearheading its way to lobby with the various Ministries of the Govt to create a level playing field for the Indian MRO Industry. www.indianaviationnews.com - India’s only website for Civil and Military Aviation news XXVII

Nov-dec 2013

November 2015

SPECIAL REPORT

MTDC launches seaplane

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KPMG launches background paper on MRO

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Nov-Dec 2013

CONTENTS

INDIAN NEWS

04

GLOBAL NEWS

06 COVER STORY

MRO India 2013 concludes successfully

SPECIAL REPORT

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SPECIAL REPORT

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MTDC Launches Seaplane

Passions around the Russian-Indian fighter INDIAN AVIATION

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SPECIAL REPORT 18 KPMG launches background paper on MRO

SPECIAL FEATURE

Beechcraft identifies great potential in India 03

23 Nov-Dec 2013

INDIAN NEWS

New integrated terminal building inaugurated at Goa Airport

The thrust of the Government is to have an inclusive growth in the country for which the regional or remote area air connectivity can act as a catalyst. In this endeavour, the Government has plans to take up the development of airports in Tier-II and Tier-III cities including the airports belonging to State Governments. The Government of Uttar Pradesh has handed over three airports namely Meerut, Moradabad and Faizabad to AAI. Further, the State Government has also agreed to provide land and other logistical support for establishing new Civil Enclaves at Agra, Allahabad, Bareilly and Kanpur. Thus, a total of seven airports/civil enclaves in Uttar Pradesh will be developed.

Hyderabad Airport to become international hub

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New Integrated Terminal Building (NITB) has been inaugurated by the Minister of Civil Aviation, Ajit Singh at Goa Airport. Dedicating the new facility to the people of the state, the Minister said, “Providing quality aviation infrastructure commensurate with the expected passenger traffic growth is high on priority of my ministry.” Expansion and upgradation of airport at such a tourist and industry destination as Goa assumed significant importance, he added.

The NITB at Goa is an integrated terminal building capable of handling both domestic and international operations. The terminal building is equipped with the state-of-the-art facilities like passenger boarding bridges, CUTE enabled check-in counters, inline compatible baggage handling system, software based building management system, elevators and escalators.

The terminal building can handle 2,750 peak hour passengers at a time. The terminal building has been built at a cost of Rs. 345 crore.

Speaking on the occasion, the Minister of Civil Aviation highlighted the contribution of Goa in overall economic growth of the country.

He said “Goa Airport with 1,000 plus annual international charter flights accounts for almost 90 per cent of India’s international charter tourist flights. In the year 2012-13, Goa Airport handled 1,208 charter flights, an increase of 45 per cent INDIAN AVIATION

over the year 2011-12.” He acknowledged the role of Goa Government and Indian Navy for paving way for the development of the new integrated terminal building at Goa Airport.

Ajit Singh underlined that the civil aviation has become a focal point of the development as it is a key infrastructure that connects people, shrinks distances and facilitates the growth of business and seamless flow of investment, leading to multiplier effect across the economy. Expressing the hope that India’s domestic air travel market will become the second highest growing market in the world in near future, he said, “the domestic passenger movement in the next ten years shall exceed 336 million passengers per annum and international passenger traffic shall cross 84 million-mark from the current level of 117 million domestic and 43 million international passengers in 2012-13.”

MoU signed for development of airports in UP An MoU has been signed between the Government of Uttar Pradesh and Airports Authority of India (AAI) for the development of airports at Meerut, Moradabad, Faizabad and new Civil Enclaves in Agra, Allahabad, Bareilly and Kanpur in the presence of Minister for Civil Aviation, Ajit Singh.

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Minister of State for Civil Aviation, KC Venugopal informed the Rajya Sabha that Rajiv Gandhi International Airport, Hyderabad is among the airports which has been identified for development as international hub.

An ‘international airport’ is an airport designated by the International Civil Aviation Organization (ICAO) Contracting State in whose territory it is situated as an airport of entry and departure for international air traffic. At such airports, formalities relating to Customs, immigration, public health, agricultural quarantine and similar procedures are carried out. On the other hand, a hub is an ‘international airport’ where facilities are planned to handle large volume of transfer/connecting passengers along with one or more carriers having a base at the airport with ability to provide wide network on domestic to domestic, domestic to international, international to domestic and international to international sectors.

Besides Hyderabad Airport, Delhi, Mumbai, Bangalore, Kolkata and Chennai International Airports have been identified for development as international hubs. As per the decision of the Union Cabinet in its meeting held on May 9, 2013, a standing Inter-Ministerial Group (IMG) has been constituted to remove the bottlenecks and to provide the right coordination mechanism for the development of aviation hubs in India.

Ashok Lavasa appointed civil aviation secretary Senior IAS officer Ashok Lavasa was appointed as civil aviation secretary. The 1980 batch IAS officer of Haryana cadre is currently Special Secretary in Ministry of Power. He will take charge after Nov-Dec 2013

INDIAN NEWS superannuation of incumbent KN Srivastava, a 1978 batch IAS officer of Karnataka cadre, on December 31, 2013, said an official release by Ministry of Personnel.

Navi Mumbai Airport project heads towards implementation The Minister of State for Civil Aviation, KC Venugopal informed that the Government of Maharashtra (GoM) is in the process of issuing Request for Qualification (RFQ) for the selection of Concessionaire regarding construction of Navi Mumbai International Airport.

Necessary clearances from Ministry of Defence, Ministry of Environment & Forest (MoEF) etc. have been obtained. Bombay High Court has permitted the clearance of mangroves in the airport area. A high level meeting of Chief Minister of Maharashtra and representatives of the airport project affected persons was held on November 11, 2013 wherein the land acquisition model as well as Relief & Rehabilitation Policy was discussed and the same was agreed to.

Besides, Prime Minister has also taken a meeting on November 13, 2013 with all the stakeholders for removal of the bottlenecks with respect to speedy implementation of the Navi Mumbai airport project.

Change in policy gives fillip to MRO industry Maintenance, Repair and Overhaul (MRO) industry will now be considered as part of the sub-sector of airport in the transport sector infrastructure for the purpose of External Commercial Borrowings (ECBs) in accordance with a policy change announced by RBI Circular No. 85 dated January 6, 2014. Consequently, the MRO industry which is a nascent vertical with an annual turnover of about US$700 million in the aviation sector, will get a boost.

Global MRO market is estimated to be about US$50 billion and market analysis suggests that given the right environment, MRO industry in India has the potential to achieve an annual growth rate of 10 per cent for the next 10 years.

Expanding fleet size of incumbent carriers and with the entry of more players in the Indian aviation market, MRO industry is set to grow at a faster rate than before. Policy change at this juncture to classify MRO as transport INDIAN AVIATION

infrastructure is quite timely, feel the industry representatives.

MRO industry is potentially capital intensive, involving substantial import of equipment and related technical knowhow and services. Since MRO has a long gestation period, access to foreign debt is vitally important and critical.

MRO industry will now be able to avail ECBs for long tenure and cheaper debts from international markets. Access to cheaper sources of credit in a high interest rate environment in domestic market will improve viability of the industry and pave the way for robust growth of this high-tech industry in India.

Govt approves operations of Airbus A380 in India The Union Minister for Civil Aviation, Ajit Singh has decided to remove restrictions on flights of Airbus A380 to India. Now, flights of A380 to India will be allowed to airports which are equipped to handle them. At present only 4 airports, i.e. Delhi, Mumbai, Hyderabad and Bangalore have the required infrastructure for operations of A380. The decision has been taken after due consultations with the DGCA, Air India and Airports Authority of India.

The operations of A380 aircraft would be subject to overall traffic entitlements within the bilateral Air Service Agreements (ASAs) with different countries. It has also been decided that wherever the entitlements are not expressed in terms of seats per week, the same should be rationalized and converted into seats per week before allowing A380 operations to India from these countries. If any Air Service Agreement (ASA) specifically prohibits operation of A380 to India, the same will also be required to be amended before A380 operations from that country are allowed. The rationalization of traffic rights from services per week to seats per week shall be done through mutual negotiations through Memorandum of Understanding. Before operations of A380 are allowed, all the airports shall have to get DGCA certification and make adequate preparation in terms of various services required.

The operation of A380s will help airports to generate more revenue, give more comfortable and luxurious travel to passengers, liberalize the Civil Aviation milieu in India and boost the Iimage of Indian civil aviation in the international market. As per available information, Singapore Airline, Emirates and Lufthansa are interested in operating A380 aircraft in India on various international routes.

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TEJAS team sets new record of 500 flights in one calendar year TEJAS attained another significant milestone on Dec 27, 2013, by flying the 500th sortie this year, the highest achieved in a calendar year thus far. The achievement is significant, given that the highest number of sorties attained earlier in a calendar year was less than 300 sorties This feat follows close on the heels of attaining IOC on Dec 20, 2013. The pace of the programme continues with greater enthusiasm towards achieving newer milestones.

Congratulating the Tejas team, Avinash Chander, SA to RM and Secretary Dept of Defence R&D said, “The single most important factor behind the achievements is the synergy of teamed efforts of ADA, DRDO, CEMILAC, HAL and IAF.�

Year 2013 has been exceptionally successful year for Tejas in achieving key milestones while participating in seven detachments all over country, an excellent achievement in itself.

Noteworthy accomplishments are In-flight relight (shutting off and then reigniting the single engine), high energy brake testing, flight envelope expansion, R73E missile firing with radar guidance, Air to ground weapon tests, Emergency jettisoning of entire store, Aircraft in wake tests, Wet Runway trials, demonstration of Swing Role capability during exercise IRON FIST. All these led to a big leap towards achieving IOC 2.

New terminal building at Chandigarh by March, 2015 Minister of State for Civil Aviation, KC Venugopal informed that the construction of an Integrated Terminal Building at Chandigarh Airport (Mohali side) along with other infrastructure for operations has been undertaken by Airports Authority of India (AAI) and work commenced in August 2012. The entire work including air-side facilities for the new Civil Enclave is expected to be completed by March, 2015. The new Civil Enclave is likely to be made operational by June, 2015.

Government of India has granted `in-principle` approval for setting up of a Greenfield Airport at Karaikal in the Union Territory of Puducherry to M/s Karaikal Airport Private Limited in 2011. M/s Karaikal Airport Private Limited has taken up necessary steps for development of the airport. The timeline for construction of airport projects depends upon many factors like land acquisition, mandatory clearances and financial closure.

Nov-Dec 2013

GLOBAL NEWS managing engine configuration, which is key for continuous airworthiness management.

Speaking on the partnership, Virender Aggarwal, CEO, Ramco Systems, said “We have been strengthening our footprint to address the aviation software needs of heli-operators. Last year, we entered into a strategic partnership with Airbus Helicopters to offer a cloud based solution to reach small and mid-sized operators.

Our engagement with Turbomeca on the other hand, will strengthen our position to address the Engine MRO Services segment. Ramco and Turbomeca can provide a proven, end-to-end MRO Solution with prebuilt Engine OEM data to customers. This helps customers maintain accurate, quality data in the system and reduce time cycle for system implementation.”

MATERNA ips gets new contact from Hamburg airport

Transaero Airlines signs Abacus to expand in Asia Pacific

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ransaero Airlines, Russia’s second largest carrier, has secured a new 2-year distribution agreement with Abacus, Asia Pacific’s leading travel technology company. The agreement provides travel agents at over 20,000 locations with full access to fares, schedules and seat inventory on all routes within Transaero’s network.

The new content includes the carrier’s 200 routes across Russia, Europe, Asia, the Americas and Africa. Expanding its global reach in partnership with around 100 of the world’s leading airlines, Transaero is also making attractive interline offers available to Abacus users.

Ho Hoong Mau, Vice President, Airline Distribution of Abacus explained, “There are a lot of synergies in this partnership. Transaero Airlines serves many of the destinations booked in volume by our corporate and leisure travel agents. Where more choice is needed, Transaero Airlines is offering some very compelling prices.”

Roman Vdovenko, Deputy Head of Commerce Department, Transaero Airlines added: “Our successful cooperation with Abacus proved that it is a powerful distribution channel reaching 31 markets in the Asia Pacific region. We are delighted to continue our joint work that fully meets the interests of our clients and partners.”

The agreement includes joint marketing activity, as with Transaero Airlines’ participation in future INDIAN AVIATION

Abacus Corporate Travel Executive Forums in Kazakhstan, aimed at developing Central Asia where the carrier is a leading brand.

Turbomeca signs MoU with Ramco Systems During the Heli Expo 2014, Ramco Systems, the global Aviation Software provider on Cloud, Mobile and Tablets, announced signing of a Memorandum of Understanding (MoU) with Turbomeca to develop compatibility solutions between Turbomeca’s BOOST and Ramco’s M & E / MRO solution. The partnership aims at developing interface to integrate both the solutions to help customers, Engine Service Centres and Heli-operators benefit from seamless data transfer.

BOOST is Turbomeca’s future range of advanced engine and maintenance management services. With this unique, highly secure webbased application, customers will be able to electronically share data with Turbomeca, and facilitate operations and airworthiness tasks and limit human factors through its specific online features. Thanks to the electronic engine logbook integrated with the web-Interactive Electronic Technical Publication (IETP), customers will discover an innovative and fully reliable tool for

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Hamburg airport awarded the Dortmund based specialist for integrated passenger services systems “MATERNA ips” with a contract to develop a “Common Use Self Bag Drop Solution”.

The solution should in particular be tailored to the specific needs and requirements of the fifth largest airport in Germany.

In the initial phase MATERNA ips are working together with partners EVANS Airport Solutions, SICK, Vanderlande Industries and Hamburg airport representatives to develop and implement an automated baggage drop-off system. The so called “Self Bag Drop Solution” is based on the CUSS standard (Common Use Self Service).

The objective is to standardise and speed-up the baggage handling of different airlines and at the same time take into account their different requirements. The modern design of the airport is a very important factor with the development of the system. The new kiosks should blend in with the interior design of the check-in areas.

After an extensive test phase, 40 of these new Self Bag Drop Systems are to be installed. In addition MATERNA ips are also to deliver 20 new self check-in systems which are to be optimised for the requirements at Hamburg airport.

MATERNA ips has gained another large customer with this contract and can further extend its leadership as a supplier of integrated passenger services in the German market.

Nov-Dec 2013

GLOBAL NEWS Airbus Helicopters selects Honeywell Navigation System Honeywell Aerospace’s LASEREF VI navigation system has been selected by Airbus Helicopters for its light helicopter platforms, the EC145 T2 and EC645 T2 family.

The LASEREF inertial reference unit (IRU) allows helicopter operators to always have an autonomous navigation source available in the absence of a Global Navigation Satellite System (GNSS) and radio navigation. The capability is especially useful when navigating during a mission when the GNSS is unavailable due to terrain masking, limited satellite constellation availability, or unintentional or intentional jamming.

“LASEREF will provide Airbus Helicopters with exactly what they’re looking for — an alwaysavailable and highly reliable navigation system,” said Varant Panossian, customer business manager at Honeywell Aerospace. “When you’re in extreme situations, navigation is essential for everything from crew safety to completing critical missions.”

Designed for fixed-wing and rotary-wing applications, the LASEREF is the lightest and smallest IRU on the market, but delivers the highest reliability in the industry. Its integration with a Global Positioning System prevents delays in information delivery and keeps operations running safely and efficiently even under harsh environments and demanding mission situations.

Cathay Pacific & Qatar Airways enter into strategic agreement Cathay Pacific Airways and Qatar Airways, members of the oneworld alliance, today announced a strategic agreement on services operated by both airlines between Hong Kong and Doha, effective 30 March 2014. Sales will commence on 25 February 2014.

The agreement between the two airlines is expected to generate a wide range of benefits for customers. Under the new agreement, Cathay Pacific and Qatar Airways will each operate INDIAN AVIATION

one flight between Hong Kong and Qatar daily, offering premium products and services to passengers travelling to and from the two cities.

Cathay Pacific makes its debut on the Doha route on 30 March, launching a daily service using Airbus A330-300 aircraft with a threeclass configuration: Business Class, Premium Economy Class and Economy Class.

The new agreement will give customers of both airlines more opportunities to earn and redeem frequent flyer points or miles. Top-tier members from Cathay Pacific’s The Marco Polo Club and Qatar Airways’ The Privilege Club will enjoy reciprocal benefits when travelling on flights between Hong Kong and Qatar, including lounge access, extra baggage allowances, priority boarding and many other priority services.

Cathay Pacific Chief Executive John Slosar said: “Cathay Pacific has a strong commitment to serving the Middle East and we are pleased to enter into this agreement with oneworld partner Qatar Airways, and at the same time launch our own new service to Doha. This exciting business opportunity will help us maximise the potential of the market between Qatar and Hong Kong and enable both airlines to create synergies that will improve the overall travel experience for our customers.”

Qatar Airways’ CEO Akbar Al Baker said: “Qatar Airways is delighted to extend our oneworld partnership with Cathay Pacific with this new initiative as it will offer our passengers the opportunity to enjoy an even greater range of five-star benefits. The advantages of this agreement, such as premium lounge access and extra baggage allowances, reflect our ongoing commitment to ensure that we offer the highest standard of in-flight experience.”

Air China to be first airline equipped with GX Aviation Honeywell Aerospace has signed a memorandum of understanding with Air China to begin testing GX Aviation on the airline’s A330 aircraft. Air China is the first airline to collaborate with Honeywell and Inmarsat to test the GX Kaband connectivity solution, and joint testing is expected to begin in the second quarter of 2015.

GX Aviation represents a new era in cabin connectivity for commercial aircraft. Its unprecedented speed and bandwidth will bring Air China one step closer to providing customers with a home- and office-like wireless connectivity experience even at 40,000 feet. Passengers will have the freedom to do what they want online inflight, from chatting on social media to streaming videos. With GX Aviation, passengers can expect a 60 percent improvement in download speed

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for their in-flight connectivity compared with current solutions in the market today.

“The airline industry is highly competitive, and airlines must constantly innovate with new and compelling value offerings to stay ahead of the competition. GX Aviation will enhance the in-flight experience for Air China’s customers, providing them with a superior level of in-flight connectivity,” said Brian Davis, vice president, Asia Pacific, Airlines, Honeywell Aerospace. “GX Aviation will undoubtedly establish new global benchmarks for passenger standards for the next two decades. True worldwide coverage and highest speeds are just some of the benefits that Air China can look forward to enjoying once the service comes into play in 2015.”

“GX Aviation is rapidly gathering momentum,” says Bill Peltola, Inmarsat vice president, Aviation. “The first satellite in the Global Xpress constellation is in place following a successful launch in December 2013. The second and third satellites are scheduled to be launched by the end of 2014. This testing program with Air China is further confirmation that everything is on track for GX Aviation to be available globally for all types of aircraft from the get-go.”

EPCOR extends its APU support service with APS 5000 capability EPCOR can henceforth offer its expertise and MRO services to all carriers operating Boeing 787 aircraft equipped with the APS 5000 auxiliary power units (APUs) manufactured by Hamilton Sundstrand. The offer includes APU repair and maintenance including warranty repairs, along with the supply of spares. In the second half of 2014 EPCOR will have its own 787 state of the art test facility.

The APS5000 capability will be the seventh type of APU that is on the capability list of EPCOR. With this new capability EPCOR can extend its APU services to APU’s equipping Boeing 787 fleet.

EPCOR Managing Director Romain Helmer said: “We are delighted to offer this new product to our parent airlines AIR FRANCE KLM and prospective clients. We have worked very closely with Pratt & Whitney AeroPower (former Hamilton Sundstrand Power Systems), and are very proud today to have earned approved repair shop status for this specific APU. We will strive hard to put all our experience and know-how to good use so that we can deliver reliable, fast and top-quality services. EPCOR will be able to take part in any product improvement programs announced by Pratt & Whitney AeroPower”.

Nov-Dec 2013

SPECIAL REPORT

Maharashtra gets its first Seaplane MTDC and MEHAIR start amphibian plane services from Mumbai to boost tourism

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n February 24 yet another first for the state took place when the Maharashtra Tourism Development Corporation (MTDC) and Maritime Energy Heli Air Services Pvt Ltd (MEHAIR) launched the first seaplane service in Mumbai’s Juhu Aerodrome. The amphibian aircraft will eventually connect Mumbai with tourist destinations adjacent to suitable water bodies even though there are no runways at these destinations.

In the first phase of its operations in Maharashtra, the services will be launched to destinations like Aamby Valley lake, Mula Dam (Meherabad/Shirdi), Pawna Dam (Lonavla), Varasgaon Dam (Lavasa) and Dhoom Dam (Panchgani/Mahabaleshwar). Fliers can book seats from March 5, 2014.

The service was launched by the State’s Minister of Tourism Chhagan Bhujbal and present dignitaries during the event included, Ranjit Kamble, State Minister for Tourism;

Nov-Dec 2013

SPECIAL REPORT

Sumit Mullick, Additional Chief Secretary, Government of Maharashtra; Dr Jagdish Patil, Managing Director, MTDC; Satish Soni, Joint Managing Director, MTDC and Siddharth Verma, Director and Co-Founder MEHAIR and Vivek Kumar, CEO Aamby Valley City.

Bhujbal said, “This is one more feather in the cap of Maharashtra Tourism. We have been constantly offering best and innovative services and concepts to the tourism in the state. The seaplane service will add a lot to the tourism and help unlock the potentials.”

Similarly, Kamble said that it was the need of hour to have such a service. “We have to keep up our pace with the global tourism standards.

Maharashtra Tourism has been moving aggressively in the directions of making the state as one of the most favoured destinations in the country.”

The amphibian aircraft service will be priced to suit all pockets as it will be for the mass market and not for a premium niche. MTDC has partnered with MEHAIR to extend its support and engulf the vast vision and encumbrance of this venture.

Dr Patil, said, “These services will boost tourism greatly. Seaplanes will turn vacation destinations into weekend destinations. The fatigue and expenditure involved in reaching your INDIAN AVIATION

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destination will also come down drastically.”

Speaking on the occasion, Vivek Kumar said, “Seaplane services will add to the attraction of the Aamby Valley and will cater to the resident and property owners within Aamby Valley by offering a quick, economical and exciting mode of transport from Mumbai.”

MEHAIR plans to soon have a full-fledged commuter service from Juhu to Nariman Point which is the star attraction and is much awaited by the people jostling with the heavy traffic of Mumbai.” The first flight is being flagged off to the tourist destination of Aamby Valley which becomes the first seaplane destination in the mainland of India.

The seaplane service is being launched in Maharashtra with a Cessna 206 Amphibian and another Cessna 208 Amphibian aircraft will be inducted by April 2014 and these two models can accommodate 4 to 9 passengers respectively.

“We want to charge our customer affordable rates. A journey from Juhu to Nariman Point could cost Rs 800 in a radio cab, and take at least an hour. We plan to charge an inaugural price of Rs 750 for our service, which will complete the journey in less than ten minutes. This venture was only possible with the tremendous support from the MTDC,” Siddharth Verma said.

Nov-Dec 2013

SPECIAL REPORT

Passions around the Russian-Indian fighter of the fifth generation

By Special Correspondent

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here has been a media campaign against the Indian Air Force’s ambitious FGFA (Fifth Generation Fighting Aircraft) project that is being jointly developed by India and Russia, says Konstantin Makienko, Deputy Director, Center of the Analysis of Strategy and Technologies (Moscow).

Referring to an article published by Business Standard, which made an allegation that Russians are reluctant to share design information with India, Makienko says that it does not represent the actual facts. “All information of the project is accessible for the Indian engineers and designers.

But the management of the Indian counterparts changes very often, which is reflected in rhythm of work being done by the Indian side.

Besides, the Indian team does not possess, unfortunately, sufficient engineering resources to finish the work on time. This causes part of works being forcedly transferred to the Russian side,” he says.

Makienko says this campaign has a direct connection with the enormous cost that Indian government has to spend for buying and manufacturing of MMRCA

INDIAN AVIATION

(Medium Multi Role Combat Aircraft), which is won by Rafale. “The critical article published

by Business Standard has no objective bases.

Basically, this is an effort to distract attention from a financial trouble, which will comprehend the IAF in case of purchase of Rafale,” the expert says.

In modern economic conditions, he observes, purchase of the French fighters cannot be realised without cutting down expenses for other programs.

The cycles of creation of modern aviation engines differ the big duration of creation of a glider and even a board of fighting aviation complexes, so two-phase structure of creation of the engine for FGFA - quite reasonable and natural decision. “At last, the allegation—that the project cost of FGFA is too high—is simply ridiculous, in conditions when the Indian Air Forces is going to buy 126 Rafale for the sum, which considerably will

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exceed 20 billion euro,” he says.

According to the expert, in a reality, campaign against FGFA speaks a competition aggravation for resources in connection with the arisen economic difficulties. Rates of increase of gross national product of India have fallen about 10,5 per cent in 2010 to 6,3 per cent in 2011 and only 3.2 per cent in 2012. Accordingly, the military budget reaching of a maximum in US$39,9 billion in 2006-2007 financial year, for 2013-2014 originally has been planned in size only US$32,89 billion. However, on January 23, the Indian Government has decided to reduce the defence budget for Rs78,7 billion (US$1,26 billion), that is, it will make only US$31,63 billion, provided that there will be no further falling of rupee.

“The sequester of perfectly functioning manufacturing program of HAL Su-30MKI is resolutely impossible, therefore, the real competition for resources goes between projects FGFA and MMRCA/Rafale,” says Makienko, adding that growth inhibition in emerging markets (in Russia, Brazil, and even in the Peoples Republic of China) carries India not cyclic, but structural character and can be tightened for 5-10 years. In these conditions, cancellation of MMRCA project and redistribution of means for Su-30MKI (add 70 units to 272 fighters), MiG-29UPG and Mirage 2000-9 would be the most rational for India.

“Project FGFA, at stage of engineering development, will not demand considerable expenses, and by the time of the batch production beginning, it is possible to hope for improvement of an economic situation to India and renewal of high rates of economic growth,” he concluded.

Nov-Dec 2013

COVER STORY

MRO India 2013

Conclud a high n

The third edition of MRO India, held on Nov 7-9, 2013 at the Bombay Exhibition Centre, in Mumbai, concluded successfully with large participation from key industry players who also attended thoughtprovoking conferences

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Nov-Dec 2013

COVER STORY

des on note T

he country’s only dedicated exhibition and conference of civil and military MRO saw who’s who of the industry attending in good numbers. The tone was rightly set by the chief guest Air Marshal P. Kanakaraj, AVSM VSM, Air Officer Commanding-in-Chief, Maintenance Command, Indian Air Force, who inaugurated the annual event. Air Force Maintenance Command also participated in the event as an exhibitor.

The Air Marshal in his inaugural address appreciated MRO India’s efforts to provide a common platform for all the players from the civil and military aviation fields to interact

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with one another. “The event is an excellent opportunity to interact in a win-win atmosphere for all concerned,” said Air Marshal. He observed that the civil MRO industry in India has been slow in catching up with the demand in spite of having inherent advantages.

The Air Marshal said that there could be a synergy between the civil-military MRO in three ways. The civil industry could assist IAF MC in: a.) outsourcing of specific overhauling tasks, life extension studies, repair & refurbishment activities, supply chain management, etc; b.) become additional vendor source for the BRD for its indigenisation efforts; and, c.) provide

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employment to highly trained Air Worriers with immense experience in MRO work.

Pulak Sen, Conference Director – MRO India, said, “MRO India since inception has been championing the cause of Indian MROs and is of the firm belief that a synergy could evolve between the civil and military MROs. In this desire, Indian Air Force, Maintenance Command was approached.”

Besides Air Marshall, industry leaders from the DGCA, MRO industry, airlines and aircraft manufacturers also took part in large numbers to debate and discuss issues relating to Indian MRO industry over the three days.

Nov-Dec 2013

COVER STORY Air Marshal P. Kanakaraj, AVSM VSM inaugurates the MRO India 2013 Air Marshal P Kanakaraj AVSM VSM, Air Officer Commanding-in-Chief Maintenance Command, IAF was the chief guest at MRO India 2013. He inaugurated the event by lighting the lamp.

The Air Marshal in his inaugural address said that the IAF was not new in the business of MRO. The Maintenance Command established in 1995 today has 13 Base Repair Depots providing end-to-end solutions for most of IAFs fleet and systems. He also acknowledged the growth of its DPSU partner HAK and its contribution in meeting manufacturing and MRO requirements of the IAF. He indicated that the IAF by virtue of its experience in MRO can also contribute in the growth of civil MRO in our country. He said private players could interact with IAF in defence MRO and subsequently venture into civil MRO. He identified areas which could be outsourced by IAF to the private industry thus providing them an opportunity to integrate with the IAF. Interaction of this nature would help in gaining insight into the aviation working culture and enhance the skill level of their engineers and technicians.

He also suggested integration with academicians like IITs/ IISCs and research establishments such as CSIR labs, DRDO and private research establishments to develop a world class quality and flight safety system.

The concurrent exhibition had exhibitors from India and overseas, such as Air India Engineering Services Ltd, MAS-GMR Aerotechnic, Aman Aviation Aerospace Solutions, GUJSAIL, Deccan Charters, MRO Association of India, Turkish Technic and the UK Trade & Investment.

Highlighting the growth potential of MRO sector in his inaugural speech, Sen said that the Indian airline industry is generating MRO work of around US$ 700 million per annum. “Currently, with a modest estimate putting all MRO capabilities in the country together among the third party MRO (Aircraft & Component), we have a potential to undertake the work of approx.

US$ 100 million per annum only. This means that of all the work generated in our country 80 per cent of the work is going overseas and the Indian MRO industry is left with only 20 per cent,” he said.

With civil MRO work going overseas, Sen said, the only other market for organization engaged in maintenance, repair and overhaul business is logically the defence services. “The defence services of India have among themselves several thousands of aircraft, helicopters and unmanned aerial vehicles (UAVs). To support their maintenance, repair and overhaul requirement the defence services have their own setups apart from Hindustan Aeronautics Ltd’s INDIAN AVIATION

facilities. However, there are situations when these organizations may not be able to meet the demands fully and would like to outsource such jobs. This is where the capabilities and services of Civil MROs could be utilized,” he added.

In the past two editions and the current one, MRO India has managed to attract not only Indian, but also international aviation players in the MRO sector. Aircraft maintenance engineering professionals from the MRO and airline industry also visited the exhibition and conference in large numbers.

KPMG also released a background paper on the Indian MRO sector during the MRO India 2013 Conference. The paper highlights the key challenges confronting the Indian MRO sector and enablers to achieve its true potential.

The thought-provoking conferences presented an ideal platform to participating industry players to speak out and raise their issues. Highlighting the issue of high taxation during the conference, Bharat Malkani, CMD of Max Aerospace and Aviation, said the list of different taxes on MRO in India add up to around 32 per cent, which is acting as a deterrent to its (MRO) growth in India. Service tax, value added tax, royalty to Airport Authority of India, custom duties, etc, eventually gets passed on to end users.

“On the other hand, foreign countries realise the

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importance of MRO facilities in giving a push to aviation sector and are, therefore, taking steps to promote it,” said Malkani.

Experts said this is the reason why the airlines prefer to send their aircraft to places such as Sri Lanka and Dubai for maintenance rather than to an MRO in India.

Amber Dubey, partner and head of aviation sector at KPMG, said, “High taxes on MRO are also driving away MRO work from the country.”

While speaking on the sidelines of the seminar, N Nanda Kumar, GM (Engineering), Air India Engineering Services Ltd (AIESL), said, “Many of the third-party airlines are already our clients and we are seeking to provide the services to new entrants like AirAsia and TATA-Singapore airline,” he said.

AIESL, which had put up a huge stall, also revealed that they are at advanced stages of talks with Indian Navy to provide maintenance and engineering support to the latter’s aircraft.

The event had again received the support of Air India as its principal partner and Indian Air Force was the new principal partner. UK was the partner country and Gujarat joined as the partner state.

In the evening of day one, a glittering award ceremony was organised to felicitate and honour the best performing MRO organisations.

Nov-Dec 2013

The next edition of MRO India will be held in 2015 in Mumbai.

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Nov-Dec 2013

SPECIAL REPORT

KPMG releases

Background Paper on the Indian MRO sector during the MRO India 2013 Conference

By Amber Dubey Partner & Head, Aviation & Defence- KPMG

The paper highlights the key challenges confronting the Indian MRO sector and enablers to achieve its true potential Indian Aviation – An Overview 1. In the last decade, India has made tremendous strides in aviation. As per data from Airports Authority of India (AAI), passenger throughput grew to 159 million (FY 13) and cargo throughput to 2.19 million MT (FY 13) clocking an impressive growth of 13% and 10% CAGR respectively for the period FY 2003-13. India is poised to be among the top three aviation markets in the next ten years, from its ninth position currently.

2. There have been a series of positive measures taken by the Government over the past few years: INDIAN AVIATION

Figure 1: Indian aviation sector growth (FY 06-13)

Source: AAI, KPMG analysis

a) Opening up the leading airports to private management through Public Private Partnership (PPP). Another six AAI airports have been identified for handover to private management under the PPP route.

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b) Allowing foreign airlines to invest up to 49% in Indian carriers. Apart from bringing in funds, global best practices and synergy benefits to India, such tie-ups will lead to improvement in regional connectivity and enhancement in inbound tourism. It will also help enhance the share of Indian carriers in the global traffic emanating from India. c) Opening of international sectors to all Indian carriers. Hitherto, Air India enjoyed an unwritten “right of first refusal.” This has led to a series of new flights to foreignlocations by private Indian carriers, especially the low cost carriers (LCC). d) Forming the inter-ministerial Air Cargo Logistics Promotion Board to facilitate air cargo growth in Nov-Dec 2013

SPECIAL REPORT India. Facilitating 24x7 customs at the cargo terminals at gateway airports. e) Extension of time period for consumption /installation of parts and testing equipments imported for Maintenance, Repairs and Overhaul (MRO) of aircraft by MRO units from three months to one year. f) Planning 51 new low-cost airports in Tier 3-4 cities.

3. While there is ample reason to rejoice at the above achievements and enabling policy reforms, one should not lose sight of real potential that could have been achieved. The indigenous MRO segment has struggled to benefit much from this growth. The country has the potential to be an MRO hub due to the growing aircraft fleet, location advantage and availability of technical talent, but faces formidable challenges on taxation, policy and procedural issues.

Figure 2 : MRO spend (in %) in India, by value

II. MRO in India – A case of scoring self-goals 4. India’s current fleet size and expected fleet growth over the next decade represents significant growth potential for MRO service providers. Indian carriers today have around 390 aircraft with another 400 on order.

Boeing, in its 2012 forecast, has estimated that Indian airlines will receive 1,450 aircraft in the next 20 years.

5. At present, India has a relatively younger fleet, with an average age of almost 5 years, resulting in limited heavy maintenance requirements. Going forward, as the fleet ages, the requirements for advanced checks will increase. With the fleet size of Indian scheduled and non-scheduled operators likely to double by 2020, the need for a strong domestic MRO industry is critical and not just desirable.

6. India’s current MRO market size is estimated to be around US$ 700 million. As per Boeing, the market is expected to grow at 7 % CAGR for the next 8 years to reach US$ 1.2 billion by 20201.

7. In terms of MRO spend by value over different categories; engine overhaul remains the largest market in MRO segment in India. The figures below show the breakup of MRO spend over different segments. Line maintenance is mostly done in-house, whereas, heavy maintenance is mostly outsourced as it requires higher skills and sophisticated facilities.

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Source: MRO prospector

8. The Indian MRO industry is facing significant challenges. Factors such as unfriendly taxation structure, cumbersome procedures for import of components and movement of foreign experts, lack of scale and adequate infrastructure are some of the issues confronting the industry. Indian MRO industry is fragmented and lacks large players with an end-to-end services portfolio.

9. It’s a matter of national shame that Indian carriers find it more cost effective to fly empty aircraft and crew to overseas MRO hubs for maintenance of their fleet.

According to industry sources, merely 5-10 percent2 of the MRO work for domestic scheduled carriers is carried out in India and most of the maintenance activity work is outsourced to third-party service providers outside the country.

10. Except for Air India, all other Indian carriers depend on MRO facilities located in South Asia, South East Asia and Middle East. MRO business worth nearly US$ 450 million has been estimated to be outsourced by the scheduled carriers to other countries in FY 123. This is a colossal loss of revenue, employment, Government taxes. To make matters worse, the loss of revenue is in foreign exchange, at a time when India is facing a high degree of current account deficit (CAD).

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11. It is an ironical that in the quest for more taxes, we have actually enriched the governments of our competing countries.

This is because we miss the simple logic that for MRO services, the taxpayer (read airlines) has the option to shop abroad and get the same service at a cheaper price.

The government of India also foregoes the corporate tax on the profits of the MRO service provider.

12. The loss of employment, revenue, foreign exchange and Government taxes will increase each year as more aircraft get inducted in India and the existing fleet ages.

13. In the absence of a well-developed MRO base in India, there are currently around 40 overseas MRO providers approved by the Directorate General of Civil Aviation (DGCA) to conduct work on Indianregistered aircraft, in locations such as the UK, Germany, France, Romania, Jordan, Israel, the UAE, Sri Lanka, China, Singapore, Malaysia and Australia4. The plans by some of the large global MRO players to set up base in India are yet to see the light of the day.

14. It is critical that both the taxation and policy related bottlenecks are thoroughly examined and addressed to put the Indian MRO industry on a high growth trajectory.

It is beyond doubt that the country has huge potential to be MRO hub due to its growing aircraft fleet size, strategic location advantage, rich pool of engineering expertise and lower labor costs. All that is needed is a comprehensive and conducive approach towards resolving the taxation, policy and infrastructure issues of the industry.

III. Key action steps 15. The exemption of basic customs duty on aircraft spares and extending the duty-free period for spares consumption from three months to one year are welcome steps. This highlights the growing acknowledgement Nov-Dec 2013

SPECIAL REPORT within the Government that the revenue loss on MRO has to be reversed. A lot more needs to be done.

A) Leverage India’s competitive advantage in manpower advantage 16. India has a significantly large advantage due to its labor costs which are roughly 40-60% per cent lower than global MRO hubs5.

India’s aircraft fleet is poised for a significant increase. However, this advantage is undone by the unfriendly tax structure. The high tax regime makes aircraft services 20 to 50 per cent more expensive in India than in international hubs. This has spelled trouble for over a dozen MRO projects announced, several of them involving foreign direct investment.

B) Implement the long-pending Goods & Service Tax (GST) regime 17. Despite the acceleration of reforms carried out in the past few years, the prevailing indirect tax regime in India is still in a state of evolution.

The pattern of such evolution is rather haphazard and is characterized by several ‘stopgap’ arrangements. Outcome of such an ad-hoc process is the prevailing complicated indirect tax system, with multi-layered levies both at the Federal and State level.

18. While most of the levies are independent of each other, there are several instances where the same transaction is exposed to multiple levies and that too with very high tax rates, like MRO services which are subjected both to VAT (mostly at higher VAT rate between 12.5% to 15% which varies from State to State) and Service Tax at 12.36%.

19. Another major problem associated with the current tax regime is the cascading of taxes in absence of proper credit mechanism across different Federal and State levies.

Despite the introduction of VAT at State level and cross credit mechanism for Excise Duty and Service Tax at Federal level,businesses continue to incur a significant cost in the form of ineligible credits in the supply chain.

Further, there is no cross-credit mechanism for claiming credit of VAT paid on goods against Service Tax paid on services or vice-versa. Further, the industry has the challenges of dealing with increased compliance costs and managing multiple levies.

20. Introduction of GST should help overcome all of these problems including uniformity in tax rates, eliminating differential tax treatments and credit leakages since GST is a INDIAN AVIATION

simple broad-based form of taxation wherein tax on goods and services is leviable at each point of sale or provision of service.

C) Rationalize VAT on MRO 21. VAT (Value Added Tax) at the rate of 12.5 -15% is levied on aircraft parts imported

by MRO service providers, whereas no such tax is levied on the airlines importing their own spares for self-consumption.

Further, VAT is levied on selling price and not on cost price, which effectively makes the total tax component to be around 20-22%, when added with Service Tax. As a result, the MRO service providers prefer NOT to stock aircraft parts. This impairs India’s competitiveness in providing fast turnaround to aircraft. This may cause significant congestion and financial losses in case a damaged aircraft is stuck on the runway of a busy airport.

22. The procedures for procurement and custom clearance of imported spares are timeconsuming. This too affects the turn-around time for airline customers.

23. The MRO service provider typically charges a fee for providing access to the parts contained in the pool to airline customers. Such access fee is chargeable to VAT at the rates specified in the state where such pooling operations are being carried out. In case the repair of aircraft is undertaken outside India, airlines are not chargeable to any such additional levies, thus rendering Indian MRO uncompetitive.

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24. Some of the corrective measures required are: a) Apply zero rate of VAT on MROs The argument is similar to that of Service Tax. Today, there is miniscule VAT collection on aircraft spares since most of the high value spares are purchased by Indian carriers abroad. Zero rating of VAT would enable development of MRO infrastructure in India.

The Government would earn significantly larger revenues from the multiplier effect of MROs, generation of local employment spend and growth of ancillaries. The State Government would earn VAT on every rupee spent by employees on consumption goods plus get a share of the income tax, excise duty and service tax paid by such employees to the Central Government. Every incremental job yields incremental revenue for the State Government. Imposing VAT on MRO has killed its potential to create jobs. b) Alternatively, sale of aircraft parts and consumables by MRO should be brought under ‘Declared Goods’ list This would ensure uniformity of a low VAT rate across the country. If the size of the MRO pie is made ten times larger (and it is possible!), a smaller percentage of VAT would yield much higher revenue for the State than by imposing a higher tax rate on a miniscule pie. c) Extend other fiscal benefits to MROs States which encourage setting-up of MRO hubs and provide VAT exemption on MRO activities and should also extend other benefits like exemption from State electricity duties, Stamp Duty, land benefits, etc

D) Rationalize Service Tax on Indian MROs 25. In case an MRO activity is undertaken in India, Service Tax is levied at the rate of 12.36 %. However, in case such repairs are undertaken outside India, Service tax is not charged which makes Indian MRO industry uncompetitive with respect to other neighboring countries. Service Tax exemption should be provided for MRO activities in order to level playing field for Indian MROs vis-a-vis foreign MROs. 26. Given the small MRO base in India, the Service Tax collected by the Government of India from MRO is negligible. Further, whatever be the Service Tax rebate, the Government of India would recover most of the same from the Service Tax levied on the Indian carriers. This low-cost-highimpact policy reform would allow Indian MROs to compete in the global market for MRO orders.

Nov-Dec 2013

SPECIAL REPORT Taxing the MRO – ‘Rupee-wise and dollar-foolish’ If all Indian carriers carry out their entire MRO activity in India, the incremental addition to the GDP will be around INR 6000 crores. Of this around INR 3000 crores (around 50% of the MRO billing) will be the wage cost of Indians, of which nearly INR 1500 crores can come back to the Government in the form of income taxes and consumption taxes (VAT, Service Tax, Customs, Excise, etc). This is a conservative estimate – the actual may be more.

Today all that the Central and State Governments are collecting from MRO is around INR 100-150 crores by way of VAT and service tax, a fraction of what it may. This is because Indian aircraft can simply fly to competing countries, get what they want, and fly back without paying any taxes to the Indian Government.

The Indian MRO industry is not looking for tax sops. All it is wants is a rationalization of the tax regime, to make it a level playing field with India’s competitors.

What the Government may theoretically ‘lose’ today may come back to the same Government multi-fold, in perpetuity. Plus it would bring back the jobs and precious foreign exchange that is being lost every year to our competing countries.

It’s simple mathematics!

27. The specific action steps include: a) Provide zero rated Service Tax structure to the Indian MRO sector Service Tax should be exempted by way of zero-rating mechanism, whereby no service tax should be charged on services rendered

by MRO’s and taxes paid by MRO’s on their procurement should be fully refunded. b) In the interim, the following measures could provide immediate respite: i) Increase the abatement on MRO services Currently, MRO services qualify as ‘Works Contract Service’, which attracts Service Tax @12.36% on 70% of the service portion of the work. The present rate of abatement should be increased from 30% to 90% to reduce the Service Tax incidence ii) Liberalization of credit regime for airlines Airline industry is primarily a ‘service’ industry, thereby full Cenvat credit for MRO activities should be extended to the airlines without any restriction since airlines at times may not be in a position to claim full credit.

E) Rationalize the Customs Duty exemption on import of MRO tools and consumables 28. The existing Customs exemption only covers parts and testing equipment for MRO operations.

There a significant import of consumables and tools etc. which are equally important, but the exemption regarding the same is not granted by Customs authorities in India.

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29. These items form part of the standard Illustrated Parts Catalog (IPC) issued by the original equipment manufacturer (OEM) and are applicable globally.

30. In the case of the shipping industry, Customs duty exemption has been provided for all tools and consumables used in the repair of ocean going vessels, unlike aviation MRO wherein exemption is restricted to spare parts and testing equipments only. This anomaly needs to be corrected immediately.

F) Abolish royalty charged by AAI on MRO 31. The Airports Authority of India (AAI) charges 13% royalty from Indian MROs, which renders them uncompetitive. This is over and above the rents that MROs pay to AAI for use of the airport premises.

A royalty over the rent may be termed unjustified and should be abolished.

G) Abolish the Customs requirement to produce certificates from end-user airlines for import of aircraft parts 32. Under Customs law, MROs are granted exemption from Customs duty for import of aircraft spares, subject to submission of requisite documents in the prescribed manner to the satisfaction of the Customs authorities.

33. While importing spares, Customs authorities at different airports have varying requirements of documents many of which

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are tedious and impractical. For instance, some authorities demand a certificate from the customer airlines certifying the parts that are being imported. An MRO provider may order the same Airbus A320 part for three different airlines. It is difficult to obtain such certificates, and for what?

34. The complexity in procedures is unnecessary as the aircraft spares are high value items specific to each type of aircraft and their chances of misuse are almost negligible. It also entails considerable time and resources on part of MROs to comply with the unwieldy rules, leading to avoidable waste of time and effort.

35. The specific action step is the abolition of the requirement to produce certificates from airlines for Customs. MRO’s should instead submit a copy of the relevant pages of the IPC, which is specific to a particular version of each aircraft type and is provided by manufacturer, indicating that the component is a part of the aircraft and should be accepted as standard procedure.

36. The aforesaid documentation should be accepted by Customs as a means of promoting selfdeclaration and minimizing interference. The risk of non-compliance is low since the Customs authorities have the recourse to review such aspects during postimport audits or investigations.

H) Customs should allow 24x7 clearance of aircraft parts at six major airports 37. Unlike for air cargo at major airports, the Customs department has fixed working hours for clearing aircraft spares. This further leads to delays in custom clearance which is critical in quick turnaround especially in situations like ‘Aircraft-on-Ground’ (AOG). A 24x7 window for custom clearance of aircraft spares would go a long way.

I) Distinguish MRO as a separate category through amending Aircraft Rules 38. MROs have been clubbed with Ground Handling Agencies (GHA) for security and other related procedures at the airport. There is no distinction made between these two very distinct services. This causes avoidable issues related to airport passes, etc. and subsequently delays. MRO, by definition, should be declared a separate category by the Government, through amendment of Aircraft Rules, 1937.

J) Accord infrastructure status to MRO industry Nov-Dec 2013

SPECIAL REPORT The MRO is an integral part of the airport infrastructure. The Government may consider extending tax benefits on lines of 80IA to MRO.

K) Encourage airports to support MRO as a strategic activity 39. The MRO facility has to be located at the airport itself – there’s no choice! The Government should take a holistic view and should ensure that adequate space is mandatorily allocated at Indian airports for MRO. Else certain airport operators may take a narrow view of the same and allocate precious airport land for other commercially attractive activities.

40. Globally, all major airports have dedicated MRO hubs that also lead to higher revenues for the airport by way of higher aircraft movements and hangar rentals.

L) Provide SEZ status to MRO hubs 41. The Government should encourage Indian airport operators and Indian carriers to partner with MRO providers and develop Aerospace Parks at the airports. These Parks could be dedicated for MRO and aerospace manufacturing activities with unrestricted access to the runways. The Government should accord Special Economic Zones (SEZ) status to such for such Parks, treat goods and services produced therein as ‘deemed exports’ and provide full tax exemptions.

M) Develop globally competitive skills and capabilities 42. Given the industry challenges, not many MRO players in India possess globally competitive endto- end capabilities. Very few players have global certifications from USA’s Federal Aviation Administration (FAA) or European Aviation Safety Agency (EASA) or UAE’s General Civil Aviation Authority (GCAA) to undertake heavy maintenance works on Airbus and Boeing aircraft.

The Government of India may consider reimbursing 30-50% of the cost of obtaining global certifications as an incentive to the industry.

43. As the Government moves on the reforms front, the MRO industry should strive to develop capabilities and get multiple global certifications. To this end, leading industry players may consider forming business alliances with leading aircraft and INDIAN AVIATION

component OEMs, global MRO companies, airlines and airport operators to develop high quality MRO solutions.

The future is about to change.

IV. Conclusion 44. MRO is critical to the growth of the aviation sector in India. It produces employment, revenue and Government taxes. India has a huge potential to be a global MRO hub due to its growing aircraft fleet size, strategic location advantage, rich pool of engineering expertise and lower labor costs.

45. It is a matter of national shame that Indian carriers find it more cost effective to fly empty aircraft and crew to overseas MRO hubs than to get them serviced in India.

This is because Indian aircraft can simply fly to competing countries, get what they want, and fly back without paying any taxes to the Indian Government.

An irrational taxation structure, cumbersome procedures and lack of adequate infrastructure are some of the contributory reasons.

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46. We need a bold, visionary, pro-India approach. MoCA has been sympathetic to the genuine challenges of the MRO industry and have brought in certain significant changes. There’s, however, a long way to go.

47. Specific action steps have been highlighted in this document. MoCA may decide to set up a high level MRO task force for considering the suggestions and deciding the way forward in terms of policy reforms and procedural improvements. A close collaboration between the Government, airlines, airports and the MRO industry would be critical. Else the advantages may continue to accrue to India’s competitors. The choice is ours!

Boeing, Airbus Sources: Asian aviation article ‘Challenges,

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opportunities await Indian MRO providers’ 3Source: KPMG Analysis, Annual reports of various airlines

Sources: CAPA Sources: Airworks, Wedbush Securities, Inc.,

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US‐India Aviation Cooperation Program

Nov-Dec 2013

SPECIAL FEATURE

Beechcraft identifies great potential in Indian business aircraft market Business aircraft manufacturer announces significant investment in its Indian operations

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Nov-Dec 2013

SPECIAL FEATURE

B

eechcraft Corporation, a world-leading manufacturer of business aircraft, has identified India as one of the most attractive markets in the world for business aviation, and it is making major investments in the country to support this fast growing sector. The company recently opened a new office in

New Delhi.

Recent analysis by the company of the latest available market data reveals that 65 business aircraft were delivered to India between 2008-2012, representing an increase of 38 per cent compared to the 47 business aircraft delivered during the previous five-year period (2003-2007).

Beechcraft’s analysis also reveals that there are currently more than 254 business aircraft

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in India, the largest business aviation base in the region. Beechcraft anticipates that the fleet could continue to grow in parallel with India’s increasing international trade, particularly as the

country’s leading entrepreneurs develop foreign trading partners. This sector is expected to grow dramatically, with the number of wealthy entrepreneurs forecast to double between 20122022 (individuals with net assets of more than US$10 million increasing from 8,481 to 17,032).

In addition to the new sales office, Beechcraft recently announced the appointment of Arrow

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Aircraft Sales and Charters Private Limited (ARROW) as the company’s exclusive sales representative for India. Founded in 2009, ARROW has developed into a significant provider of business aviation services, including sales, charter and operation

management, supporting customers from its headquarters in New Delhi, as well as offices in Mumbai, Kolkata and Sharjah in the UAE. Having served customers in India for more than 50 years, the country continues to be an exciting market for us,” said Richard Emery, Beechcraft President, APAC and EMEA. “With significant growth in deliveries over the past decade, the country continues to show huge potential for future growth. This is why we have decided to make a significant investment in increasing our presence in India. Our market share in the business turboprop category currently stands at 79 per cent, and these investments will help ensure that we remain at the forefront of Indian business aviation.”

Research for Beechcraft amongst global professional investors and senior business executives found that 96 per cent of them forecast growth for the Indian economy over the next five years, with 2 in 5 (41 per cent) stating that this growth will be significant.

Linked to these predictions, 53 per cent believe that the business aviation sector in India will grow significantly over the coming decade.

Nov-Dec 2013