Thursday, April 12, 2018

Is India emerging as aircraft repair hub?

Last month, the government announced that it had appointed the consultancy firm EY as the transaction advisor for Air India’s strategic sale. The aviation minister said that Air India would be offered to potential buyers as four different entities –

Air India, and its low-cost arm Air India Express and subsidiary AI-SATS,
Regional airline Alliance Air,
Air India Air Transport Services Ltd (AIATSL),
Air India Engineering Services Ltd (AIESL) which would be sold separately.
What the minister did not tell was that of all the entities, AIESL has the potential of becoming the most profitable business in terms of rates of return on capital employed. This is because AIESL is engaged in providing MRO or maintenance, repair and overhaul of aircraft services (http://aiesl.

But, in order to become an extremely competitive global player, AIESL will require funds of around $250 million. Moreover, with the markets themselves expanding (see chart), this is the best of times when AISEL could actually blossom. However, the profitability of the MRO business depends on huge investments as well. In addition to money, the success of the MRO business itself depends on three factors – quality, turnaround time, and commercials.
12/04/18 RN Bhaskar/Free Press Journal