Growth of Indian aviation underlines the need for top class MRO services

With an order book exceeding 1,000 aircraft, India is poised to emerge as the world’s third-largest purchaser of commercial passenger planes, trailing only the United States and China. This surge in aircraft acquisitions is expected to generate a demand for 200–300 significant maintenance checks each year. Furthermore, the ongoing replacement of ageing aircraft in various airline fleets opens up opportunities for MRO services to fulfill redelivery contracts

India's aviation sector is amongst the fastest growing in the world and is all set to become the third largest globally. The current commercial aircraft fleet size is estimated to grow from about 714 aircraft to 2,000 within the next decade.

This aligns with the government's plans to build 220 new airports and add 1,000 new routes by 2026. The rising middle class will fuel the growth in air passenger traffic at an expected CAGR of 8.5%. India outsources nearly 90% of its MRO services to Singapore, Malaysia, the United Arab Emirates, and Sri Lanka, indicating a sizable supply-and-demand gap, negatively impacting the trade deficit.

Therefore, the Government of India aims to promote India as a global MRO hub and provides a host of initiatives supporting this goal. The revenue opportunity in the country's aviation MRO industry is immense.

Hindustan Aeronautics Limited (HAL) is set to establish a Maintenance, Repair, and Overhaul (MRO) facility for the popular Airbus A320 family aircraft as part of its collaboration with the European aerospace giant. This move is aimed reportedly at supporting HAL’s “entry into the commercial aircraft servicing sector”.

Notably, Indian carriers Air India and Indigo have recently placed orders for 1,000 Airbus A320 planes, totalling over $120 billion in value for this year alone.

This strategic push is proving to be successful as MRO plays a crucial role in the aerospace industry. India has also become the third-largest aviation market in the world, with the number of airports rising from 74 in 2014 to 147 in 2023. Currently, around 90 per cent of MRO requirements in India are fulfilled through imports, indicating significant growth potential for the domestic MRO sector.

Various companies are actively exploring opportunities to set up MRO facilities in India, with Rolls Royce and Safran, a French aviation engine maker, planning their respective MRO facilities in the country.

The Air India Maintenance Repair and Overhaul (MRO) depot, located in Mihan-SEZ in Nagpur, is on the verge of welcoming its inaugural foreign aircraft, after nearly a decade of operation.

Rising global interest in India’s MRO sector is also an endorsement of the safety standards followed by India’s Directorate General of Civil Aviation.

As India’s aviation sector experiences robust growth, the Modi government is emphasising the development of indigenous manufacturing and repair facilities. This shift aims to bring tens of thousands of high-paying jobs and advanced industry skills to India, contributing significantly to the nation’s overall economic growth.

With an order book exceeding 1,000 aircraft, India is poised to emerge as the world’s third-largest purchaser of commercial passenger planes, trailing only the United States and China. This surge in aircraft acquisitions is expected to generate a demand for 200–300 significant maintenance checks each year. Furthermore, the ongoing replacement of ageing aircraft in various airline fleets opens up opportunities for MRO services to fulfill redelivery contracts.

India’s trajectory toward becoming a substantial market for defense aircraft further amplifies the need for military MRO capabilities to meet the evolving demands of the aviation sector.

Establishing a mature MRO industry will not just create high paying jobs but also save billions in foreign exchange for India. It will also add a strategic advantage to India and its aviation industry.

India’s defence purchases in aviation are also expanding owing to its burgeoning air force and overall firepower under the backdrop of heightened tensions with its northern neighbour China. There is a similar trend globally with the global defence aviation market projected to grow considerably, opening up opportunities for India to seize the day in the MRO business.

India’s yearly Maintenance, Repair, and Overhaul (MRO) revenue has the potential to triple, reaching $55-60 billion by fiscal 2028. This substantial growth, up from around $18 billion, is anticipated due to the overall expansion of civil aviation and supportive government initiatives, as indicated by Mumbai-based analytics group CRISIL Ratings.

Notable initiatives include the reduction of Goods and Services Tax (GST) on MRO services from 18 per cent to five per cent, the shift to open tenders for land lease instead of predetermined rates to lower rental costs, the elimination of the 13 per cent royalty charged by government authorities on revenue, and the extension of land allotment to MRO service providers for 30 years as opposed to the current three to five years.

Simultaneously, construction activity has significantly taken off, with dedicated MRO facilities being established at Delhi and Bengaluru airports for select private airlines. More facilities are in progress. Plans are also in place for establishing two MRO facilities near Jewar airport in Uttar Pradesh, in Belagavi, Bhopal, and Tirupati.