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    Rajat Agrawal
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    The document discusses strategies for airline maintenance, repair, and overhaul (MRO) activities, whether to perform them in-house or outsource them. It notes the rapid growth in Indian aviation and forecasts continued growth. It outlines the major costs for airlines and typical MRO activities like line maintenance, scheduled checks, engine overhauls, and their characteristics. Currently most MRO activities for Indian airlines are outsourced abroad. Key factors for determining whether to insource or outsource include economies of scale, resources, regulations, costs, and location of service providers. Line maintenance is best done in-house while heavy checks and engine overhauls are generally outsourced due to lack of facilities in India.

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    The document discusses strategies for airline maintenance, repair, and overhaul (MRO) activities, whether to perform them in-house or outsource them. It notes the rapid growth in Indian aviation and forecasts continued growth. It outlines the major costs for airlines and typical MRO activities like line maintenance, scheduled checks, engine overhauls, and their characteristics. Currently most MRO activities for Indian airlines are outsourced abroad. Key factors for determining whether to insource or outsource include economies of scale, resources, regulations, costs, and location of service providers. Line maintenance is best done in-house while heavy checks and engine overhauls are generally outsourced due to lack of facilities in India.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPSX, PDF, TXT or read online from Scribd
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    156 views16 pages

    Jet Airways MRO Market

    Uploaded by

    Rajat Agrawal
    The document discusses strategies for airline maintenance, repair, and overhaul (MRO) activities, whether to perform them in-house or outsource them. It notes the rapid growth in Indian aviation and forecasts continued growth. It outlines the major costs for airlines and typical MRO activities like line maintenance, scheduled checks, engine overhauls, and their characteristics. Currently most MRO activities for Indian airlines are outsourced abroad. Key factors for determining whether to insource or outsource include economies of scale, resources, regulations, costs, and location of service providers. Line maintenance is best done in-house while heavy checks and engine overhauls are generally outsourced due to lack of facilities in India.

    Copyright:

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    of 16

    MRO Strategy for the Airline In-House or Outsource

    17th March 2011

    Agenda
    Indian Aviation Growth MRO Market (World and India) Airline Cost E&M E&M Activites India In-house vs. Outsourcing (Factor to consider) Reasons for current E&M activities in India Comparison of In-house vs. Outsource

    Domestic & International air traffic growth India


    CAGR FY 06 FY 10 : 17 % Domestic passenger growth CAGR FY 06 FY 10 : 20 % International passenger growth

    Passengers in Millions

    Source: Published data, research estimates

    Passengers in Millions

    Domestic traffic volume Forecast

    Source :Airbus GMF2010

    India fleet - 2010

    Total commercial fleet size :411

    Source : MRO Prospector

    Forecast South Asia & India

    Source : Boeing CM0 2010

    No: of aircrafts

    Source : MRO Prospector

    MRO Market forecast


    World MR O market

    18 16 14 12
    USD Billions

    10 8 6 4 2 0

    Pa ci fic

    As ia

    2010

    2015

    2020

    M .E as t N .A m er ic a W .E ur op e
    Source : MRO Prospector

    hi na

    a In di

    .E ur op

    L. A

    m er ic a

    Af ric a

    MRO value by activities

    India s MRO market is approximately USD 620 million

    Source : MRO Prospector

    Value of MRO market in India

    USD M illions

    Source : MRO Prospector Source : MRO Prospector

    Typical Airline major costs

    The major cost contributors for the airline are Fuel Personnel Acquisition Cost Airport related cost E&M Cost

    E&M Activities

    E&M Activites

    Labor

    Material

    Typical

    Line Maintenance
    Light Scheduled Checks Heavy Scheduled Checks Engine Components APU

    High
    High High Low Low Low

    Low
    Low Low High High High

    In-house
    In-house Outsourced Outsourced Outsourced Outsourced

    Landing Gear

    Low

    High

    Outsourced

    Current Indian MRO market & Outsourcing locations


    Outsourcing locations Malaysia Singapore UAE Jordan China France Germany

    % of Work

    Source : ACAS

    In house or Outsource
    The Major factors that dictate the decision to Outsource MRO activity In house

    vs. Outsource are: Maintenance Philosophy Economy of scale / sufficient volume Available resource / skilled manpower, facility (or build and plan) Regulatory Economic feasibility Tax impacts Favorable policies / schemes Geographic location Existing Service Providers (in-country and regional)
    Each of E&M Activities needs to be evaluated E&M strategy has to be periodically reviewed

    E&M Activities
    Line Maintenance / Light Maintenance Checks Does not require facility (done within the operating network) More labor intense, less downtime and lower skills Currently it is better to do in-house Heavy Scheduled Checks (Base Maintenance) Mostly outsourced due to shortage of facilities Requires facility More labor intensive, higher ground time and higher skills Has good potential for in-country MROs but there are service tax, sales tax, VAT, customs duty Collaboration model coupled with SEZ benefits. Engines / APU / Components / Landing Gear Outsourced (out of country) Requires sufficient volume for overhaul shops More material intensive, high skill Withholding tax Collaboration model coupled with SEZ benefits for some selective types

    In-house vs. Outsourcing


    In-house
    Sufficient volume Complete control Proactive for uncertainty Third party revenue

    Outsource
    Quick startup Predictable cost (PBTH model) Contracts Performance & Penalty Flexible to fleet changes Airlines can have mix fleet Reactive to uncertainty Could have exit penalties Taxes: withholding, sales tax,

    Long lead time Investment Cost Inflexible to fleet changes Downsizing Inflexible to cater to mix fleet

    Thank you
    Contact: Haris M. Ansari General Manager - Corporate Projects Planning Jet Airways (India) Limited Mobile: +91 9820507287 Direct (Tel): +91 22 40191205 Email: hansari@jetairways.com Website: www.jetairways.com

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