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Recession hits MRO plans
Bibhu Ranjan Mishra in Chennai/Bangalore
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March 12, 2009 11:24 IST

Many global and Indian firms who had earlier announced their intent to set up maintenance, repair, overhaul facilities in India to exploit the huge opportunities in this sector, are re-visiting their plans in the wake of the economic downturn which has had an adverse impact on the aviation sector adversely.

The last couple of years of frenzied activity in the MRO space made many believe that time is not far when umpteen number of MROs will start servicing narrow and wide-bodied aircraft on the Indian soil like motor garages.

While many of the projects announced over the last couple of years have not seen the light of the day, Aviation firm AirWorks which launched India's first MRO in airline segment at Hosur (Tamil Nadu) is yet to land their first anchor customer.

Bangalore-based Hindustan Aeronautics Limited, who has a successful track record in aerospace engineering, has announced to withheld plans to set up an MRO facility at the old HAL airport in the wake of the global recession.

"We planned to open an MRO facility at the HAL airport. We had gone ahead with the plans; we had got the shareholders' approval. But, there is a recession in the world economy. People are not flying that much. The fares have risen again. The existing operators have their support arrangements with companies abroad. That's why we are putting it on hold," Ashok K Baweja, chairman of HAL said.

Most MRO projects announced in 2007-08 by large global players like Lufthansa, EADS and Boeing involved major domestic airlines as their local partners to derisk their business model.

However, when the airlines business in the country is bleeding under the impact of recession and growing losses, most prefer to focus on their core business instead of diversifying into a new business like MRO.

"With the problems that the airlines industry is going through financially since last year, it's not the right time for airlines companies to go to the Board of Directors to seek clearance to invest in MRO business, which is not their core business. I think the airlines are now going back to the basics, and trying to find it out how to make money on their core business instead of getting into all kinds of new business," said Fredrik Groth, CEO of AirWorks.

Groth who has over 10 years of experience in the MRO industry in the US and another eight years with the airlines industry in Europe, said even though the MRO hype took a hit due to the global downturn, the growth projections of the MRO industry was going to happen.

Recently, breaking its long silence, aircraft manufacturer Boeing announced that the company is committed to its plan for an MRO in Nagpur. Even though the Seattle-based company had first evinced interest in setting up the MRO at Nagpur in 2006, there was little progress on this plan so far.

There were also talks that Swiss company SR Technics, now owned by Dubai Aerospace, was planning to set up an MRO facility either in Hyderabad or Bangalore; but no progress has been made so far.

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