Jet Airways MRO Market
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Transcript of Jet Airways MRO Market
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 IndiaCAGR 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 forecastWorld MR O market
18 16 14 12USD 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 eSource : MRO Prospector
e
hi na
a In di
.E ur op
L. A
E
m er ic a
Af ric a
C
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 MaintenanceLight Scheduled Checks Heavy Scheduled Checks Engine Components APU
HighHigh High Low Low Low
LowLow Low High High High
In-houseIn-house Outsourced Outsourced Outsourced Outsourced
Landing Gear
Low
High
Outsourced
Current Indian MRO market & Outsourcing locationsOutsourcing 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 youContact: Haris M. Ansari General Manager - Corporate Projects Planning Jet Airways (India) Limited Mobile: +91 9820507287 Direct (Tel): +91 22 40191205 Email: [email protected] Website: www.jetairways.com