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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
Passengers in Millions
Passengers in Millions
No: of aircrafts
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
USD M illions
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
% 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
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