Edge

Engineering

‘India is not an over-serviced but an under-serviced market’

That Indian aviation sector is booming is well-known. However, what is not so well-known is that there is a demand for maintenance, repair and overhaul (MRO) of aircraft which is mandatory for every aircraft after it flies for a number of hours and miles. Worldwide the total volume of the MRO business is about US$ 55 billion and growing at four per cent annually. India's fleet strength, already prominent on the aviation radar with 300 commercial aircraft flying, is slated to grow to 500 by 2010 and 1,000 by 2020. This offers a huge opportunity to MRO service providers. Lufthansa Technik AG, of the Lufthansa group has just announced its plans to set up a MRO facility in collaboration with GMR group, the promoters of the greenfield Hyderabad International Airport, who are also modernising the Delhi International Airport. August Wilhelm Henningsen, chairman of the board, Lufthansa Technik AG shared his plans with Satya Naagesh Ayyagary. Excerpts.

August Wilhelm Henningsen Chairman of the board Lufthansa Technik AG

The timing of your entry into the MRO market. Is it right or is it in response to the competition?

The aviation sector in India is booming. There are a lot of new airlines and aircraft. These aircrafts, of course, need support. Lufthansa Technik is the world market leader in MRO services. We have good relations with almost all airlines here in India that we have developed over the years. We have a number of contract supporting components engines and it is only logical that we go for another product. What we would like to offer to India and the Indian subcontinent is base maintenance to the Indian fleet so to speak.

Why Hyderabad?

It's a very good location. It is centrally located in India. There is a new airport coming up and there is sufficient space. Also, GMR, our partner is willing to support and join forces. I think it will be a big challenge for us to build and develop this facility. We are very confident that we will find the right workforce here.

We also have gained a lot of experience from working in China and Philippines and around the world. Education and training of the future workforce is very crucial, which we will start very soon.

The investment of US$ 20 million seems small compared to the some studies that say it will cost about US$ 100 million?

We have to start. With our experience, we can start the facility and ours is a modular approach, which will have two bays that will be able to conduct about 50-60 C-C-checks and around 11 heavy checks per year and D-checks, so that we have the full spectrum of base maintenance activities. If we are successful we will be happy to expand it.

When will the facility commence operations?

We will be ready to host the first airplane by the end of 2008.

What is the nature of the relationship with GMR for this facility?

It is a joint venture where Lufthansa Technik will hold over 75 per cent and the rest will be held by GMR. However, we are working out the final details of the agreement.

How many people will man the facility and what's the composition?

When the facility is full blown, really up and running there will be about 400 people. This includes some management people and also those dealing with engineering support, planning, materials and logistics and and in other areas.

It is also good that Lufthansa is flying directly daily to Hyderabad, which ensures a relatively good connectivity with our main hub in Frankfurt. This will also help us in bringing material support and specialists from Germany or take people from here for on the job training. So, it is also important that we have this close link.

But where are the people? Are you looking at the obvious source like the Indian and Air India?

No. We are not going to the market. We are looking at young people who can be trained and educated for this important task. This will be achieved in cooperation with Lufthansa Technical Training through a specially designed training programme, tailored to the requirements of the facility. A dialogue with technical institutes in Andhra Pradesh has already been initiated. However, we cannot reveal the full details of this at the moment.

You have the Aircraft Maintenance and Engineering Corporation an ongoing MRO facility in China, a joint venture with Air China where you were the general manager for a while. There is also another facility in Philippines. How has the experience been and could some of that be helpful while setting up the facility here?

Lufthansa Technik has 27 big and small subsidiaries around the world and the Hyderabad facility will be the 28th. The Chinese facility is a big one developed 17 years ago.

The experience has been positive. China and India are a little bit similar-infrastructure-wise. What China was then is what India is seeing today. In the Philippines, we have a JV since 2002 with Philippines Airlines wherein we are serving the market for line maintenance and base maintenance. That facility offers overhaul facilities for Airbus A330s and A340s.

According to some studies, an Indian MRO facility would result in cost savings of at least 25-30 per cent compared to what it costs overseas. Would you agree with that?

Wages in India are, of course, lower than many parts of the world and we would like to use that. But we would rather like to learn.

With Boeing's proposed MRO in Nagpur, there is already competition. What's your strategy to take on competition since you plan to offer the services to the Boeing 737 family of aircraft as well?

I do not see a major problem there. India is not an over-serviced but an under-serviced market. Taking the best out of the MRO cake will be the starting point.

Do you see any hurdles in the form of the current policy environment?

Not really.