Mumbai: The Make in India slogan to encourage local manufacturing and create jobs may still be on the drawing board, but state-owned Air India (AI) is already prepared with Asia’s largest repair in India facility for aircraft, two airline executives said.

By the end of this month, the maintenance, repair and overhaul (MRO) facility in Nagpur built by Boeing Co. will be handed over to Air India, in a relief for domestic airlines which fly to West Asia or Singapore for the purpose. Boeing built the facility as part of its obligations while selling 68 aircraft to India in 2005.

Built at an estimated $107 million, the facility is ready for transfer to Air India, albeit with a delay of three years. The facility, sprawling across 50 acres, can accommodate three widebody aircraft such as Boeing B777 or Airbus A380 model at a time.

Separately, Air India will build an engine MRO unit along with engine maker General Electric Co. for $89 million, next to the airframe MRO facility built by Boeing. The airline has acquired 50 acres for the purpose. The company is also investing in similar facilities in Hyderabad, Kolkata, Mumbai and Delhi.

“We are trying to create a one-stop shop for maintenance, repair and overhaul of airframes and aircraft engines. Once all MROs are operational, Air India will offer these facilities to third parties to shore up revenue," one of the executives said. Both officials declined to be named.

Boeing declined to comment. An Air India spokesperson confirmed the development.

Air India will transfer all functional MRO facilities to Air India Engineering Services Ltd (AIESL), a subsidiary, which is expected to clock 1,000 crore revenue in three years, with half of it coming from the parent company.

“Firstly, MRO in Nagpur, which is Asia’s largest facility, will decongest Mumbai airport as there is no more space left for hangars. Second, as the MRO is situated in MIHAN (Multimodal International Cargo Hub and Airport at Nagpur) special economic zone, the cost of repairing would be lower compared to other MROs. Lastly, Air India MROs can offer these facilities to other domestic and international airlines," the second official quoted above said.

A March report by consultancy firm KPMG estimated India’s current MRO market at around $700 million. Indian airlines are expected to double their fleet by 2020, which would call for a strong domestic MRO industry. The report pointed out that merely 5-10% of the MRO work for domestic scheduled carriers is carried out in India, with the rest outsourced to third-party service providers outside the country.

“We have invested $17 million in Hyderabad facility while another $13 million is invested for aircraft engine MROs in Delhi, Kolkata and Mumbai. Nagpur MRO can handle GE 90 and General Electric GEnx engines," the second Air India executive said. The airline has also invested $13 million at Thiruvananthapuram in Kerala to repair narrow body planes, he added.

Air India has already secured the contract to do minor maintenance check of Vistara airline, floated by Tata Sons Ltd and Singapore Airlines Ltd. Vistara is awaiting final clearances from the Indian aviation regulator and plans to start flying by this year end. The same executive added that Air India’s financials will improve after it hives off the MRO company into a separate unit.

There are sceptics as well.

“Nothing will change until and unless Air India’s MRO units secure big third-party orders and turn profitable before three years. Otherwise, the parent will have to bear the burden of MRO subsidiary too," an airline consultant said, requesting anonymity.

Air India, that has a total debt of 40,000 crore, posted a net loss of 5,100 crore in 2012-13 and a net loss of 7,100 crore in 2011-12. It is in the middle of a 30,000 crore government bailout programme.

Air India will post an operating loss of 2,100 crore and a net loss of 3,900 crore for the year ended 31 March, Mint reported on 17 March. Air India hasn’t disclosed earnings for the fiscal year 2014 yet.

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