To Capitalise On Aviation Growth, India Has To Prioritise MRO

The global aviation stockpile is on the upsurge due to a growing global demand for air travel. This is reflected in the consistent northward trend in global aircraft fleet size. It grew from approximately 23,715 aircraft in 2021 to around 28,398 aircraft in in 2024 worldwide. The number is expected to grow to around 35,413 in 2034, displaying a rising trend through the coming decade. 

The maintenance, repair and overhaul (MRO) segment of the aviation sector plays a crucial role in maintaining the airworthiness of these aircraft, and eventually, the safety of passengers and crew. Globally, the MRO market — pegged at approximately US$ 101 billion in 2023 — is expected to reach US$ 124.1 billion in 2034.

MRO services are categorised in four major segments — line, components, engines and airframes. Of these, engine and auxiliary power unit (APU) maintenance constitutes almost 60 per cent of the total MRO outlay, whereas component, line and base maintenance form around 22 per cent, 8 per cent and 10 per cent, respectively.,

Global Best Practices 

The expansion in global MRO is characterised by long-term and developmental initiatives that provided a boost to the emergence and sustenance of important MRO hubs. For instance, Malaysia has stressed the development of a nodal agency for MRO services, while also encouraging clustering based on strength, creating a data repository for overall monitoring, and encouraging the development of niche technologies through establishments such as the Malaysian Industry-Government Group for High Technology (MIGHT).

Dubai (UAE) has fuelled growth in MRO by developing modern facilities, forging partnerships with major players, ensuring technology transfer and strengthening the training ecosystem. Singapore has taken several initiatives to streamline key areas like capacity building for nose-to-tail services, lower costs and tax burdens. The country also developed a co-investment programme involving global and local enterprises that fosters holistic growth.

Thailand has taken significant steps in strengthening key supply chains, developing logistics and attracting foreign expertise through tax incentives. Countries like the Philippines have also prioritised investments in MRO services, indigenous manufacturing of parts/components, and skill development to prop up the sector.

Policy Boost For India's MRO

The Indian aviation sector has also witnessed significant growth, particularly in passenger traffic, which crossed 220 million passengers in 2024. With rising traffic and an increasing aircraft fleet — from the current strength of 800 to around 1,700 over the next few years — the Indian MRO segment will have considerable potential to expand and diversify within Indian alone.

The MRO industry in India — which was estimated at around US$ 1.7 billion in 2021 — is slated to grow to approximately US$ 4 billion in 2031, at a CAGR (compound annual growth rate) of 8.9 per cent. India has the potential to upgrade itself towards becoming an MRO hub in the coming years by significantly strengthening its ecosystem through systemic reforms and developing its comparative advantages vis-à-vis competing markets.

Realising this, the Government of India has been working on various policy initiatives. Major measures among these are the MRO Policy (2021), the National Civil Aviation Policy (2016), the rationalisation of GST and the removal of Gross Turnover Tax (GTO).

One of the defining recent reform measures is the reduction in GST on MRO services, from 18 per cent to 5 per cent. This will be a key step in creating a robust ecosystem for MRO in India while competing with global players, facilitating the government's vision to develop India as a global MRO hub.

However, the growth of the sector will also depend on how efficiently and collaboratively India can address key challenges faced by its major MRO players.

Indian Challenges

A recent report by BRIEF India and Niti Aayog noted that despite persistent efforts by the government, the growth of the Indian MRO industry has been restricted owing to some challenges.

The strong presence of Original Equipment Manufacturers (OEMs) in the aftermarket, contractual conditionalities and offset clauses, dearth of land near airports for MRO hangars, issues with Federal Aviation Administration (FAA)/European Aviation Safety Agency (EASA) approvals, tax anomalies, lack of access to credit and shifting cost for airlines, are some factors that adversely affect operations and capacity building of Indian MROs.

Furthermore, there are teething problems that new entrants may have to deal with. The near impossibility of matching the scale of international players affects the cost competitiveness of emerging MRO players in India. There is also the high initial outlay in facilities, personnel, initial advertising, research & development and equipment, all of which poses a significant challenge.

Ease of doing business is also yet to reach the desired level. Difficulties in attaining FAA/EASA licenses, control of OEMs/manufacturers on relevant information/data/manuals, and lack of adequate training infrastructure, create an array of hurdles for new Indian players.

In recent months, a series of high-profile aeroplane mishaps have intensified scrutiny of the aviation industry worldwide, with a specific focus on safety, operational reliability and maintenance practices. In India, the spotlight is now firmly on the MRO sector, which plays a crucial role in ensuring the safety and efficiency of its continually expanding aircraft fleet.

As the country witnesses rapid growth in air traffic, while the aviation ecosystem evolves, the demand for advanced MRO services will continue to surge. To keep pace with these developments and achieve envisaged advancements in the Indian MRO sector, well-directed reform measures and implementation of the same through a participatory approach involving relevant stakeholders, will be key.

The Way Ahead

Going forward, Indian MROs may ensure fruitful negotiations with established global MROs and manufacturers, fostering greater flexibility in information sharing. They would also have to gradually move up the value chain — possibly via joint ventures with established OEMs and MROs, thereby building necessary capacities and presence.

In the long run, the development of a resilient supply-chain for components, parts and spares would be key to the growth of Indian MROs. Also, systemic developments like the identification and incentivisation for the manufacture of components and spares — where India can have a comparative advantage — are needed.

Along with increased private participation, convergence of civil and defence MROs and consistent development of human capital will be essential to achieve necessary growth. The realisation of these objectives would potentially go a long way in catapulting the Indian MRO industry to the levels of its global peers.

(Hussain is director and Chakraborty a project manager at New Delhi-based research institute Bureau of Research on Industry and Economic Fundamentals, aka BRIEF. Views are personal)