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CRISIL Ratings: Aircraft MRO services revenue could leap 3x in 5 fiscals

Posted On: 2023-06-19 19:40:00 (Time Zone: IST)


Fleet expansion, favourable policies and upcoming infrastructure to drive growth

Revenue of domestic maintenance, repair and overhaul (MRO) services providers is expected to triple to Rs 5,500 - 6,000 crore by fiscal 2028 from around Rs 1,800 crore currently, piggybacking strong growth in domestic civil aviation, government support, and ongoing MRO capex at airports.

That should help lower costs and improve utilisation, a CRISIL Ratings study of three MRO services providers, accounting for more than 90% of the industry's revenue, indicates.

Demand for MRO services, which correlates highly with the size of aircraft fleet, will get a shot in the arm from substantial orders that airline operators have placed to purchase aircraft, with domestic fleet expected to be more than 1,000 by 2027 from around 700 as of March 2023.

Consequently, the overall amount spent by Indian airlines on MRO services (both domestic and global) is projected to surpass Rs 25,000 crore by 2028 from around Rs 14,000 crore levels last fiscal.

MRO services[1] play an important role in ensuring airworthiness and availability of aircraft. Opting for domestic MRO services is generally considered cost-effective in terms of fuel and logistics and saves time as well.

Says Ankit Hakhu, Director, CRISIL Ratings: "The domestic MRO industry's penetration rate is expected to reach 22-24% by fiscal 2028 from ~12% at present, piloted by the less-complex line-maintenance services. The engine and component maintenance segment, where global technical companies are investing to develop local capability, should also see penetration improve."

Revenue of domestic MRO providers has been minuscule so far. Revenue per domestic aircraft fleet for Indian operators is less than Rs 5 crore against more than Rs 400 crore in Singapore, which caters to demand from other countries, including for aircraft from India.

Says Varun Marwaha, Associate Director, CRISIL Ratings: "The government has introduced several policies over past year to realise its vision of making the country a global MRO hub. The upshot of these will be a 10-20% reduction in the overall cost of MRO services."


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