The entire world is hit with the COVID-19 crises. All of us are trying to deal with this pandemic and fight it, on a personal as well as professional level. Confined to our homes, everyone is making the best use of their time to get in touch with clients, getting to know them better over social media and calls, trying to keep up our businesses from the confined walls of our houses. In this crises, some aircraft are still flying, they are ferrying passengers stuck as far flung places from home, students gone away from their homeland for studies, medical supplies and allied services. Many passenger aircraft are now temporarily converted to Cargo flights for humanitarian purposes. In such a scenario what is the Aerospace MRO industry doing. How are independent MROs coping up with this crisis? How long will the MRO industry stands back on its feet once this crisis ends? Questions like these and many more were answered by the D. Anand Bhaskar, MD and CEO of Air Works, one of the leading independent MROs in India in an exclusive interview with Swati.k
Q. How do you see the possible outcome of this crisis on the MRO industry?
A. It is difficult to define an outcome as this unprecedented crisis is still evolving across the world. In a non-typical situation, we have a complex number of parameters that have flummoxed the global community. Governments are uncertain; pharma industry unprepared, businesses across a host of sectors – both direct and indirect – has been halted almost overnight undermining confidence and the very genesis of an economic value chain. In a situation where no two people in or across continents or countries are expected to engage and transact, all strategies are constantly evolving. Such an event hasn’t happened before and comparisons are being made with situations which existed decades earlier such as the Spanish flu, Emergencies, and the like. Everyone is searching for data points from the past in order to arrive at a future plan with an element of certainty.
Hence, in sync with a six-month cycle that befell China and a broad preparedness of the Indian Government for a period of at least 3 months, we are making identical arrangements at our end. As the country’s biggest independent MRO, we have a business portfolio that comprises both global and domestic customers. While I am confident of Air Works emerging stronger out of the current crisis given our current financial and operational performance, the crisis will undoubtedly cause the industry including some customers and peers, disruption and people with stronger balance sheets and operating practices will emerge out strong. We hope that the Government’s comprehensive lockdown strategy is successful in containing the spread of the infection, in which case the domestic industry may yet bounce back earlier than anticipated, which will be in the interest of everyone. However, the global recovery will certainly take more time, in light of the on-going situation in the USA and Europe. The Indian Aviation sector will have greater resilience given it is more domestic focussed.
For the MRO sector both globally and in India, the development has and will impact business level in the medium term. While most countries have announced packages to protect jobs and businesses, we think that some weaker airlines may not be able to outlive the current crisis, leading to a marginal increase in redelivery and repossession business. Also, airlines are expected to take advantage of lower Passenger Load Factors and bring forward certain kinds of maintenance activities, to be able to earn additional revenue once they hit the peak with maximum utilisation of assets in hand. Airlines are expected to push out delivery of newer aircraft and also ask Lessors for moratorium for payment of lease rentals. The proactive steps taken by the Reserve Bank of India in enhancing cash supply to industries will help airlines, MROs & airport operators to tide over the current hump much better. Over the course of six to eight quarters, we expect normalcy to be restored and business to return to earlier levels.
Q. How will the MRO industry survive and surge forward in years to come?
A. It will all depend on the scale and longevity of this crisis. Hopefully, this crisis should make Governments, business leaders, and OEMs sit up and reassess their current strategy of outsourcing everything to a single country instead of broad-basing their investments in other equally robust and healthy economies such as India. The risks associated with such a strategy of putting all the eggs in one basket are against business continuity.
India is already the world’s 3rd largest aviation market and will soon become the world’s most populous nation with a huge and unparalleled domestic market that is already and will continue to be the envy of all marketers. With the amount of aircraft on order and the on-going up gradation of aviation infrastructure driven by the Government, it is the right time for India to assert the right to its market and its strengths on the global scale, which will help feed our national ambition of making the country a hub for MRO activities. The Indian MRO market has been growing at about 12% YoY, and with the upsurge expected in travel, we have the potential and resources to evolve as a strong and viable destination for MRO work including airframes, components and engines. The sector also has the potential of meeting the Govt’s agenda of ensuring jobs for India’s young millennials.
The survival of the industry is not in question and the correction of the inverted Tax structure by the Government recently will be an added help for Indian MROs to sweeten the business case of marketing our products and services to both Indian and global customers. As we step into the new decade, the policies and decisions we enact now will play a crucial role in determining the position as well as the surge you seek for Indian MROs in the forthcoming period.
Q. How long will it take for the MRO industry to stand back on its feet once the COVID-19 crises ends?
A. We are in uncharted waters as of now and much will depend not just on the extent of the crisis but also on the state of the aviation market, once the crisis is over. The recent Govt. policy initiatives have been a welcome move in assisting the industry’s case since many years and the worst may soon be over if and once our domestic aviation market springs back on its feet. The impact on Indian MRO industry may well be moderate, if the COVID-19 crisis ends within this quarter and as per Govt. estimates. With the number of aircraft now available, Indian airline operators today possess both the power and ability to ensure that the impact of COVID-19 on the Indian MRO industry becomes minimal, subject to their sending aircraft to Indian MROs for maintenance instead of abroad. Further, this is also the time to make structural changes and enhance the domestic content of services, be it for component overhauls or Engine deep checks, to significantly higher levels than current pitiable ones.
Q. How is Air Works dealing with the current crises?
A. Like all organizations, Air Works has also taken a host of measures with the twin objective of ensuring the safety of its employees and ensure business continuity. We created an internal team called the COVID Rapid Action Team which has been meeting on a daily basis, ever since the news of this crisis first broke. The team has been studying market and media reports, Government and institutional advisories, and medical updates to align both internal ways of working and an external operations strategy, allowing us to maintain normal services while ensuring the well-being of our employees. We strengthened our sanitation and hygiene regimen and ensured adequate supplies of disinfecting equipment across all our offices/ locations pan-India. We have also been disseminating internal advisories regarding the infection since some time, following up and strengthening employee cleanliness regimes via a host of communication tools including mailers, situation reports, screensavers, telecons, and even a health app. We are actively engaging with the Ministry of Civil Aviation (MoCA), Directorate General of Civil Aviation (DGCA), FICCI, MRO Association & other bodies to take quick corrective actions and also support the country in this time of crisis.
We have even tweaked and instituted different working/ reporting timelines for our senior colleagues who may fall into the high-risk category while for others, operations were gradually transformed into a rostering or need-to-work basis, as part of providing essential services at airports. We provided our employees with appropriate kits to handle suspected cases of COVID-19 as part of our maintenance services and even for cargo transits. In fact, select teams of our MRO warriors are still engaged in assuring flights at key airports, where cargo operations are still underway, even while passenger traffic has stopped for the interim, as part of moving medical and other shipments. I am happy to report that for now, all Air Works’ personnel continue to be healthy and safe at all our 27 locations. In fact, teams are highly motivated and some of them are already asking us as to when can they re-join their duties. The positive momentum should help us bounce back immediately as soon as the current curbs are relaxed, basis a review by the concerned authorities.
Q. Can you tell us about the maintenance of the aircraft that is currently grounded?
A. We have been working closely with our customers to handle their maintenance and aircraft preservation as part of Standard Operating Procedures, keeping OEMs and regulators duly informed. However, supply of components and parts/ equipment has been impacted which has affected the maintenance schedules of certain aircraft belonging to both businesses and scheduled airlines. However and as you must be aware, most of the aircraft have been parked at airports in a planned manner and as per defined processes to ensure their flight readiness.