Union Budget 2019-20: Ambitious plans for aviation

Realising MRO, aircraft financing proposals a huge task.

Published - July 05, 2019 10:40 pm IST - MUMBAI

The announcements concerning the aviation sector are positive but it would be a gigantic task to translate the intentions into reality.

“Developing India as a MRO (maintenance, repair and overhaul) hub is a good idea, but it is not that easy. Providing tax benefits will not solve the problem. The MRO has to have an anchor client (airline) which needs to provide over 60% of the business. Without assured business, it does not make sense. In India there is an advantage in labour cost, but that will disappear soon,” K.G. Vishwanath, co-founder and Director, Trinity Aviation Consultants Singapore, said.

‘Lacking promise’

“So far India has not been a promising place for MRO whereas small countries such as Thailand and UAE have developed a vibrant MRO set-up. The government has to look into their model,” Mr. Vishwanath said.

The proposal for introduction of aircraft financing and leasing is a good one but it will not benefit unless interest rates are brought down.

“I don’t see any benefit or action in this front in the short term. But in the long term it will help the airlines sector. Today the interest rates are more than 10% and unless they are down to 7%, no one will go for domestic financing. Once the domestic financing picks up, their will be a lot of predictability and cost of doing business will go gown,” Mr. Viswanath said.

However, Sunil Bhaskaran, MD & CEO, AirAsia India, said, “The government’s proposal to introduce aircraft financing and leasing will bring down the costs for carriers hopefully.”

He also said the announcement of identifying and developing 17 iconic sites across the country to attract tourists will boost domestic air travel demand.

Jaideep Ghosh, Partner & National Head, Transport, Leisure & Sports, KPMG in India, “Aviation is a priority area for the government and the continued emphasis on regional connectivity, focus on MRO/aviation engineering and encouragement for domestic financing for aircraft leasing is a welcome move.”

Though the government has revived its plan for disinvestment of Air India, analysts did not see much interest coming from potential buyers. The plan to develop a blue print for regional airports is a pragmatic idea for providing air connectivity to the nook and corner of the country, they said.

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