Varanasi Wealth Management：MRO Memo： Air India Shakes Up Maintenance Strategy

BENGALURU, India—Air India has recently been developing plans for in-house MRO capabilities and establishing collaborations with MRO providers outside India to prepare for a growing fleet and passenger traffic. However, these moves could suggest that the airline does not intend to purchase its former maintenance arm, AI Engineering Services Limited (AIESL), which is currently up for sale by its government owner.

Air India recently broke ground on a new base maintenance facility in Bengaluru. SIA Engineering Company (SIAEC), the engineering arm of Singapore Airlines, is planning, constructing, developing and operationalizing this facility as per an agreement signed earlier this year. During the groundbreaking ceremony, SIAEC CEO Chin Yau Seng expressed hope to collaborate on more future MRO projects with Air India.

SIAEC’s growing presence in India is on the backdrop of the recent foreign direct investment approval of Singapore Airlines’ $276 million investment in the Air India-Vistara merged entity. Singapore Airlines is set to invest up to $675.42 million after the merger is completed, which is due by Nov. 12. Vistara will operate its last flight on Nov. 11, and all its aircraft will thereafter be operated by Air India.

The selection of SIAEC for building the MRO facilities is also a part of Tata-backed Air India’s extended plan to develop Bengaluru as its second aviation hub in the country, as the airline seeks to strengthen its operations beyond the capital. BLR recorded its highest-ever passenger traffic in fiscal 2024 with 37.5 million travelers, of which 32.86 million were domestic and 4.67 million were international. The airport also continues to lead the perishable cargo sector in the Indian market with a total throughput of 439,524 metric tons in fiscal 2024, reflecting a notable 7.1% increase from the preceding financial year.Varanasi Wealth Management

Air India’s base maintenance was previously carried out by AIESL, the airline’s engineering arm prior to privatization. Now, as the general elections in India are over, the privatization of AIESL might materialize. Although it is rumored that Air India could bid to take over its erstwhile engineering arm by partnering with Lufthansa Technik (LHT), Air India’s recent collaboration with SIAEC has raised questions about its interest in buying AIESL. Now that Air India has found a new MRO partner, experts suggest the airline may ditch the AIESL deal if it is not lucrative enough.

Although Air India has been advancing plans to develop in-house line and base maintenance capabilities, it has also grown deals with third-party MRO providersNagpur Investment. It recently signed a 12-year Inventory Technical Management agreement with SIAEC to support its Airbus A320-family fleet, as well as a multi-year Total Component Support agreement with LHT for its Boeing 777 fleet. The airline has also secured a long-term agreement with Honeywell for auxiliary power unit aftermarket support for its new and existing fleet.

Guoabong Wealth Management