GROUND HAN­DLING & MRO – KEY AS­PECTS

With the new civil avi­a­tion pol­icy, In­dia could well achieve self-suf­fi­ciency in ground han­dling and then work to­wards the laud­able ob­jec­tive of be­com­ing an MRO hub for Asia

SP's Airbuz - - Table Of Contents - BY GROUP CAP­TAIN A. K. SACHDEV

ANEW CIVIL AVI­A­TION POL­ICY (NCAP) was re­leased in June 2016 and a Re­gional Con­nec­tiv­ity Scheme (RCS) draw­ing in­spi­ra­tion from it and cir­cu­lated in draft form, is await­ing fi­nal­i­sa­tion. While na­tional poli­cies can­not be ex­pected to pro­vide full sat­is­fac­tion to all stake­hold­ers, a be­gin­ning has been made by way of pol­icy, some­thing that has not hap­pened since lib­er­al­i­sa­tion of civil avi­a­tion in the 1990s and emer­gence of pri­vate of air­line in the 1990s and again since 2003. Con­stant in­vo­ca­tion is re­peated ad nau­seum in avi­a­tion events, of the cheer­ing pro­jec­tion of In­dia be­com­ing the world’s third largest avi­a­tion mar­ket by 2020.

How­ever, skep­tics are be­gin­ning to have doubts about it. An apt para­ble here is of a strong man lift­ing an ele­phant calf off the ground and tri­umphantly declar­ing that he would do so ev­ery com­ing day. The story would end on a de­spon­dent note the day the crea­ture’s mass over­whelms the lifter’s might. In­dian civil avi­a­tion is op­ti­misti­cally pro­jected to grow like the calf; but the

sup­port­ing in­fra­struc­ture ap­pears to be con­strained in achiev­ing com­men­su­rate in­cre­men­tal strength to sup­port the in­ex­orable en­large­ment of its bur­den. So is the In­dian sys­tem doomed to never match its civil avi­a­tion pre­ten­sions of grow­ing to a third place or is there hope? This ar­ti­cle cov­ers two as­pects of re­lated in­fra­struc­ture — ground han­dling and main­te­nance, re­pair and over­haul (MRO). IS GROUND HAN­DLING OFF THE GROUND YET? On Au­gust 9, 2016, the CEO of Cam­bata Avi­a­tion, In­dia’s old­est pri­vate ground han­dling com­pany, wrote to its em­ploy­ees not to re­port for work. The ac­tion was the cul­mi­na­tion of a trou­ble­some pe­riod the com­pany had wit­nessed as it pro­gres­sively lost busi­ness to com­pe­ti­tion and had prob­lems dis­burs­ing salaries. Its 1,000 em­ploy­ees threat­ened hunger strike un­less they were paid their dues. This tur­bu­lence was a symp­tom of the woes ground han­dling has had in In­dia for al­most 15 years now.

In May 2003, for se­cu­rity rea­sons, the Home Min­istry made it manda­tory for ground han­dling at air­ports to be car­ried out by firms floated by In­dian Air­lines, Air In­dia and the Air­ports Au­thor­ity of In­dia (AAI) while turn­ing down a pro­posal by the Min­istry of Civil Avi­a­tion (MoCA) to per­mit do­mes­tic air­lines to con­tinue self-ground han­dling at air­ports. Ad­versely af­fected were the over 40 ground han­dling agen­cies across the coun­try em­ploy­ing 20,000 per­son­nel whose protests were coun­tered by the gov­ern­ment with as­sur­ance that it would in­duct trained man­power into the new ven­tures be­ing floated by the gov­ern­ment firms. Air­lines and ground han­dlers promptly pointed out the fal­lacy that if the per­son­nel who were go­ing to work for the gov­ern­ment firms were largely the same as were work­ing for pri­vate ones, how would en­hanced se­cu­rity lev­els be achieved by the change? A sim­i­lar ques­tion on se­cu­rity was raised about joint ground han­dling ven­tures which both In­dian Air­lines and Air In­dia were con­tem­plat­ing with Sin­ga­pore Air­lines and Sin­ga­pore Air­port Ter­mi­nal Ser­vices (SATS), both for­eign en­ti­ties. Even­tu­ally, the Home Min­istry re­lented in June 2003, per­mit­ting pri­vate do­mes­tic air­lines to carry out self-ground han­dling only to over­turn that rul­ing in 2007 by dis­al­low­ing self-han­dling by do­mes­tic car­ri­ers at metro air­ports. The al­ter­na­tives of­fered were three en­ti­ties, the air­port op­er­a­tor or its sub­sidiary, a sub­sidiary of Air In­dia or In­dian, and a ground han­dler se­lected through a com­pet­i­tive bid­ding process. Af­ter pro­longed and un­suc­cess­ful par­leys, pri­vate air­lines moved the Supreme Court in 2011. Their main con­cerns were low­ered ef­fi­ciency of turn­around, re­duc­tion in ser­vice qual­ity, and huge losses on ac­count of the in­vest­ments in ground equip­ment and train­ing of per­son­nel. Though the apex court did not pronounce judge­ment on the is­sue, it di­rected an in­terim or­der in this re­gard be fol­lowed, al­low­ing air­lines to self-han­dle their air­craft even at metro air­ports. In Septem­ber 2015, pri­vate air­lines op­er­at­ing at Chandi­garh air­port were de­nied ground han­dling ser­vices and five pri­vate air­lines filed a pe­ti­tion against the con­tract awarded by AAI to Air In­dia Air Trans­port Ser­vices Lim­ited (AIATSL) to han­dle ground op­er­a­tions. The High Court al­lowed pri­vate air­lines to man­age ground han­dling ser­vices against the de­ci­sion of AAI.

Against this back­drop the new civil avi­a­tion pol­icy en­shrines what it calls “a new frame­work”. From the point of view of sched­uled air­lines, the most cheer­ing stip­u­la­tion is that all do­mes­tic sched­uled air­line op­er­a­tors in­clud­ing heli­copter op­er­a­tors, are free to carry out self-han­dling at all air­ports us­ing equip­ment owned or taken on lease and also through a sub­sidiary, through own em­ploy­ees or em­ploy­ees of their own sub­sidiary taken on reg­u­lar em­ploy- ment. Hir­ing of em­ploy­ees through man­power sup­plier is not per­mit­ted; but hir­ing of equip­ment with­out man­power is al­lowed. As far as air­port op­er­a­tors are con­cerned, ma­jor air­ports are re­quired to en­sure that there are at least three ground han­dling agen­cies (GHA) in­clud­ing Air In­dia’s sub­sidiary/joint ven­ture ( JV) while small air­ports are ex­empted from this min­i­mum num­ber of ground han­dlers, leav­ing it to the air­port op­er­a­tor to de­cide the num­ber, based on the traf­fic, air­side ex­tent and ter­mi­nal build­ing ca­pac­ity. Air In­dia’s sub­sidiaries/JVs are re­quired to match the roy­alty/rev­enue share of­fered by other GHAs. In the event of mul­ti­ple GHAs, Air In­dia is to match the low­est roy­alty/rev­enue of­fered by the other GHAs. De­tailed func­tions for air­lines and air­ports are ex­pected to be no­ti­fied sep­a­rately while a loosely worded clause asks air­lines and agen­cies al­lowed to carry out ground han­dling ser­vices at air­ports to “en­sure com­pli­ance with se­cu­rity pro­vi­sions as re­quired un­der the law”. Un­less sub­se­quent fine print takes away some of the mu­nif­i­cence of the pol­icy, this is good news for air­lines. MROS. The se­cond big­gest com­po­nent of an air­craft op­er­a­tor’s ex­pen­di­ture is on main­te­nance of his fleet, the first be­ing avi­a­tion fuel. The Direc­torate Gen­eral of Civil Avi­a­tion (DGCA) web­site lists 55 ap­proved for­eign MROs to which In­dian op­er­a­tors can take their air­craft. The ma­jor­ity of heavy main­te­nance is car­ried out by for­eign MROs. Thus, a do­mes­tic strength in the MRO arena would mean suc­cour by way of lower main­te­nance costs. Un­for­tu­nately, In­dian MRO in­dus­try has had an un­der-nour­ished growth and is far from at­tain­ing the sta­tus re­quired to serve a civil avi­a­tion mar­ket touted to reach third po­si­tion in a few years.

The new civil avi­a­tion pol­icy makes the right noises about rem­e­dy­ing this state, declar­ing the gov­ern­ment’s in­tent to de­velop In­dia into an MRO hub for Asia. Some steps were taken in this di­rec­tion through pro­vi­sions in the union bud­get 2016-17 by way of ex­emp­tions and reg­u­la­tory re­lax­ations. Other steps pro­posed in the pol­icy in­clude mak­ing it eas­ier for for­eign air­craft to use In­dian MRO fa­cil­i­ties, ex­hor­ta­tion to state gov­ern­ments to im­pose no VAT on MRO fa­cil­i­ties, pro­vi­sion of land for MRO in all fu­ture air­ports and re­lax­ation of air­port roy­al­ties and ad­di­tional charges for five years from the pol­icy ap­proval date.

The $100-mil­lion MRO fa­cil­ity in Nag­pur built by Boe­ing con­se­quent to an agree­ment be­tween Boe­ing and Air In­dia af­ter it placed a huge or­der for Dream­lin­ers in 2006, was in­au­gu­rated by Union Min­is­ter Nitin Gad­kari in June 2015. How­ever, for some rea­sons, it failed to take-off. In February 2016, Air In­dia in­vited bids from pri­vate play­ers to take over and op­er­ate the fa­cil­ity. It is un­der­stood that SpiceJet has signed up with Air In­dia for use of that fa­cil­ity for ma­jor ser­vic­ing of their air­craft.

Pri­vate sec­tor MROs have been more suc­cess­ful with Air Works In­dia lead­ing the mar­ket. In ex­is­tence since 1951, the com­pany and proudly claims to be “the largest in­de­pen­dent MRO fa­cil­ity in In­dia”. Some other play­ers are Dec­can Char­ters, Re­liance Aerospace Tech­nolo­gies and In­damer Avi­a­tion. For he­li­copters, MRO fa­cil­i­ties are neg­li­gi­ble. There are over 300 he­li­copters fly­ing in In­dia but MRO sup­port has been neg­li­gi­ble so far and only now Pawan Hans He­li­copters Lim­ited is plan­ning to set up four MRO firms as a part of its di­ver­si­fi­ca­tion plan; the first two are to come up in Delhi and Juhu, with Guwa­hati and an as yet un­named sta­tion in the South. It re­mains to be seen whether the it­er­a­tions in the pol­icy doc­u­ment ac­tu­ally get trans­lated into mean­ing­ful reg­u­la­tions. If they do, In­dia could well achieve self­suf­fi­ciency for its own air­lines and then work to­wards the laud­able ob­jec­tive of be­com­ing an MRO hub for Asia.

GEN­ERAL AVI­A­TION LEFT GEN­ER­ALLY UN­HAPPY. As is ev­i­dent from the fore­go­ing, the ground han­dling pol­icy and MRO ex­cludes non-sched­uled op­er­a­tors and busi­ness avi­a­tion from its scope. While the pol­icy was still be­ing fi­nalised, Delhi In­ter­na­tional Air­port Lim­ited (DIAL) is­sued evic­tion no­tices to all the gen­eral avi­a­tion air­craft op­er­a­tors, some of whom are car­ry­ing out their main­te­nance ac­tiv­i­ties un­der ex­ist­ing agree­ments and within the am­bit of ex­ist­ing rules and reg­u­la­tions, or­der­ing them to va­cate the hangar spa­ces so far leased to them. This step was a pre­quel to DIAL entering into agree­ments with two fixed-base op­er­a­tors (FBO)/MRO (Bird World­wide Flight Ser­vices — Ex­e­cuJet and In­damer — Mjets) for a duopolis­tic and what turned out to be op­pres­sive regime al­low­ing only these two en­ti­ties to han­dle flights and carry out main­te­nance ac­tiv­i­ties for gen­eral avi­a­tion op­er­a­tors based at Delhi. Busi­ness Air­craft Op­er­a­tors As­so­ci­a­tion (BAOA) ap­pealed in Delhi High Court; but was told by the court that the mem­bers af­fected by the DIAL no­ti­fi­ca­tion would have to file cases sep­a­rately. Af­fected com­pa­nies have reached work­ing com­pro­mise with the des­ig­nated ser­vice providers and cur­rently no lit­i­ga­tion is in progress. How­ever, BAOA has got the court to per­mit it to re­serve the right to file a case in the fu­ture. CON­CLU­SION. Ground han­dling and MRO ex­penses are sub­stan­tial shares of an air­craft op­er­a­tor’s over­all out­flow of pay­ments and any sav­ing therein would help bot­tom lines. For over a decade, pol­icy-re­lated woes have af­fected the pros­per­ity of In­dian civil avi­a­tion. All stake­hold­ers in civil avi­a­tion wait with bated breath to see how the new civil avi­a­tion pol­icy is trans­muted into pro­cesses and prac­tices. If civil avi­a­tion has to flour­ish, the gov­ern­ment will have to not just be con­tent with hav­ing framed a pol­icy but also throw its weight be­hind con­sum­mat­ing the spirit of the pol­icy and ca­jole state gov­ern­ments into do­ing so. At the mo­ment, fu­ture pro­jec­tions can at best be spec­u­la­tive.

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