Indian (Airlines) on Thursday signed a tripartite term sheet agreement with Airbus and European Aerospace and Defence group's (EADS) partner Jupiter Aviation for setting up a Maintenance Repair and Overhaul (MRO) facility in a joint venture. This is still at a formulation stage and once the modalities are finalised and the third joint venture partner is identified, it would turn into a formal Memorandum of Understanding.
Unlike Boeing, which is directly investing $100 million in a MRO facility in Nagpur, as part of its commitment during the signing of the deal to sell 68 aircraft to Air India, Airbus, which has a similar commitment with Indian, is making its partners to invest in the MRO venture. Airbus Executive Vice President Marketing Dr Kiran Rao said that globally Airbus does invest in equity in any MRO venture directly.
He said, "This venture will be fully supported by us and this would help us to fulfill our MRO obligation. But independently Airbus would invest $1 billion in India in 10 years."
To keep its commitment Airbus is making one of its 14 network partners to join this venture. Once the partner is identified, Airbus would exit from this agreement. Recently, Airbus' parent company EADS appointed Bangalore based Jupiter Aviation, a Rajiv Chandrasekhar venture as its exclusive strategic partner for MRO and life support of commercial aircraft in India.
While Indian would provide its hangers and related facilities for the joint venture, most of the investment will come from Jupiter. In two phases Jupiter would invest Rs 300 crore, its CEO and MD Ravi Narayanan said.
"We are on schedule and will start operations by October. This would be the first, biggest and most comprehensive MRO in India. From the beginning we will achieve critical mass." Jupiter's chairman Rajiv Chandrasekhar had a brief presence on the occasion. Chandrasekhar who had exited from BPL Mobile and BPL communications is plush with funds and has been investing in several ventures including Jupiter Aviation.
Indian CMD Dr Vishwapati Trivedi said that the airline would have lots of cost advantage due to this new venture. "We will have priority in repair and maintenance work and will get 20 per cent discount in our bills. This is a step in the right direction," he said.
As per the term sheet this MRO venture would begin its activities in Delhi with A320 hangers and a third hanger would be added in the second phase of expansion. The facility would cater to major maintenance of A320 fleet of Indian followed by checks maintenance of ATR and other A320 fleet of Indian.
In phase two the MRO would cater to wide body and other aircraft types including the super jumbo A380. In its third year of operation this joint venture would have the facility to cater to over 200 aircraft belonging to various customers from India and abroad.
A comprehensive business plan has been worked out to meet the goals.