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MAS Joint Venture Eyes US$450 Mln Indian MRO Mart

Malaysia Airlines (MAS) has sealed a deal with GMR Hyderabad International Airport Ltd to establish a joint venture company to tap into India's US$450 million (US$1=RM3.33) maintenance, repair and overhaul (MRO) market.

The first full-fledged world class MRO facility to be built at the greenfield Rajiv Gandhi International Airport at Shamshabad in Hyderabad with an investment of between US$50 million and US$70 million including training, will provide maintenance services for narrow- and wide-bodied aircraft.

It can also handle light jets and super-jambos such as the A380.

"The MRO facility will be built on a four-six hectares. About 100ha have been earmarked specifically for aerospace-MRO activities. Our MRO venture will be located on the earmarked land and will act as an anchor to drive future aerospace-MRO development," chairman (airport business), GMR Group, Kiran Kumar Grandhi said Wednesday.

The facility will have a minimum of two or a maximum of four hangars.

"Besides MAS, four other companies have shown interests in establishing MRO facilities at the greenfield airport.

"Currently, there is no full-fledged MRO facility available in India and except for Air India and Indian Airlines, which have in-house MRO facilities the other airline companies send their aircraft for maintenance either in Middle East or South-East Asia's MRO facilities," he said after signing the agreement here Wednesday.

Both Air India and Indian Airlines only capture 50 percent of the US$450 million MRO market in India, which grows at about 17 percent annually.

The Indian market has some 300 aircraft in operations currently. Hence, the MRO business is expected to growth at a phenomenal rate, as the Indian aviation market is one of the fastest growing in the world. More than 200 new aircraft will be headed for India in the next two years, while 2,000 new planes are expected in 8-10 years.

"We hope to cater to both Indian-registered aircraft as well as select foreign carriers. In addition, we strive to expand the level of technical competence of the facility to generate a multitude of job opportunities for the readily-available engineering talent in India," said Kiran.

MAS, he said, would begin the venture with the training of 70 engineering students that have been hired by GMR.

"It will also help to design the facility, ensure appropriate civil aviation certificate and help commission and manage the joint venture," he said.

MAS' chief financial officer and executive director, Tengku Datuk Azmil Zahruddin, said the facility was expected to be ready by the third quarter of 2009.

Azmil, who declined to disclose MAS' equity participation in the joint venture company, said it would not be a major stakeholder.

"We are still talking about that (stake). (For now) we will provide expertise and experience," he said.

He said MAS was committed to building MRO facilities in Subang and Kuala Lumpur International Airport but at the same time will keep its options open to venture into other markets.

"What MAS is doing is similar to what other MRO service providers are doing. We are committed in pushing ahead in the MRO business," he said.

Asked if it was in significant discussion, he said: "Possible. But it is premature to talk about it at this point of time."

MAS, he said, expected third-party revenue from MRO business to grow to RM400 million this year and "it is fast becoming an important contributor to the group."


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