Airbus in talks for stake in GMR's maintenance unit

The GMR Group is in discussion with European airplane maker Airbus for a possible stake sale in its aircraft maintenance, repair and overhaul (MRO) unit in Hyderabad. A deal will help GMR raise cash as a part of its ‘asset light’ strategy and enable Airbus to fulfill its commitment of developing an MRO in India.

“Our MRO strategy is well documented and we have nothing to add,” an Airbus spokesperson said in an email response to this newspaper. GMR did not respond to an email query.

GMR launched its MRO in 2012, in a joint venture with Malaysian Aerospace Engineering (part of Malaysia Airlines) with an investment of Rs 300 crore. Initially, Jet Airways too was to be become a partner in the project but it backed out. Last month GMR said it was acquiring its partner MAS stake in the project as the latter expressed inability to infuse more funds. According to media reports till March end the MRO incurred cumulative losses of Rs.240.30 crore and its operations have been mostly funded by promoters.

"Talks between Airbus and GMR group are on for last two-three months. There are various options on the table including full divestment,'' said an aviation source familiar with the development.

Airbus has been looking to develop a MRO facility in India and CEO of Airbus India Srinivasan Dwarakanath told media persons in March that partner for the MRO will be finalised by year end.

Currently Indian carriers (Air India, GoAir, IndiGo, Jet Airways and AirAsia) operate a fleet of over 170 Airbus aircraft. Airbus' current market share of sales in India represents over 60 per cent of the country's total aircraft backlog. In addition, since 2005, Airbus has enjoyed over 60 per cent market share of all new orders.

The plane maker committed to develop a training centre and MRO as a part of Rs 8399 crore deal to sell 43 Airbus A320 type planes to erstwhile Indian Airlines (now Air India) in 2006. However the MRO project did not take off and the issue has been a subject of scrutiny by Lok Sabha and investigation by Central Bureau of Investigation.

The Hyderabad MRO facility has been unable to attract long term business as airlines in India send their planes abroad for major maintenance checks owing to high tax structure.

However, GMR group in its 2014 annual report said the MRO carried out heavy maintenance checks on 37 planes and carried out engine changes and landing gear changes on various aircraft. The company said it is advanced negotiations to conclude heavy maintenance contracts with domestic airlines and is expanding its marketing efforts to attract business from other South Asian countries.