Story ID: 654 AirWorksDubai15.doc
Air Works Eyes New Business Model
By: Neelam Mathews
Caption: Engineering firm to honor flight-hour services deal with Vistara
Word Count: 821
With a focus on India and Dubai–the latter thanks to a strategic investment it made in Dubai’s Empire Aviation Group–Air Works India Engineering is looking at a new business model with a focus on line maintenance, an area that was until recently a domain handled by airlines.

The move follows Airbus India signing comprehensive maintenance-support agreement with full-service startup airline Vistara, the first such agreement in the country. Air Works and Air India Engineering Services will honor the so-called Flight Hour Services Tailored Support Package (FHS-TSP) for Vistara, a joint venture between Singapore Airlines (SIA) and Tata Group.

Vistara started operations in October last year, and with a current fleet of nine A320s, expects the fleet size to grow to 20 by 2017. The support package will enable Vistara to benefit from the expertise offered by Airbus in airframe maintenance, engineering, reliability and components supply chain management.

Vistara has become the first airline with “no engineering department…It is outsourcing A to Z, nose-to-tail maintenance and logistics of spare parts…The A and B checks include transit/turnaround between flights…Interiors and minor upgrades are included as some seats need to be replaced…,” Vivek Gour, managing director of Air Works, told AIN.

The company does not handle engines, as “the volumes do not justify setting up engine shop.” The contract is valid for 14 years starting October 14. Gour said the trend to outsourcing line maintenance is catching on as “airlines are reaching maturity and [now] approaching us for the Vistara type of contract.”

Air Works late last year formed a joint venture in Nepal, Air Works Nepal, to provide maintenance services for international airlines and domestic operators from Tribhuvan International Airport, Kathmandu. It is likely to look at line maintenance in Myanmar once volumes pick up, AIN has learned.

“This is a sage step by Vistara given that it was [possibly] part of the aircraft deal with Airbus. This FHS-TSP also helps with smooth cash flow for the airline,” said Vishok Mansingh, director, CAV Aviation Services. He added that while India is known to have a high tax structure for MROs, Air Works operates from a private airport near Bangalore (Hosur) that has no royalty charges, with the flexibility to make quick decisions. “While 30 percent taxes seem high, the low cost of labor makes up for it.”

The contract is in two parts: Continuity Airworthiness Management, which includes monitoring, compliance and modifications of components that will be handled by Airbus India (as the country does not have the capability in that arena); and the line and C/D check maintenance under CAR 145, for which Air Works will be responsible.

Gour said that no royalties have to be paid in Bangalore on the C-checks that will be done at its facility, but royalties do have to be paid to New Delhi International Airport for overnight checks, eating into cost-effectiveness. “However, with economies of scale and no overbearing weight of an engineering department, the airline [Vistara] is bound to benefit,” added Gour.

By investing in a new product in the long run, Air Works is “taking a bet,” he said. “Once it starts in full swing and we get 2-3 airlines for one aircraft type, we will then get economies of scale…It is a model we have decided to go with. In terms of costs, airlines spend more on A and B checks through the life of an aircraft than on C checks.”

In addition, while competitors will come, Air Works clearly has the first mover’s advantage. “We don’t want to compete at the C-check level as it is at the easy end of the market and providers are lowering prices desperately.” However, Gour added, to get the entire engineering support is “a different ball game that is difficult.”

The MRO is also preparing for certification for Embraers. “Time will tell if aircraft delivered will be in significant numbers,” said Gour.

Air Works is also close to finalizing a contract for Vistara’s advanced inflight entertainment system that will need to be installed and tested. Vistara is the launch customer for BAE’s IntelliCabin system, which provides tablet-based IFE, dynamic LED lighting and in-seat power. “We are now able to provide airlines with capability to stream early window content to passengers’ devices. This is a game-changer for our industry,” said Jared Shoemaker, director of cabin systems at BAE Systems.

With this approval, “early window” content will be streamed from a server locally installed on the aircraft. Meanwhile, as India does not yet allow live Wi-Fi streaming onboard, Vistara is presently installing a router on board as an interim arrangement that will permit passengers to view pre-recorded programs on their personal tablets. The process will be completed by November, AIN was told.