Sky One To Invest In MRO, Expand Partnership With Domestic Airlines In India Sky One, predominantly into Cargo services, is exploring partnerships with domestic airlines in India to provide comprehensive leasing solutions

Currently, India is predominantly a lessee market, where Indian airlines lease aircraft owned by overseas entities mainly based in Ireland and Singapore. Approximately 80 per cent of the total commercial aircraft fleet in India is leased from foreign lessors, quoted PwC in its Aircraft Leasing report. Sky One, an aviation service provider across cargo, charters, crew training, operations and maintenance, as part of expanding its leasing business, is looking to partner with domestic airlines in India and invest in MRO (Maintenance, Repair and Operations) services.

The aircraft leasing landscape is evolving rapidly, driven by increased demand for flexible financing solutions and the need for airlines to maintain operational agility. This results in foreign exchange outflows in the form of lease rentals and interest payments. Leasing offers airlines the ability to scale their fleets quickly without the burden of heavy capital expenditure. Additionally, advancements in lease structures and the emergence of new leasing hubs like GIFT City in India will create more competitive and attractive options for airlines in the future. The focus on sustainability is also influencing leasing trends, with a growing interest in fuel-efficient and technologically advanced aircraft.

In 2024, Sky One aims to consolidate its position in the aviation sector. "Our roadmap includes expanding our aircraft leasing portfolio, investing in state-of-the-art MRO facilities, and enhancing our service offerings to meet the diverse needs of our clients. Additionally, we will focus on forging strategic partnerships with airlines and other industry stakeholders to drive growth and innovation," said Jaideep Mirchandani, chairman Sky One.

Investments and expansions in India

Over the next two to three years, Sky One is looking to expand its footprint in the Indian aviation market through strategic investments in aircraft leasing and MRO (Maintenance, Repair, and Overhaul) facilities. The company is planning to enhance its fleet with the latest aircraft to meet the growing demand. "Additionally, we are exploring partnerships with domestic airlines to provide comprehensive leasing solutions. We are always considering investments in advanced MRO facilities that will not only support our fleet but also offer services to other operators, fostering a more self-reliant aviation sector in India," the chairman said.

India's MRO sector holds immense potential but is currently underutilized. High taxes and regulatory challenges have historically driven airlines to seek MRO services abroad. However, there is a significant opportunity for growth of the sector as the aviation industry expands and India looks to be self-reliant. Sky One plans to invest in advanced MRO facilities in India, leveraging its expertise and technological capabilities to offer world-class maintenance services. Its aim is to support the Indian aviation sector by providing reliable and cost-effective MRO solutions, reducing dependence on foreign facilities.

For Sky One, aircraft leasing is currently the higher revenue generator in its business compared to Helicopters. The demand for fixed-wing aircraft, driven by the expansion of commercial airlines and the need for efficient passenger and cargo transport, significantly contributes to its revenue. However, helicopters play a crucial role in niche markets such as emergency medical services, offshore operations, firefighting and emergency services etc. and the company continues to see steady growth in this segment as well.

On regulatory challenges

To make aircraft leasing seamless in India, regulatory changes should focus on simplifying the leasing process and creating a more favorable tax environment. This includes implementing clear and consistent leasing regulations, reducing bureaucratic red tape and offering tax incentives similar to those in leading global leasing hubs.

"Streamlining customs procedures for aircraft imports and exports, enhancing legal protections for lessors and fostering a transparent and efficient dispute resolution mechanism will also contribute to a more conducive leasing environment. Ireland stands out as having the most seamless and efficient aircraft leasing model, thanks to its well-established regulatory framework, favorable tax policies, and robust legal protections for lessors. The Irish model provides clarity, consistency and a supportive business environment, making it an attractive hub for global leasing activities. India can adopt several aspects of Ireland's model, such as streamlined regulatory processes, tax incentives and a strong legal framework, to enhance its own leasing ecosystem and attract more leasing companies to operate," he explained.

The opening of aviation leasing and financing services in GIFT City presents a significant opportunity to enhance the accessibility of capital and financing options for the Indian aviation sector. Leasing aircraft from GIFT City can significantly reduce costs for airlines, thanks to the tax incentives and regulatory benefits provided by this financial hub. Lower leasing costs can translate to reduced operational expenses for airlines, which can then be passed on to consumers in the form of more affordable airfares. "The streamlined processes and financial services available at GIFT City can enhance the overall efficiency of leasing transactions, further contributing to cost savings and making air travel more accessible to a broader segment of the population," said the chairman.

Catering to growing demand

With a focus on enhancing connectivity both domestically and internationally, the Indian aviation sector is leveraging its strategic geographic location and the market demand. According to the International Air Transport Association (IATA), India is expected to become the third-largest aviation market by 2024, surpassing the United Kingdom. The sector has witnessed substantial investment in infrastructure, with over 100 new airports planned by 2025 under the National Infrastructure Pipeline (NIP). The total number of aircraft in the fleets of scheduled airline operators stood at 771 as on December 31, 2023.

Passenger traffic is also rebounding strongly post-pandemic, with domestic air traffic expected to grow at a compound annual growth rate (CAGR) of 6-8 per cent over the next decade. "By FY2025, I anticipate a significant increase in passenger numbers, potentially reaching pre-pandemic levels and surpassing them. The Indian market could see passenger numbers approaching 200 million annually, driven by domestic travel and a recovering international sector. Correspondingly, the aircraft fleet is expected to expand, with Indian carriers likely adding around 200-300 new aircraft to meet this growing demand. This expansion is likely to be supported by favorable government policies and increased investment in aviation infrastructure," he added.

Overall, the sector has seen a substantial uptick, however, challenges remain, such as high operational costs, regulatory hurdles and infrastructure bottlenecks. Continued reforms and investments will aid in sustaining the growth trajectory.