MADC to pick up 25% stake in Duke Aviation's MRO

MUMBAI: Maharashtra
Airport Development Company is picking up a 25% stake in Duke Aviation's upcoming maintenance, repair and overhaul (MRO)
facility in the special economic zone at Nagpur.

In return the Maharashtra Airport Development Company will give about 30 acres of land to Duke Aviation which plans to undertake heavy maintenance of aircraft at the MRO facility, according to executives connected with the development. The MADC has already handed over six acres of land for Rs 60 lakhs to Duke Aviation, where a Bhoomi Pujan would be done on February 5.

When contacted, Maharashtra Airport Development Company vice chairman RC Sinha told ET: "We are in talks for 25% stake in Duke Aviation in lieu of the land given to them in the SEZ. A report has been placed before the board. The finance secretary and other officials will take a final call soon."

Duke Aviation MD Ajit Karnik said: "If any equity dilution goes through we'll jointly announce it at an appropriate time. We are aiming to provide maintenance and aircraft engineering services to airlines and to tap into on-going trend of outsourcing across the world."

Maintenance is the third largest segment of the operating cost of an airline. Carriers spend as much as $100 million towards maintenance expenses every year for maintaining narrow and wide body aircraft, which are typically sent overseas to MRO providers in Singapore and Middle East.

The country's largest private carrier Jet Airways is looking at buying a stake in MRO facility at the new Hyderabad international airport. Then, Air India (Nacil) is planning MRO, with Boeing, at Nagpur. Even, Paramount is planning its first MRO for Embraer aircraft in India.

The domestic MRO market is growing at an annual rate of about 15% and the Asia-Pacific market is estimated at $12 billion in 2011, according to analysts. Duke Aviation is not only setting up an MRO facility but is also forming a joint venture with two US-based firms for setting up five strategic business units. Apparently, it has plans to make the SBUs as separate companies in the long run and is likely to list them.

Duke Aviation plans to invest Rs 725 crore in five SBUs including the MRO facility spread over 36 acres in the Nagpur SEZ, which could be operational by the end of 2011. The first SBU is being established at an investment of Rs 140 crore and will be partially operational by October 2009.

Stanton Dodson, founder and managing partner of Duke Equity said: "Duke Equity and high networth individuals have invested 50% in Duke Aviation and rest will come through term loan."
http://economictimes.indiatimes.com/articleshow/4070212.cms