Adat stalls on way to Indian expansion

A worker beside a turbine in a hangar of Adat.

ABU DHABI // Turbulence in the Indian airline market due to record oil prices is cutting into the ambitions of Abu Dhabi Aircraft Technologies (Adat) to expand into that country's emerging aircraft maintenance market. The world's 12th-largest aircraft maintenance, repair and overhaul (MRO) firm, according to man-hours worked, was unlikely to open up operations in India this year, its chief executive said, as economic conditions there became more uncertain due to the record price of oil, which traded at US$144 (Dh528) a barrel yesterday.

"We have been looking at India for some time," said John Byers, the chief executive of Adat. "With the way they are being impacted by fuel prices, it might be a little way longer before definitive plans are made." The relatively young Indian airline market has been on an upwards trend as an expanding middle class increasingly opts for air travel. With passenger demand rising and new airlines created in recent years, the industry has attracted the MRO market. Last year, Lufthansa Technic invested a reported $23 million to set up a maintenance facility in Hyderabad.

But with Indian carriers unable to fully pass on record fuel bills to customers, the country's airline industry is forecast to lose as much as $1 billion this year alone. That, in addition to mergers and consolidations that are reshaping the market, means Adat has continued to wait in the wings. Adat, first formed as the Gulf Aircraft Maintenance Company (GAMCO) in 1987 by the Abu Dhabi Government and Gulf Air, is the largest privately owned aviation maintenance firm in the region.

Last year it was wholly acquired by Mubadala, an investment vehicle of the Abu Dhabi Government, and folded into its portfolio of aviation companies that includes stakes in SR Technics and Piaggio Aero. The maintenance firm has 70 clients, spanning commercial airlines from the Middle East, India and European airlines, as well as regional air forces. Its largest contract to date was a five-year, $500m service agreement with Abu Dhabi's Etihad Airways to support the airline's strong growth.

Adat believes it can add new levels of care at a lower cost to the Indian carriers that presently receive servicing at Adat's facility at Abu Dhabi International Airport, including Kingfisher Airlines and Deccan. By setting up an MRO facility in India, Adat would allow its clients there to avoid paying costly fees imposed by the Indian government for receiving service work abroad. Mr Byers said he was considering an MRO business through a tie-up with an Indian airline. But with Indian laws recently amended to allow for foreign maintenance firms to wholly own their businesses in India, he said Adat was also considering going it alone without a local partner.

"Everyone's view is that the Indian market is on a general expansion," said Mr Byers. "The issue is, not everybody is sure exactly what the timeline actually looks like, and who will be the major players as we go forward." @Email:[e-mail]