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33% increase in GA flights through Indian airports

12 October 2011

Taking a chartered flight is no longer a luxury, but slowly emerging as a need for corporates, who are willing to shell out extra money to use their man hours to the maximum. Today, private jets have become a regular mode of transport for industry heads in India. Big industrialists with private jets include the Hinduja Brothers, GVK Reddy, Shishir Bajaj, Anil and Mukesh Ambani, Vijay Mallya, Rahul Bajaj, Sajjan Jindal and Ratan Tata, among others. 

Market scenario and challenges
In the last few years, charter airlines have gained importance in the aviation sector, along with scheduled airlines. Indian airports witnessed 33.55 percent more general aviation flights during the last four years from 2006, according to research and consulting firm Frost & Sullivan.

Sanjay Saihgal – VP, Business Development, Deccan Charters Ltd, says, “Charter business has been growing steadily over the past few years. Businesses and HNIs have increasingly started realising the efficiency and other benefits of using air charter services. Charter is helping most customers to avoid long hours spent at the airports and also enables direct access to remoter locations.”

“At present, there are around 680 general aviation aircraft, which are expected to reach 2,000 by 2020. Nearly US$12 bn is expected as investments in acquisitions in the next decade,” says Gautam Singhania – CMD, Raymond Ltd. The Indian charter fleet is dominated by Hawker Beechcraft with 35 aircraft, Cessna Aircraft Company with 31 aircrafts and Bombardier with 24 aircrafts. These three companies together hold 66 percent of the market share, while the rest is shared between Dassault Falcon, Gulfstream, Embraer, Airbus and Boeing.

The increasing charter aviation movement in the country has encouraged airport authorities to construct additional facilities catering only to general aviation or non-schedule flights. However, these facilities lack various amenities to become a full-fledged Fixed Based Operator (FBO). At present, separate facilities for general aviation are available at Delhi and Mumbai airports. Such additional facilities for air charters at the governmentowned airports in cities such as Kolkata, Bhubaneswar and Trivandrum are in their planning stages.

Despite improving business scenario, the general aviation movement has witnessed around 12 percent decline in April-June period of 2011, as compared to the corresponding period in the previous year, reveals aircraft movement data available with the Airport Authority of India (AAI). Industry experts opine that several key challenges are preventing the sector from thriving in a booming economy. Charting out the challenges for the general aviation sector, Dhiraj Mathur – Executive Director and L e a d e r (Aerospace & Defence), Price w at e r h o u s e Coopers India says, “High taxes, limited infrastructure support in terms of hangar facilities and increased airport capacity, combined with frequent curfews in major cities that limit the availability of operating slots for chartered jets are some of the issues that the chartered/general aviation segment needs to cope with.” 

Absence of well-equipped FBOs is a key hurdle plaguing the industry. The government’s lethargic approach in setting up FBOs for promoting general avia-tion movements in the country has led to poor infrastructure. Maintenance of charter aircrafts outside India due to lack of infrastructure, spare parts and adequate MRO (Maintenance, Repair and Overhaul) facilities, combined with dominance of highly-paid foreign pilots add to the aircraft operating costs.

Besides, the government’s decision to charge 25 percent customs duty on the import of business aircraft has impacted the purchase decision of potential customers. Further, the involvement of too many agencies for licensing a charter aircraft such as the Ministry of Home Affairs, Ministry of Civil Aviation, Bureau of Civil Aviation Security, the AAI and others lengthens the time taken for these aircraft to be operational.

Trends and opportunities
Charter aircrafts in India are either owned or leased, with former being the most in demand. Buying an aircraft provides long-term benefits to companies. However, risks are equally involved in buying aircrafts. This has given rise to the concept of fractional ownership scheme, which is quite popular in developed nations.

The fractional ownership model offers an individual or company the option to purchase a share of an aircraft, which can be as little as 1/16th of an aircraft, offering nearly 50 hours of flight time per year, to 1/2 of an aircraft depending on the needs of the operator. In addition, the management company provides all scheduling, flight planning, staffing, catering, maintenance, communications and insurance servi ces. “Although lucrative on paper, I believe that the fractional ownership model is difficult to sustain,” says Captain Karan Singh – CEO, Indo-Pacific Aviation Pvt. Ltd and MD, Business Aircraft Operators Association.

Commenting on the new happenings in the segment, Clive Lewis – Vice President (Marketing), Swajas Air Charters says, “The recent transformation is that clients who used to charter aircraft and fly about 15–20 hours a month have decided to purchase their own aircraft. A few clients are going one step ahead by offering their aircraft on charter when it is not in use; the additional revenue earned will help cover operational overheads.”

The increasing scope of charter aviation provides opportunities for other industry players across the value chain, eventually acting as a catalyst in the national economic growth. 

MRO service providers, FBOs, aircraft management, aircraft manufacturers and flight training schools are some of the industry players to benefit in the value chain over the foreseeable future. 

Realising the local manufacturing potential, Mahindra Aerospace has already entered into manufacturing of small civilian aircraft for the general aviation market. These aicrafts are priced 20 percent lower than a Cessna aircraft. Many global firms including Hunt & Palmer PLC and Dubai-based Empire Aviation Group (EAG) have forayed into charter and aircraft management business in India.

Tremendous scope for growth also exists in charter airlines targeting pilgrimage, medical and adventure tourists. The concept of air ambulance is also emerging and has great long-term potential in the Indian market. This new air charter wing, which provides lifesaving services to patients and transports them from remote locations to cities, has witnessed a five-fold increase in demand over the last three years.

Road ahead
Growth in the general aviation market is expected to be around 12–15 percent in the coming years. Arjun Bafna – MD, Bafna Aviation Pvt. Ltd states, “The general aviation industry is expected to grow at a radical pace. There are ample opportunities opening up for everyone. The MRO space is almost untapped. With more than 1,500 aircrafts expected in the next decade, there is also a huge potential on the maintenance side.” Infrastructure development, flexibility in regulatory framework, government focus in structuring the air charter business, easing taxes/duties and construction of dedicated general aviation airports can take air charter operations in India to new highs.

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