Rising operational costs and infrastructural hurdles hurt business aviation in India
India’s civil aviation market may have grown tremendously over the years with a double-digit growth, but it has been a tough ride for the country’s chartered and private aircraft operators. The data from the Directorate General of Civil Aviation (DGCA) shows that the number of such operators reduced from a peak of 147 in 2011-12 to 111 in 2017-18.
India has registered 512 business aircraft and helicopters in the year 2017, with no significant growth since. The number is expected to grow to 868 by 2023. The business aviation sector contributed USD580 million to India’s GDP, this could grow to USD790 million by 2024. The sector employs whole range of technicians comprising aircraft owners, pilots, engineers, technicians, operations staff and regulators, a diverse sector which contributes directly and indirectly to the GDP in a significant manner.
Despite all the challenges, the charter plane aviation in India has been successful in overcoming numerous obstacles over the years. The sector has been more of a surviving business, with major companies striving to break even. Some of the challenges include lack of trained and qualified staff, a complex regulatory structure and work process, inadequate infrastructure and mounting operational costs, etc. being major hindrances in the sector.
Business aviation is not just about luxury, today it is more of a necessity, and is widely used by corporate houses for travel needs of their top executives. While commercial air travel would mean chaotic, overcrowded airports, with occasional delays, charter services help the businessmen to travel seamlessly saving time and pandemonium.
The global business aircraft market is dominated by companies like Bombardier, Gulfstream, Cessna Aircraft Company, Dassault Aviation, Embraer, Honda Aircraft Company, Pilatus Aircraft, Piper Aircraft, Saab AB and Textron Aviation. The industry is expected to register a CAGR of approximately seven per cent by 2023.
Indian industrialists often prefer Gulfstream jets or Dassault Falcons, while the wide-bodied Airbus A380 or Boeing 727 is preferred by ultra-rich people. Aircraft companies like Gulfstream, Dassault and Bombardier have largely dominated the Indian market because of their optimum price and specifications meeting busy Indian industrialists. The introduction of G650 ER jets by Gulfstream has helped to tap the long-range sector. Dassault Falcon 8X and Bombardier Global 8000 have proven to be foremost competitors for G650/650ER, being preferred by an increasing number of business travellers.
It’s the challenger series from Dassault Falcons and Bombardier that have monopoly over short range flights, and Gulfstream rules the long-range sector. The Falcon 8X also boasts of three engines (as opposed to the Gulfstream’s two) which is supposed to make it more reliable, though no Gulfstream has suffered from having an engine less than the Dassault challenger. Though India is largely a turbojet market, the last decade has seen the arrival of jets such as Embraer Phenom, Eclipse, the smaller Cessna and HondaJet, costing between USD3 million to USD5 million.
On 27 March 2017, Embraer delivered the 500th Phenom 300 series business jet. The Phenom 300 is the only business jet model to reach this milestone in the last 10 years. The Phenom 300 performs in the light jet class and has set multiple speed records. The aircraft is in operation in more than 30 countries, having accumulated more than 800,000 flight hours on more than 600,000 flights during the past decade.
Jets like Cessna Citation CJ2 and the Embraer Phenom 100 are more popular in India, as their ownership and operating cost is comparatively less. CJ2 aircraft is the most sought after, followed by midsize private jet types – Citation XL and Hawker 800. And for India, the Falcons are also preferred as they are comfortable, and possibly the most customer-friendly planes in the skies right now. A prominent operator said customers who have flown the Falcon, do not want any other plane, not even the bigger Bombardiers.
The long-range jets such as the Gulfstream G650/650ER, Dassault’s Falcon 7X, and Boeing’s BBJ 777/787 are in prominent demand globally and owners are procuring them in large numbers. The market demand has accelerated the sale prospect of Bombardier business aircraft, Gulfstream, and Textron Aviation, with Dassault Aviation and Embraer executive jets following close behind.
As far as India is concerned, helicopters have been more in demand in the business aviation sector, covering almost half of the market share in financial year 2018. The easy operations and relatively low cost of helicopter tours make them an ideal choice for transportation, medical uses, slung work, pilgrimage visits and for politicians during elections.
The growing number of high net-worth individuals in India has created an increased demand for business jets, moreover, such premier services are used by celebrities, sportspersons, politicians, tourists, business people, etc. Business jets opted for by tourists and business class passengers are anticipated to have higher seating capacity as compared to others.
The business flight operators rue that the government at present is giving a lot of emphasis to scheduled airlines, right from the planning stage till the implementation of aviation policies and programmes. The policy makers should consider the role of charter airline sector in contributing to the nation’s economy and its specific needs, which are different from that of the commercial airlines.
Shilpa Raj, vice president, Air One, an integrated aviation group, headquartered in New Delhi, said there have been constraints that make India a tough market to survive for the private jets’ owners. India’s private charter industry is at its nascent stage, thus the scope of growth is immense, India’s domestic aviation sector is growing at a rate of over 20.3%. General Aviation, however, is gradual as there have been constraints that make India a tough market to survive for the private jet owners. Infrastructural challenges, high cost of operations associated with owning an aircraft add to the woes of the owners, fixed costs on the aircraft, pilot, maintenance and other miscellaneous aspects unless you clock around 800 to 900 hours of flying time a year – 90 hours a month – owning a jet is not practical.
While the domestic airline operators have complained of very high fuel costs, even private business jet owners have the same complaints. Raj said the airport charges have significantly been raised, and besides the high import duty on buying planes from abroad and parking issues at many airports, including Delhi and Mumbai, have impacted the market significantly.
However, the upcoming general elections have spurred a lot of activity. Recently, there has been a surge in the demand for business jets. “Industry receives good business during election season with VIPs, politicians and ministers flying around the country,” said Raj. The business aircraft owners association agrees that the demand surges to two or three-fold as the elections approach, and it’s generally the best season for the industry.
“With the growth in volumes, the infrastructural facilities and basics such as parking space has not grown proportionately. There is no space to expand fleet at the Mumbai airport, which is the financial capital of the country. Similar is the situation of the Delhi airport. Demonetisation and the change in the tax structure has added to the blues of the selection business groups owning such aircraft, rising airport charges and the duty structure for importing planes from abroad are a bit of a downer for people looking to acquire planes, as a result of which, the aggregator concept has come into play,” she adds.
Big business groups have leased their aircraft to maintain these aircraft and generate revenue which meets the necessary expenses. This concept has found many supporters as the business houses who haven’t adopted this model have had to liquidate their assets. Keeping the challenges in mind, the luxury charters business is on its way to develop and hopefully will soon have its teething period over, Shilpa Raj says.
“India charter business is yet to see its paramount/maximisation phase. It is yet to happen. It is expected to start by 2025, wherein aviation industry will see the multiplier effect and that when the boom is expected. Till then, there is enough space in the skies to capitalise and seize the opportunity,” Shilpa Raj says.
The global market research firm, Ken Research, showed that the sector is witnessing a subdued growth because of high operational costs, difficulty in ease of doing business, complicated tax structures and a variety of other reasons. The growing number of high net-worth individuals in the country had somehow boosted the demand for business aviation in the country. The report found that Delhi NCR, Mumbai, Chennai, Bengaluru, Pune and Hyderabad have been the biggest hubs for business aviation in India.
Majority of airports in India offer limited hour operations because of shortage of manpower and lack of air traffic movement. The long closure of airfields at these airports affects the movements of business aviation aircraft, causing economic losses. Moreover, due to stringent regulations, the operators have to suffer a lot of hindrance with increased time lapses. Also, the perception of business aviation being for the ‘rich’ has discouraged any measures by the government that could help reduce the heavy taxes and regulations. The 2.5 per cent import duty charged on importing the business aircraft has further worsened the situation.
While the global business jet operations grow, India has still to see that kind of growth. Global demand for business jets is forecasted at 9,100 by the next decade, and India will have close to 13-1400 private planes in the next 20 years. But there is much deterrence from the government and even the premier jet operators have sold their planes and they aren’t buying anymore, a fact pointed out by Raj. Groups like DLF and many others who had their own business jets have sold them. An aircraft owner has to clock around 800 to 900 hours of flying time a year – 90 hours a month – otherwise, it’s not practical to own the aircraft.