Business aviation is luxury, but also necessity for those who use it: Jayant Nadkarni

Thu, 12 Nov 2015-07:10am , DNA

DNA India article on the interview of Jayant Nadkarni from Invision Air by Shahkar Abidi

Jayant Nadkarni, president, Business Aircraft Operators Association (BAOA), an industry federation working for business aircraft operators in India, says the General and Business Aviation (GA/BA) industry is in recession. Nadkarni, who comes from a military aviation background having flown MiG-21 fighters in 90s, has been closely associated with commercial aviation industry since over two decades. In an interview with Shahkar Abidi, he spoke about the issues ailing the industry

What ails the general & business aviation industry?

The three broad reasons are constrictive regulations, irrational taxation  and insufficient infrastructure. These have caused the GA/BA operators  to remain highly fragmented. To illustrate, on the commercial side there  are more than 50 non-scheduled operators with just one aircraft, around  25 operators with two aircraft and another 10 to 15 with 3 aircraft. Add to  this the private category operators and the fragmented picture of the  industry worsens. Had our operators managed to grow their fleets, it  would have brought in cost efficiencies and other benefits that accrue  from economies of scale. Some operators have had to shut shop, many are  mulling it, and several in the midst of selling off their aircraft to reduce  costs. This is direct fallout of previous government policies. Signs from the NDA government were positive, and we were hopeful that a conducive and growth oriented regime would be put in place with the new national civil aviation policy. However, the new draft policy appears disappointing as none of our representations appear to have been met.

Last two years have seen a series of regulatory policies. How do they affect for the industry?

Our industry has faced a lot of operational complexities, which can all be attributed to the regulator having a non-consultative rule making approach. Take just one example wherein additional cabin crew requirements applicable to scheduled-airline operators were made compulsory for GA/BA operators without taking into account that we carry mostly 8 to 10 passengers and not 100-plus as the airlines do. It took four years for the understanding to seep in and relief to come for the industry. There are many more such examples. The point is that all this happens only because there is a non-consultative approach in rule making. Thankfully we see this as changing for the positive with the regulator, but it is still very sporadic.

According to the aviation industry captains the existing taxation regime is a cause of concern…
First, there is an incorrect perception of luxury, which has contributed to the current taxation regime. Business aviation is luxury for sure, but it is also sheer necessity for those who use it. We need the government to realise that an individual or company importing an aircraft is not doing this just for luxury, but also to use it as a business productivity tool, which can only be good for the economy. It should not make a difference if the plane is imported for private use or commercial use, both of which contribute to the economy. Captains of the industry really do need to move fast with flexible timings and in comfort using even air time to work on their projects, setting up factories, holding multiple meetings and so on. Just see the sheer numbers of business aircraft in the US, Europe, Brazil, South Africa, Mex394198-nadkarniico, Russia, and now even China, and you can see how business aircraft are playing a key role in enhancing productivity of corporates. Greater volumes of aircraft will result in additional revenue from service tax, which over a 5-7 year period will more than offset the revenue loss from import duty reduction from present NSOP duty levels.

The private charter operators functioning from Juhu airport allege that the airport operator has increased the charges by over 400% in past few months. However, the infrastructure and facilities are lacking. What is BAOA doing about it?
A delegation from BAOA recently met the secretary, Ministry of Civil Aviation and raised this concern, among other issues. We have witnessed manifold increase in charges/royalties in recent years at private and AAI Airports. The indiscriminate and unregulated airport charges being levied on account of ground handling, hangarage and parking needs to be standardised immediately. We have asked for the finalization of report prepared by Economic Advisor to the committee within MoCA in this regard. Moreover, the operators should be allowed self-handling at smaller airfields and competitive pricing at other privately operated airports. This is another reason we need to start pushing for separate GA/BA airport infrastructure in addition to existing airports to create at least a semblance of competition.

There is severe shortage of parking space for non-scheduled aircraft in Mumbai. How, according to you, can the situation be eased?
Mumbai, among the most prominent airports for GA/BA operations, is also the most space constrained airport in the country. There are about 45 to 50 GA/BA daily movements on an average at Mumbai, but the available parking slots have remained stagnant at 24 for the last 10 years. While additional parking space was created for scheduled airline operators during the upgradation in 2013, no additional parking slots were created for small aircraft operators. The Lima Bay at Mumbai airport, which is lying vacant after removal of old Kingfisher Aircraft, can be effectively used for creating additional parking slots.
One workable solution is the development of a civil enclave at HAL’s Ozhar airport as a business aviation hub. It will still not solve the core problem of parking at Mumbai, but will most certainly reduce huge wastages & reduce costs, since currently GA/BA aircraft have to fly to far away Ahmedabad or Nagpur for parking, while most of their passenger pick ups and drops are in Mumbai. BAOA has given a special briefing to a team of HAL officials about the business aviation activity levels at the airport in Mumbai with an aim to provide a better insight into possibilities to develop Ozhar airport as a business aviation hub. A very long-term solution is creation of alternate infrastructure, for which the planned Navi Mumbai airport project is much delayed, and if the situation continues we may need to look at alternatives.

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Intra-state connectivity set to take wings

Suresh Nath, a Nagpur-based businessman dealing in chemicals, spends at least two days every week travelling to his factory in Latur. In contrast, he completes a return journey to Delhi within a day. The reason: It takes over seven hours to reach Latur as there is no direct air connectivity to the place at present.

For people like Nath, things are set to change with a few non-scheduled airline companies toying with the idea of starting air services connecting smaller towns and cities in Maharashtra.

Similar services have been started in Gujarat recently with the entry of Captain GR Gopinath-promoted Deccan Shuttle.
Invision Air Services Pvt Ltd, a Prabhadevi-headquartered company offering chartered flight services to business bigwigs and corporates, is planning to start air travel in 10-18-seater Turboprop engine aircrafts. The company is eyeing several tier II and III cities in the state, including Nashik, Nanded, Aurangabad, Latur, Kolhapur, Ratnagiri and Nagpur. It is in talks with airplane manufacturers to purchase between 20 to 30 aircrafts to implement their plans.

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Vinit Phatak, managing director of the company, said: “We will be creating centralised maintenance facilities in Nashik”.

The development seems significant as according to a report by Centre for Asia Pacific Aviation (CAPA), a leading aviation industry think tank, Maharashtra recorded the highest per capita airport traffic in 2011. It also leads the country in the State Domestic Product (SDP) in the current year.

According to Sanjay Saihgal, vice president, Deccan Shuttle, Maharashtra offers a huge market as there are many tier II and III cities in the state. “We are looking for opportunities in many pockets, and Maharashtra is one among them,” he added.

According to industry insiders, similar services have been a hit in European countries and in the US. In fact, air travel is the preferred mode of transport to nearby smaller towns and cities in these countries.

However, Phatak remained cautious about the success of the plan. “The project might not be 100% profitable in the initial years and it will be a big risk for a small operator like us to take,” he said.

Moreover, Kapil Kaul, chief executive officer (CEO), CAPA said, “On the one hand, the government is stopping foreign airlines from  investing in the aviation sector here. But small entrepreneurs, most of whom are likely to fail, are being handed out licenses to operate. This should change.”

Charterers do well, airlines don’t

 Monday, 2 April 2012 – 9:15am IST | Place: Mumbai | Agency: dna
Companies operating in the non-scheduled aviation space have been adding fleet, planning regional services, expanding international operations and entering allied fields
While domestic airlines are battling turbulent skies, air-charter companies seem to be cruising.
Companies operating in the non-scheduled aviation space have been adding fleet, planning regional services, expanding international operations and entering allied fields.

A couple of foreign players, too, are looking to enter allied areas such as air management services.

Religare Voyages, a Delhi-based air-charter company, plans to start regional operations this summer. “We are confident of starting operations in the summer schedule itself and are awaiting final licence clearance,” said Sandeep Bhatt, CEO, Religare Voyages.

The company would start a North India-based airline connecting destinations like Amritsar,Chandigarh and Dharamshala.
Mumbai-based Airnetz Charter Services, on the other hand, wants to extend non-scheduled services abroad. “We are keen to start international operations and are looking for partners,” said Ameya Gore, a spokesperson.

Players are also busy expanding existing services, and some are therefore looking for money.

For example, Invision Air, another Mumbai-headquartered operator, is in the process of getting $18 million of investment — and it is looking to raise another $10 million.

Invision plans to increase fleet from the current two aircraft to 12 by mid-2014 and double base locations to six.

The company is considering Ahmedabad, Hyderabad, Bangalore and a couple of more cities to add to its current base locations at Pune, Nagpur and Delhi. The expansion is expected to cost $80-90 million.

Mumbai-based Bafna Air, on the other hand, sees opportunity in the medical evacuation segment. The company is tying up with hospitals in smaller cities to extend services in case of a medical emergency. With a fleet of two aircraft now, it plans to add another jet depending on the response.

Foreign players are not to be left behind either.

South Africa-based SRS Aviation is currently scouting for an ally. Sinbongile Sambo, managing director, SRS Aviation, said, “We are looking at opportunities in the IT software space and for ground-handling services.”

Aircraft management, under which companies help big aircraft owned by corporates and generate revenues by leasing them, is another segment that has caught the fancy of air-charter firms.
The assets are pulled in for non-scheduled operations when not in use by the corporate on a fixed revenue-sharing basis. SRS Aviation, Invision Air and Airnetz are keen on this segment.
So what keeps these smaller players going when the larger ones are bleeding?

Though high fuel costs surely pinch, industry officials said as a percentage of operating costs, it is lower than that of scheduled airlines. Fuel costs form more than 40% of the total operating costs for scheduled airlines while it is 25-35% for air-charter firms.

The non-scheduled nature of the industry is also an important aiding factor. Air-charter companies are not committed to flying a fixed schedule, which may often be with lower load. Demand solely decides flight schedule.

The target segment is also very affluent for whom time is key and who are willing to pay twice the last-minute business class ticket.
Experts see corporate travel continuing to drive this market with leisure-based travel seen taking time to pick up.

Though expansion plans remain firm, the current turmoil in the aviation industry has had a mixed impact on the industry.

As cash-strapped Kingfisher Airlines curtailed its flight schedule, new routes have opened up for charter services. Invision Air, for instance, is set to enjoy more demand asKingfisher the only service provider on the Mumbai-Nashik route has stopped operations.

But  given the troubles at legacy carriers, investors are circumspect about the entire air travel space, including air-charters. Raising funds, therefore, would be a challenge.