Consolidation only way to make general aviation economically viable

May 27, 2015, 10:15 PM, IST

2015-05-27 - Economic TimesNEW DELHI: With the business jet and general aviation industry clocking a two per cent negative growth last fiscal, consolidation seems to be the only way out to make the business economically viable, the new head of an operators’ body said today.

Business Aircraft Operator Association’s newly-appointed president Jayant Nadkarni told PTI that the process has already begun, though at a smaller scale, as people have realised that flying an aircraft and setting up a company with a non-scheduled operator permit (NSOP) are not conducive.

“Consolidation has already started but it is happening in a small way. When consolidation happens, slowly growth takes place, it gives you economy of scale besides making your business more focused,” he said.

Nadkarni, who is also the co-founder and chief operating officer of the Mumbai-based air charter company Invision Air, said the jet operators need to adopt aircraft management business model, in which several NSOP holders collaborate with one operator, for a long-term viable business.

“There are so many compliances, liabilities and other issues that an individual NSOP holder come across while operating a company. In the aircraft management model, a concept which is quite popular in the Western world, you have several (flying permit) owners and one operator.

“The advantage of this concept is that a single operators get the fleet, he works on scale of economy and he runs it more efficiently and safer manner than an operator having just one or two aircraft,” he said.

According to BAOA, there are a total of 122 NSOPs which cumulatively have around 365 aircraft. This is in addition to another 180 functional aircraft, which are owned by private firms and individuals.

Also, more than 90 operators out of the total 122 NSOPs, have three or less than three aircraft.

According to the Association, these NSOPs together hold a total of about 150 aircraft.

“Running the business has become all the more difficult in the face of duty differential,” Nadkarni said.

Currently, an aircraft imported for personal use attracts import duties between 19 per cent and 21 per cent, while one imported for commercial operations attracts duties of 2.5-3 per cent only, as the latter is not subject to countervailing duty and special additional duty.

This differential tax structure has led many private jet owners to import aircraft through the NSOP route to save on customs duty.

The association in its pre-budget demands had sought uniform and lower duty on both non-scheduled operator permit and private category to encourage import of more aircraft for enhancing regional connectivity.

This, demand, however, remained in unaddressed in the 2015-16 Union Budget.

Emphasizing that his efforts as the head of the industry body would be to bring the industry closer to the regulator and government through regular meetings and dialogues, Nadkarni said, “Its not going to be of blame game but a free and fair discussions to understand each others’ concerns and work together for the betterment of the industry.”

Terming the Government’s proposed policy of prodding the airline industry to enhance regional connectivity and floating proposing changes in the existing route dispersal guidelines in this regard as “a good step”, Nadkarni batted for simplifying the proposed domestic flying credits formula.

Centre asks states to follow Madhya Pradesh model to boost regional air connectivity

May 18, 2015

2015 May 18th - Economic Times Centre asks state to follow Madhy Pradesh model to boost regional air connectivityNEW DELHI: The Centre wants states to underwrite a certain number of seats per flight operated by local airlines to make regional air connectivity viable. The civil aviation ministry has asked states to follow the example of Madhya Pradesh, the only state in the country which provides subsidy to an airline operating regional flights. Madhya Pradesh provides financial support to airline company Ventura Airconnect, which connects cities including Bhopal, Gwalior, Indore, Jabalpur, Satna, Khajuraho and Rewa.

The ministry held a meeting last month that was attended by representatives of Madhya Pradesh, Bihar, Uttar Pradesh, Gujarat, Maharashtra and Rajasthan. Industry executives and experts, however, call for more than just underwriting of seats to ensure profitability on regional routes. “Apart from underwriting seats and infrastructural support, state governments should provide capital side subsidies in the form of access to cheaper capital or lower interest rates, which will help operators add more aircraft to the fleet and expand route deployments,” said Jayant Nadkarni, president of Business Aircraft Operators’ Association. According to Nadkarni, states should share an updated list of all operational and uncontrolled airports and appoint a single point of contact in each state aviation department. He added that states should tighten the evaluation process, with a greater focus on core operations and financial strengths apart from the lowest commercial bidder for subsidies and underwriting seats.

EconomicTimes01

Business of private jet companies budding, but not booming in India

Every expression on the face of Thomas Flohr, founder and chairman of VistaJet Holding SA, bore the stress and strain of a nearly 10-hour flight when he showed up in New Delhi on a recent Thursday morning. He has barely had time to shower. He is still looking to grab a bite three hours after landing. Flohr’s flight to India in a Global 6000, one of the London-based luxury air-charter company’s 37 Bombardier jets, was delayed by an hour after a client in Spain insisted they meet the previous night.

Flohr’s schedule — meetings with potential clients and journalists — has gone astray, but he is not complaining. This flexibility, he says, is why chartering a private jet makes better sense than flying a commercial airline. “Everything an airline does is driven to be on time. Everything we do is driven to be flexible.”

Flohr had landed in India to make a big splash. The country, he says, is “absolutely important” for VistaJet — which placed the largest single transaction in the history of business aviation when it ordered 56 Globalseries aircraft from Bombardier last November — from two standpoints.

One is India’s proximity to China, South East Asia and the Middle East, a geographical setting that renders cost benefits to a company that targets corporate customers and wealthy individuals travelling point-to-point with wide-cabin (8-20 seaters), longrange aircraft (connecting London with Tokyo or New York with Hong Kong). If VistaJet were to send a plane to a client in Hong Kong, it would take eight hours from Nairobi or Dubai, but only four hours from India. The second is the market itself. In recent years, a steady stream of promoters and executives from India has been travelling to their factories located in Australia, Africa , Europe and the US.

Boom Time

Flohr believes business aviation in India is on the cusp of the next phase of growth because the number of such travellers — “their DNA is very global” — is poised to rise dramatically. It is a sentiment shared by VistaJet’s principal competitor, NetJets, a unit of Warren Buffett’s Berkshire Hathaway Inc. In 2011, Buffett hosted a NetJets event in Delhi with business leaders to discuss business aviation, among other subjects.

NetJets already has a growing number of customers in India, both businesses and individuals, who are flying privately in and out of the country. “India is an important country for us and we are examining options for establishing operations here,” says Thomas Hoyt, head of corporate communication, NetJets. Indeed, for these two companies, there couldn’t have been a better time than now to enter India.

In August, aviation regulator Directorate General of Civil Aviation (DGCA) barred Indian companies that offer private jets on charter from flying abroad to comply with a safety audit by the UN’s International Civil Aviation Organization (ICAO). Under the new standards laid down by ICAO, every non-scheduled operator (private jet and helicopter companies) in India must apply afresh with the DGCA and have their operations reviewed.

Expectedly, Rohit Kapur, president of Business Aircraft Operators Association (BAOA), the umbrella body representing private jet owners in India, does not share the exuberance of Flohr. Kapur is upset that the DGCA has thrown a 256-page document at the private jet industry in India and is “sitting on applications”. “It will take at least six months before every operator can fly abroad again because of the DGCA’s staff crunch,” he says.

Chartered airlines Invision Air to set up operations in multiple states

AHMEDABAD: Mumbai-based chartered airlines Invision Air is eyeing setting up operation bases at Ahmedabad, Bengaluru, Hyderabad and Jaipur, said company Vinit Phatak. It is also planning to add 10 jet aircraft by 2014.

The company has two four-seater Embraer Phenom 100 jets and operates from Mumbai, Delhi and Nashik. “We need at least six clients in a city to set up a base, otherwise it is not feasible,” Phatak told ET in Ahmedabad on Thursday.

He hopes to add 5-6 corporate clients from Ahmedabad. At present the company has only one client in Ahmedabad. “A lot of demand is coming up for last mile air connectivity from corporates, who want its managers to visit its facilities in remotest areas. Companies provide this service to their lawyers as well,” he said.

Regular commercial aircraft cannot land and take off from smaller run-ways. Four seater aircraft like Phenom 100 can operate from about 200 air-strips across the country. Smaller jets operated by companies providing chartered service need over 350 hours of flying for commercial flying to be financially feasible.

According to Phatak, India has 130 operators providing with close to 480 aircraft, of which close to 136 are jet aircraft and the rest are turboprops, piston engine aircraft and helicopters. The chartered air service industry of India is estimated at $250 million and has been growing at 10-12% per annum.

However, 2011-12 was an exception when it declined by about 5%. “More companies will be buying jets. Its numbers is likely to rise to 400 in few years. This will create huge demand in maintenance and servicing. We are also gearing for it,” he said.