While the Indian aviation industry continues to make headlines for all the wrong reasons, Vinit Phatak, co-founder, Invision Air, has a contrarian view and believes there are several opportunities waiting to be tapped in the sector. He says, “For example, a large part of latent demand for private jets comes from poor airline connectivity to tier-II and tier-III cities which have a significant population of high net-worth individuals.” And he intends to focus on these underserved geographies to generate sizable revenue for his company that offers charter services, sales and maintenance services of private aircrafts.
He founded the Mumbai-based company in June 2011 along with a co-founder, Jayant Nadkarni. After careful analysis of the aviation industry, the company has charted out a three-phase growth plan to be implemented over the next few years.
For Phatak, identifying business opportunities in challenging sectors is nothing new. His parent company, Invision Group, founded in the early ‘90s, began as a sales and distribution company that sold antennas, cables and accessories to the telecom industry. Eventually, the business achieved an 80 per cent market share and 51 per cent of its equity was taken over by the globally renowned German antenna manufacturing company, Kathrein Werke KG. In 2002, Phatak tested out new waters as Invision diversified into the marine and aviation safety industry with the acquisition of a 30-year old niche manufacturer, Meridian Inflatables Pvt. Ltd.
This time, Phatak has reached for the skies and he firmly believes that Invision Air will be a sizable contributor to the group’s revenues by 2014. “Between April and September 2012, our revenues increased by over 112 per cent from last year in the same period and we expect to continue to grow at this rate as this is typical in the startup phase. From 2014 onwards, we expect to grow at a steady rate of about 12 per cent to 18 per cent per year for the next five years,” says Phatak. Currently, 60 per cent of the company’s revenues are generated by charters and the remaining 40 per cent comes from aircraft sales and services.
Invision Air currently operates two Embraer aircrafts from three bases, including Mumbai, Delhi and Nasik and services around 200 airports in India. The company also services international airports in the Maldives, Sri Lanka, Thailand and the Middle East. The company markets its services through sales channels and interesting promotions. In addition to direct sales to corporate or individual clients, Invision Air also focuses on promotions via partnering with private banks, concierge services, credit card partners, charter brokers, hotels and specialty travel agencies.
In the past year, despite the Indian aviation industry undergoing tremendous pressure due to high airline turbine fuel (ATF) costs, lack of adequate infrastructure (no fixed base operators in the case of chartered flights) and severe competition, Invision Air has chosen to focus on the space it knows best.
The company believes that while the ATF issue is critical, the fuel costs for operating private jets are only 20 per cent-25 per cent when compared to 40 per cent-45 per cent for commercial aviation. Moreover, the company’s infrastructural and technical facilities at the places it connects, are good enough for it to ensure safety and efficiency of its flights.
The market potential seen by Invision Air has not gone unnoticed by global manufacturers such as Gulfstream and Bombardier, who are looking to expand their presence in the Indian market. But Phatak maintains that there is enough room for local players to compete with their international counterparts. “This may not have a huge impact on the local private jet players because India currently has no local manufacturers of business aircrafts and if OEMs expand their presence in India, it can only benefit what is still a nascent industry,” he says.
Another favourable condition which has prevailed for private jet operators like Invision Air is the boom seen by the Indian tourism industry. “The private jet segment is the initial spark needed to trigger certain areas of India for tourism businesses. We’ve received a few enquiries from high-end leisure travellers and we see this market growing slowly but surely. We have also initiated tie-ups with exclusive hotel properties to jointly promote our services,” shares Phatak.
Three-phase growth strategy
Invision Air has charted out a three-phase growth strategy to strengthen its presence in the private jet industry. In Phase I (March 2011 – February2012), the company has setup three bases, each in Mumbai, Delhi and Nasik while operating Embraer aircrafts across 200 regions in India.
In Phase II (February 2012 – March 2016), the company is looking to increase its capacity to 12 Embraer aircrafts (Hawker Beechcraft B200, Hawker 900XP Type, Gulfstream, Learjet and Bombardier) and expand to six operational bases. Currently, Ahmadabad, Bengaluru, Hyderabad and Jaipur are in its consideration set.
In Phase III (April 2016 onwards), the company is planing to add a new type of aircraft to its fleet with larger cabins and range configuration, to reach international destinations from India and to cater to the highest market segment. It also plans to add a fleet of turbo-prop aircrafts of eight to 19 passenger configurations to reach locations in India that are unserviceable by jets. Expansion to international emerging markets such as Sri Lanka, Indonesia, Vietnam, Philippines, South Africa, Nigeria, and China via local partners is on the cards.
Invision Air’s total requirement of debt and equity amounts to US $80 million. While it has currently injected an equity and debt amount to the tune of US id=”mce_marker”0 million through its own sources, friends and family, it is still in the process of raising adequate funding through two rounds of external funding. In the first round, the company is looking to raise US $27 million in equity and in the second round, raise US $53 million in debt.
In this financial year, the company also plans on commencing a carbon offset programme called Invision Green, a non-profit initiative of the group, whereby all its flights will be offset via a biodiversity regeneration scheme making it the first carbon neutral operator of private jets in India.
“With more Indian companies investing abroad and more promoters managing companies in far-flung locations, there has been a shift in the perception of our target audience from seeing private jets as the toys of the super-rich to seeing them as essential and practical business tools. This has provided an impetus to the private jet industry and we see this trend only increasing with time,” concludes Phatak.
Founders: Vinit Phatak and Jayant Nadkarni
Equity and debt target: US $80 million
Target: 12 per cent – 18 per cent growth year-on-year for the next five years
Concept in brief:
Though the aviation industry in India has been posed with numerous challenges in the form of high ATFs, lack of adequate infrastructure and severe competition, Invision Air has made its entry into the private jet operating business with the belief that challenges can be turned into opportunities by identifying the right markets, adopting the right growth strategy and leveraging the right marketing channels. The company is looking to expand primarily into tier-II and tier-III regions due to their poor commercial airline connectivity and the need of several high net-worth individuals to travel to these locations. The company currently has three bases, one each in Mumbai, Delhi and Nasik, and operates two Embraer aircrafts, which connect to 200 regions in India.