The aviation sector in India continues to stay away from innovations partly due to high entry barriers and strong as well as non-adaptive regulations
| By Sudhir S. Rajeshirke |
Vice President – Sales, Arrow Aircraft Sales and Charters Pvt. Ltd.
We all remember the Monday early morning and Friday late evening crowded commercial flights. The propensity to execute businesses, build a vibrant economy and a better quality of life and to see new places drove 4.5 billion air travel trips globally in 2019. COVID completely changed the way people perceive travel. The fear of travelling in crowded flights and getting infected diminished global air travel by more than 90 per cent. However, an unexpected trend emerged. Post lockdowns, while airlines have seen single digit growth compared to 2019 levels, business aviation showed a remarkable recovery backed by the need of businesses and HNWIs to travel safely for undertaking their businesses in the safety of private aircraft and operators opening up new business models of selling seats on private jets. Per WingX, The recovery in business jet traffic in USA at this point in Autumn 2020 appears to be hitting a ceiling of around 85 per cent of comparable 2019 activity.
India needs to take advantage of this situation and now focus on building a robust business aviation ecosystem and create another parallel vibrant industry in the aviation sector. It is well documented and proven that it makes great economic sense for a number of companies and State Governments to use business aircraft. Business aviation also includes usage of helicopters for oil and gas industries and also allows State Governments officials to reach remote locations where otherwise would take an enormous amount of time. A well operated business aircraft saves time, provides travel convenience, increases productivity, enhances security of high profile individuals and helps maintain privacy.
But the purpose of this article is not to extol the benefits of business aviation. The purpose is three fold. First, it is to provide a high level perspective on this industry which has generated millions of jobs and added billions of dollars to the economy of several western countries, and which has the potential to create similar impact on the Indian economy and thus create a holistic civil aviation eco-system along with the airlines. This is required, given our Government’s focus on promoting airlines and giving a second grade treatment to business aviation. The second purpose is to provide four key reasons on impact that business aviation has on our economy and the third is to provide actionable recommendations which are within the purview of the Government.
Business aviation has always been projected as having an aura of luxury and exclusivity. Promotions by air charter companies may have contributed to that image to a large extent. In a developing country such as India, an image of a business executive or a high net worth individual using a business aircraft to travel for business may seem ostentatious and smacks on the plight of the airline travelers who have to brave long airport queues to get to their cramped airline seats. Hence a Government, which works hard to make air travel accessible to large sections of the travelers by providing incentives to reduce cost of air travel (via UDAN initiatives) would obviously shy away from promoting an industry which “appears” to cater to corporate excess. However, this prejudicial view against business aviation in India is detrimental to the overall aviation ecosystem, which now only seems to cater to the airline industry.
Here are four reasons which justify why promoting business aviation and providing the right stimulus to this industry will create a healthier aviation ecosystem and spur the next level of aviation sector growth in India. I have also added the enabling factors that can drive business aviation growth.
1. BUSINESS AVIATION CAN CREATE A HUGE IMPACT ON JOBS AND ECONOMY
Just as airlines do, business aviation companies employ highly skilled engineers, mechanics, flight despatchers, managers and pilots and are supported by several organisations which provide services such as aircraft maintenance, air charter brokerage, ground handling, food and beverage and technology. Increase in the number of business aircraft thus creates high quality career opportunities for individuals who wish to contribute to the aviation sector and also adds to country’s GDP.
INDIA NEEDS TO TAKE ADVANTAGE OF THE EXISTING SITUATION AND FOCUS ON BUILDING A ROBUST BUSINESS AVIATION ECOSYSTEM AND CREATE A PARALLEL VIBRANT INDUSTRY
It also increases the possibilities for new businesses such as fixed based operators (FBO) which number less than five in India. Consider this, per NBAA (in 2015), there were an estimated 3,000 FBOs in US, generating $15 billion in annual revenue. This was close to eight per cent of total US airline revenue in the same year and almost of the size of India’s airline market. While it would be not be a fair to compare a matured and sizeable US airline industry ($200 billion plus revenue in 2017) to India’s ($12 billion revenue in FY 2016-17), even a small possibility of establishing an FBO industry which is one per cent of India’s airline industry would mean a business revenue potential of approx. $100 million or 700 plus crore. This is a sizeable market. Pilot and engineering training for business aircraft is another area which can contribute to high quality jobs and revenue for training companies.
Hence developing business aviation further will grow the aviation sector significantly.
2. THE RIGHT REGULATORY AND OPERATIONAL FRAMEWORKS FOR PRIVATE AVIATION WILL HELP PREPARE THE LAUNCH OF NEW AERIAL TRANSPORTATION MODELS
Business aviation is mostly required on ‘on-demand’ basis and hence it is unscheduled in nature. Unscheduled operations need strong operational support such as infrastructure (airport parking slots, rooftop helipads etc.), skilled professionals (engineers, pilots, operations specialists) and regulatory support, which can provide quick approvals for on demand transportation. Such strong operational and regulatory platforms will create the base for future aerial transportation systems, which could be ‘on-demand’ in nature.
For example, there has been a phenomenal progress in the development of drone technologies, flying cars and other modes of air transportation for passengers and goods. There is a possibility that in the next five to six years we could see deployment of pilot programmes for intra city aerial travel by air taxis/rickshaws or delivery of goods to our doorsteps by drones (whether we like that scenario or not). Such transportation systems will require infrastructure (designated locations to take off and land), skilled professionals (drone pilots, air taxi pilots, engineers, operations specialists etc.), navigational support and most importantly, balanced regulations. Their operations will compete with the same limited and regulated airspace as with any other air transportation system.
Hence unless we set up seamless operational and regulatory capabilities for business aviation, setting up the same for future modes of unscheduled aerial transportations would be difficult.
3. A CHANGE IN PERCEPTION ON USAGE OF CORPORATE OR CHARTER AIRCRAFT WILL ENHANCE CORPORATE PRODUCTIVITY
Government considers business aviation as an elitist segment. Hence any attempt to ease the industry’s pain points is seen to pander to the corporate excess. This view has also percolated deeply in the minds of corporate shareholders.
We have seen instances where CEOs of public companies have put-off their decision to purchase a business aircraft or use chartered flights when it was direly needed. This was done from the perspective that the shareholders might think of an aircraft purchase or use of chartered flights as an unjustified expense. For example, in a recent instance shareholders of a well-known company questioned the minor use of the chartered flights of its CEO, who travelled for more than 500 hours in a year in commercial airlines.
A business aircraft is an important tool that gives busy executives the ability to remain “close to the customer” in a challenging business environment and reduces waste by saving thousands of hours of nonproductive travel time. The capabilities that these assets offer are as beneficial to the execution of business plans as the cellular phone, blackberry or laptop computer.
FOR DECADES, BUSINESS AVIATION COMPANIES IN THE US AND EUROPE HAVE BEEN ENHANCING BUSINESS MODELS BY INTRODUCING FRACTIONAL JET OWNERSHIP
Further, business aircraft have become more efficient in design and performance. A team of three to four executives can travel anywhere within India, especially to tier 2 and 3 cities and return home the same day. The average cost per seat on a light jet is only slightly higher than a business class fare of a commercial airline. In addition, executives can avoid overnight stay at hotels which not only saves costs, but they are also able to return home to their families rather than spend a night at a hotel.
Hence the Government as well as company shareholders need to change their perspectives and understand that as executive time is the most valuable resource, a corporate aircraft should be treated as a productive business tool and executive travel should be treated as an investment. If usage of private aircraft by senior political leaders can be seen as a way to effectively reach out to their constituencies and carry out efficient and productive travel, then the same perspective needs to be accorded to business leaders as well. This can only increase productivity of senior executives whose time and energy are of utmost importance for business growth.
4. INCREASE IN ENTREPRENEURIAL OPPORTUNITIES
India has developed a thriving entrepreneurial ecosystem which covers many sectors such as retail, travel, logistics and supply chain etc. However, aviation sector continues to stay away from innovations partly due to high entry barriers and strong and non-adaptive regulations. Particularly the business aviation has been plagued with mindset fatigue i.e. it continues to follow the traditional marketing business practices and operating processes in the same way as it has been done for the past two decades. A few brokers tried to use technology to drive aggregation but have not yet been successful as there was not much of service innovation.
For decades, business aviation companies in the US and Europe have been enhancing business models by introducing fractional jet ownership, aggressive empty leg marketing, shared private flights, airline partnerships by leveraging technology, investments and tax regulations and thus bringing down the cost of chartered and private flights. Charter brokers such as Victor and JetSmarter (now FlyXO) have leveraged technology and operating models to bring faster response times and new seamless experiences to private aviation customers.
Further, due to unscheduled nature of operations, entrepreneurs can find several opportunities across the supply chain to bring value to business aviation and increase its reach to a wider section of air travelers in India. As a simple example, business aircraft owners and operators are required to establish a complete organisation with several specialised staff if they have to operate even one aircraft. This not only increases cost of operations and but also adds to the hassles of operating a heavily regulated aviation company. This discourages a lot of potential new owners from bringing airplanes in India. If such owners / operators are allowed to outsource their aircraft operations to a professional aircraft management company, which has the skills and capabilities of managing several aircraft and operates at scale, then it would decrease the cost of aircraft operations for owners and operators, avoid managing regulatory hassles and improve ease of efficiency of business aircraft. This would encourage import of more aircraft and thus increase the overall aviation business. Thus if the regulations around aircraft management become more efficient, business aviation could become a great value proposition.
WHAT WE NEED
Business aviation needs a few enabling factors from the Government which will significantly help increase its potential in India. They are as follows:
As our Prime Minister mentions, we have to change COVID-19 adversity into opportunity. It is the right time for the Government to make changes. The Ministry and the supporting aviation agencies have the right team, skills and wherewithal to carry out large changes and the Government has the right attitude to implement changes. In a growing civil aviation sector, a significant change in the business aviation industry will provide a much needed fillip and motivation, required for the growth of this industry.