Business Aviation Set to Soar, But is Government Doing Enough?

The business aviation craze mostly started post COVID-19 pandemic with cooped up people ready to splurge in luxury and keep their families safe from the potential infections by travelling in private jets. Companies also found it safer to send over their C-suite employees in private charters rather than take the risk of infection. But as COVID-19 pandemic died down, the business aviation market slowly settled down in its comfort zone with only its dedicated clients booking jets for business or personal travels. Or did it?

POST-PANDEMIC GROWTH IN BUSINESS AVIATION – MODEST OR HIGH?

Speaking on the post-pandemic demand of private charters, Rajan Mehra, Chief Executive of Club One Air, goes on to explain that the demand has been exponential. “Most charter companies have clicked very impressive growth. We at Club One Air have seen an extremely encouraging growth of 75 per cent both on hours clocked and revenues,” Mehra asserts.

“Once you start flying business, you rarely go back to economy provided you can afford it,” says Colonel Sanjay Julka, Industry veteran and business aviation expert, Chief Executive, Technical at AR Airways. “During the pandemic, people were facing financial hardships. Those who migrated from First class to Private did so because they could afford it. Hence if affordability is not an issue, majority of these people, in fact 75-80 per cent of them will continue to fly business aviation charter planes,” adds Julka.

Explaining the market dynamics Jaideep Mirchandani, Chairman Sky One, states:

• Firstly, the resumption of commercial flights has provided travellers with more options, impacting the exclusivity and perceived necessity of private charters.
• Secondly, economic uncertainties stemming from the pandemic have led to a cautious approach among businesses and individuals, influencing their travel preferences and budgets.

Going ahead, Mirchandani anticipates a gradual recovery and growth trajectory for the business aviation sector in India. “As the economy rebounds and travel restrictions ease further, we expect renewed interest and investment in private charters, especially for corporate travel and niche segments such as medical evacuations and luxury tourism,” Mirchandani adds.

Moreover, strategic initiatives such as tailored marketing campaigns, innovative service offerings, and partnerships with hospitality and tourism stakeholders will be instrumental in stimulating demand and enhancing market penetration.

INDIAN ‘EVENTS’ LEADING UP TO BOOM IN BUSINESS AVIATION SECTOR

One most interesting part of the Cricket world cup 2023 hosted by India was the huge demand of private charters during some of the most important matches like the India-Pakistan or the India-Australia final match. On an average day, the Ahmedabad airport, run by the Adani Group, sees seven to eight arrivals and departures each handling a total of 16 private chartered flights. Just a month prior, on October 12-13 during the India-Pakistan match the airport recorded a whooping 30 departures and 29 arrivals.

Prior to the cricket world cup was the much-anticipated FIFA World Cup 2022 during which Indian soccer fans were in a frenzy to book private charters for their favourite game in UAE. The idea was to return after the match on the same day, thus saving time and hotel expenses.

Apart from cricket, the newly constructed Ayodhya airport handled about 101 charter flights in the two days leading up to the inauguration of the Ram Mandir ceremony with the airport handling over 39 private jets in less than 30 hours recording 350 VVIPs including Bollywood celebrities, business tycoons, artists, sports person etc. The rush was intense as the charters had to hover for over half an hour awaiting clearance.

After Cricket and religion comes weddings and the latest Ambani pre-wedding bash in Jamnagar broke all records of private charter moment in the small military airport of Jamnagar with the airport handling approximately over 400 charter flights in the weekend celebrations in the first week of March 2024.

Following wedding another theme that drives India is politics and as the final countdown to the 2024 Lok Sabha elections has kicked off, the private charter industry is bracing for a huge surge in demand for the upcoming rallies and political campaigns across the country. Charter companies are already facing multiple bookings especially for twin-engine helicopters recording an almost 300 per cent surge as compared to the rest of the year.

Anticipating a further surge in private charter demand, Rajan Mehra calls the events as Bonanza for private jet companies. “The upcoming elections will further add to the profits of charter companies.” Mehra adds.

Echoing Mehra’s thoughts, Jaideep Mirchandani, Chairman Sky One called these events as catalysts for heightened demand as individuals and organisations seek efficient and exclusive travel solutions to attend these gatherings.

PROACTIVE ADDRESSING OF CHALLENGES SUCH AS HIGH AIRPORT CHARGES, TALENT SHORTAGES, AND INFRASTRUCTURE DEFICIENCIES CAN UNLOCK THE FULL POTENTIAL OF THE BUSINESS AVIATION INDUSTRY IN INDIA

WHAT CAN THE GOVERNMENT CHANGE TO GROW BUSINESS AVIATION?

Sanjay Julka, CEO of AR Airways has highlighted certain policies that Indian government can amend to give a boost to Indian aviation industry. They are:

• Removing restriction of 18-year rule to import aircraft.
• Developed economies have no such restriction but in India, where the cost of money (bank rate of interest) is more than the west; having this rule inhibits growth of aviation.
• Removing requirement of flying 100 hours on type with an instructor, before being released as Captain. If we don’t do it, we will fact an acute shortage of pilots in command, like it happened last year.
• Dual captaincy must be encouraged so that well experienced pilots are free to fly more than one type of aircraft at a time.
• Common ratings for engineers. Reducing number of categories will help improve overall availability of engineers.
• Government needs to immediately align our policies with the rest of the world in as far as leasing laws are concerned. We need to be full signatories of the Cape Town Convention and address the worries of Lessors especially on repossession of aircraft.
• Helicopters are not well exploited because of our archaic regulatory environment. Night operations are very restrictive in nature and as a result, we have had a very poor growth of helicopter industry in the country.
• Handling and maintaining of foreign aircraft need mutual validation of licenses. Mutual trust needs to be built up by high standard of engagement with regulators of other countries.
• Tax/ Royalty need to be at par with the neighbouring countries. Mehra also throwed light on some of the government policies that needs attention like rationalising air turbine fuel tax which is very high at the moment and lowering of duty structures in import of business jets.

Governments hold the key to expansion of any critical sector and considerations must be given to the exploration of introducing tax incentives, which could encompass reduced corporate taxes or tax credits for both lessors and lessee airlines.

FRACTIONAL OWNERSHIP OF PRIVATE CHARTERS AND ITS IMPLICATIONS

Meanwhile the government is currently working on a policy for fractional ownership of private charters with an aim to boost the business aviation market in India. Fractional ownership as a concept has worked very well in the west with large number of business aviation aircraft. India is standing at a stage where there is a lot of demand, and this concept will help meet the rising demand is the common tone of the industry.

Hailing this move, Mehra says, “Club One Air was the pioneer of fractional ownership way back in 2006, but at that time Indian market was not ready for this type of hour-sharing concept.” However, Mehra feels that since then India has come a long way and fractional ownership could actually be one of the successful moving ahead.

Echoing Mehra’s thoughts, Mirchandani also feels that with aviation demand peaking, there is plenty of scope for finding solutions with fractional ownership. “This can keep the cost of maintenance low and will be a more sustainable solution in the long term.”

However, Colonel Julka points out that even though the ministry is keen to implement it, they are unable to negotiate the issue of ‘separate owners and operator.’ Separate owner and operator is an essential concept for fractional ownership. It is followed worldwide and needs to be followed even in India. The industry has been in talks with the Government from past three years to implement fractional ownership.

Expressing his opinion, Julka says

• Present regulations are being perceived negatively by the government
• Fractional ownership would provide opportunity for people to own share of an aircraft enabling many individuals to invest in aviation by booking depreciation in their books
• Incentive to buy an aircraft.

CHALLENGES FACING BUSINESS AVIATION

Another major pain point for business aviation in India is exorbitantly high airport charge. Industry experts have time and again voiced common opinion on the issue. Every cost can be a cause of distress and that is true across all business. The airport charges need to be monitored and rationalised by AERA (Airport Economic Regulatory Authority).

Some of the other challenges faced by business aviation in India apart from supply-demand of new aircraft is engineering challenges, talent shortage, and inadequate infrastructure. Mirchandani has given a few pointers to tackle these challenges:

• fostering partnerships with aircraft manufacturers to address supply-demand gaps,
• investing in advanced engineering capabilities and training programmes,
• collaborating with educational institutions to develop a skilled workforce,
• advocating for infrastructure improvements and regulatory reforms to support the growth of the sector.

“By addressing these challenges proactively, the business aviation industry in India can overcome barriers to growth and unlock its full potential,” Mirchandani adds.

Meanwhile, it not just political parties that are interested in private charters, there is a steady stream of business class individuals, families planning exotic vacations on charters and sports personnel wanting to take private charters, thus expanding the private charter market beyond capacity.

Government is playing its part by building more helipads and aerodromes in future to boost the business aviation sector. “The government is doing the best they can,” says Mehra. “Infrastructure development was long overdue. Meanwhile the government has also encouraged airline and leasing companies to set up base in GIFT City which is benefiting the industry and saving foreign exchange,” Mehra concludes.

While infrastructure development, such as building more helipads and aerodromes, is undoubtedly crucial for boosting the business aviation sector, it alone may not be sufficient to address all the challenges faced by existing and new players, feels Mirchandani. He further goes on to suggest that the government can further support the business aviation industry by implementing supportive policies and regulatory frameworks that streamline operations, reduce bureaucratic hurdles, and foster a conducive business environment. “Additionally, providing financial incentives or tax breaks for investments in the sector, promoting skill development initiatives to address talent shortages, and facilitating access to financing and insurance options can significantly benefit both existing and new players in business aviation,” Mirchandani concludes.

Despite its immense potential, business aviation in India faces hurdles that hinder its rapid expansion. However, with concerted efforts from both the government and industry stakeholders to address these challenges, there is considerable scope for the business aviation sector to thrive and contribute significantly to the country’s aviation landscape.

BUSINESS AVIATION IN INDIA – 10 YEARS FROM NOW

The coming decade is expected to be one of the most promising decades in business aviation. According to Mehra, “The next few years will see tremendous growth in business aviation along with commercial and scheduled airlines,” Mehra adds.

Col Julka pins his hope that with the third strong Lok Sabha at the office, government will bring in more changes. He predicts that tax and regulatory environment would be made at par with the developed economies and neighbouring countries. He also paints an extremely hopeful picture of the future with new final assembly lines (FAL) being established in the country along with OEM approved MROs. “Big players like Tata, Adani, Ambani’s will enter this sector. We will see a Wichita type city in the country,” Julka adds.

Technological advancements, globalisation, and supportive government policies will play its part in the growth of business aviation in India. “With innovations in aircraft technology improving efficiency and safety, coupled with increasing demand from high-networth individuals and corporations, the sector is set to flourish,” adds Mirchandani. “Despite potential challenges, such as economic fluctuations, the overall outlook for business aviation is highly favourable, making it one of the most promising periods yet for the industry,” Mirchandani signs off.

India has 140 billionaires and around 175 business jets while US has 750 billionaires and over 10,000 business jets. Going ahead from here, business aviation in India will only see an upward trajectory not only in this decade but in this century. Quoting an unknown personality Julka says “It is not India’s decade but it’s India’s century.”