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Jet, Set, Go

With healthy economic growth, expanding business interests and increase in the number of billionaires, India is an emerging market for private jets. A clear vision and undaunted commitment by the industry as well as the government will help business aviation scale greater heights.

Issue: 09-2013By Arun Lohiya & Sonia SafriPhoto(s): By SP Guide Pubns, Airworks

According to industry sources, general aviation in India, of which business aviation is a part, constitutes about 25 per cent of the total aircraft holding of civil aircraft in the country. A report by the Centre for Asia-Pacific Aviation (CAPA) published a year ago identified growth in general aviation in India as the next wave in the civil aviation industry. The report highlighted major opportunities of growth with the rise in aircraft sales of up to $12 billion over the next decade. By this date, the general aviation fleet is expected to reach 2,000 aircraft, up from the current strength of 680. The report estimated that the direct and indirect contribution of general aviation to the economy could be close to $4 billion per annum by 2020. It is also believed that an investment of over $40 billion is expected to be made in the general aviation sector during the Twelfth Five Year Plan.

In 2012, with a fleet of 165, India became the second-largest operator of business aircraft in the Asia-Pacific region after China that has 220 of these aeroplanes. Estimates are that around 120 business jets, 150 small aircraft and 180 helicopters will be added to the fleet of general aviation aircraft by the year 2017. Going by numbers, aircraft manufacturers have reason to be optimistic about India’s business aviation market. Reports speak of the nation’s expanding footprint in the world and an exponential increase in the number of billionaires in the country. Also, the Indian economy has not been as severely affected by the global recession in the recent past as the economies of some other nations. According to the World Bank, the growth rate of the gross domestic product (GDP) of India which stood at 7.7 per cent in 2009, is expected to be sustained in the years ahead. There is no denying the fact that with the healthy economic growth, expanding business interests and increase in the number of billionaires, India is an emerging market for private jets. The strategic geographic location and favourable demographics provide impetus not only to business aviation but to the aviation industry in general.

Changing Perceptions

In the recent times, the perception of air travel being a luxury or elitist has undergone a sea-change. Air travel is now looked upon as a speedy, time-saving, more comfortable, convenient and a highly reliable mode of transport. In fact, a business aircraft, apart from being a means of transportation, is now regarded as a management tool. No wonder that business houses and individuals in increasing numbers are harnessing the benefits of both fixed- and rotary-wing business aircraft for their travel needs. This in turn generates lucrative opportunity for growth of business aviation in the country. Predictions are that by 2017, the Indian civil aviation market will be among the three largest globally.

MRO

The maintenance, repair and overhaul (MRO) industry in India has been, for long, severely affected by numerous adverse factors, thereby losing out to their international competitors. The industry has been opposing the levy of 13 per cent royalty levied at the airports under the Airports Authority of India (AAI), along with the 12.5 per cent service tax and an import duty including countervailing duty of 18.5 per cent on spares. However, in tandem with the growth of the civil aviation industry, these issues would hopefully be resolved and that the MRO segment of the civil aviation industry would also flourish. It has been estimated that India’s MRO segment will grow at 10 per cent annually to reach $2.6 billion by 2020. Ready availability of MRO facilities in India will enable operators to achieve quicker turnaround of aircraft, savings in operating costs and a decline in foreign exchange outflows. Today, 100 per cent foreign direct investment (FDI) is permitted under the automatic route for MRO, flying and technical training institutions.

Challenges Ahead

As India’s fleet of business aircraft grows, designers of air frames are quick to point out that there are quite a few hurdles that need to be removed before a full-fledged takeoff is possible. The most fundamental of all is dedicated infrastructure including airports, fixed base operator (FBO) facilities, helipads and training schools in aviation management, air navigation and air traffic control (ATC) services. Unfortunately, the government has been of little help so far. In fact, high taxes and complex financial regulations and the stifling regulatory framework in India, makes it difficult for companies or individuals to acquire an aircraft. Added to these are the highly restrictive provisions for training as stipulated by the Directorate General of Civil Aviation (DGCA). What remains for the hapless operator is a mesh of woes!

Over the next decade, India is poised for a strong and sustained economic growth. The increasing international trade links and emerging industrial belts in the remote areas of the country would generate demand for business aircraft, spurring growth of the fleet. It is indeed surprising and tragic that a sector that has potential for high growth and substantial contribution to the national economy has no dedicated policy, regulatory framework and infrastructure. The leading manufacturers of business aircraft in the world and the international operators are somewhat distressed at the paucity of infrastructure, lack of easy access to airspace, inordinate delay in obtaining landing permits and exorbitant costs of facilities at airports. All these serve as serious impediments to the growth of business aviation in India. The CAPA report has also identified opportunities for helicopters that when compared to fixed-wing aircraft, offer greater flexibility, do not require sophisticated infrastructure and have lower sustainability cost.

The Future

There is no denying the fact that the road to the future of the civil aviation industry would be no cakewalk. The immense potential of the sector has been muffed beneath unstructured and under-funded means with no dedicated policy framework, with the resultant issues of constant concern i.e. safety and security. The role of general aviation needs to be recognised at the policy-making level. Consistent and industry-friendly regulatory framework needs to be evolved and correction in the prevailing negative fiscal environment is urgently needed.

But it seems there is still some hope. The government has undertaken a major programme to develop and improve the ecosystem for the civil aviation sector which includes the establishment of an aviation university. Realising the potential of the sector, the Ministry of Civil Aviation (MoCA) has decided to roll back the hike in royalty charged from the companies providing MRO services especially for business jet owners and charter flight operators. The Finance Bill for 2012-13 calls for a significant reduction in duties on tyres and test-equipment required for MRO. While there are definite signs of change, by when would the Indian aviation industry match international standards, is a question the government still may not have an answer.

Despite the umpteen challenges, airframers like Bombardier, Embraer, Cessna, Falcon and Gulfstream are not holding back from strengthening their presence in India. Cessna is looking to create another service centre in India, while Beechcraft is in the “final stages” of setting up a second service centre in Mumbai. It is also planning a bonded warehouse this year to ensure ready availability of spares.

All said and done, it is only with a clear vision and undaunted commitment by the industry as well as the government that business aviation can and will scale greater heights and emerge as the driving force for the economy.