SP Guide Publications puts forth a well compiled articulation of issues, pursuits and accomplishments of the Indian Army, over the years

— General Manoj Pande, Indian Army Chief

I am confident that SP Guide Publications would continue to inform, inspire and influence.

— Admiral R. Hari Kumar, Indian Navy Chief

My compliments to SP Guide Publications for informative and credible reportage on contemporary aerospace issues over the past six decades.

— Air Chief Marshal V.R. Chaudhari, Indian Air Force Chief

Business Aviation - $ense & $urvival

Issue: 05-2009By Group Captain (Retd) Joseph Noronha, Goa

Should business jet owners rush for the exit and divest themselves of their wings while they can? It would be wiser, perhaps, to hang on and weather the storm.

There is no greater gratification than whipping a scapegoat. With the world embroiled in the most severe economic crisis since the Great Depression, business jets have emerged the scapegoats of choice. Scores of people, right up to the President of the US, have virtuously jumped onto the jet-bashing bandwagon. Stung by the ferocity of the criticism, many Fortune 500 companies are dumping their jets, a move that immediately boosts the balance sheet and erases the embarrassing icon of corporate excess. We have an unprecedented situation where there is a stigma attached to flying a corporate jet, laments Credit Suisse aerospace analyst Robert Spingarn.

Private ownership of aircraft has a history dating back to the 1920s when wealthy businessmen bought their own planes. Perhaps the first aircraft to be fitted out luxuriously were Beech Staggerwings—bi-planes upholstered in leather and mohair. The most notable debut into the private jet segment was that of the Learjet in 1963, making the ‘Lear’ almost synonymous with premium, executive travel. For decades, such jets were objects of admiration and envy. However, few could afford one.

Since then, progress has been rapid. The business jet fleet today numbers perhaps 16,000 worldwide. Historically, the American market has vastly outstripped all others. But for the first time in 2007 the rest of the world bought more business jets than North America, a trend that seems set to persist. Business jets, also known as corporate jets, executive jets or private jets, have become the choice of corporate travel.

Buyers Make Hay, Sellers Get Singed
Had Charles Dickens been asked to pronounce on the current business jet ownership scene he might have said: “It is the best of times; it is the worst of times.” Buyers have never had it so good because prices of used as well as new aircraft are plummeting. However, very few deals are being closed because finance has virtually dried up. From the point of view of sellers, an increase in inventory of pre-owned aircraft and expected decline in flight activity for some more months has resulted in a significant slowing in demand, especially of new jets.

In the US, according to UBS Securities, business jet usage dropped 30 per cent during the first quarter of this year. Most manufacturers have announced dramatic production cuts—20 to 30 per cent—and production could plunge by about 40 per cent from last year’s peak. Since prices are quoted in dollars, any revival of international demand would be tempered by a dollar that is now 20 per cent higher than a year ago. Who would like to be seen acquiring a private jet at this time anyway? The ‘taint’ is likely to mar the industry for some time and even when businesses recover, they are likely to be afraid to re-enter the corporate jet market.

For the valiant, however, a slew of jets are currently on offer, ranging from four-seater Very Light Jets (VLJs) to large, converted airliners. Competition and an increased number of manufacturers have resulted in slashed prices and made business jets more accessible to a wider clientele. A variety of plans is also available, ranging from full ownership to a single fare costing a tad more than business class on a scheduled commercial airline. Consequently, there has been explosive growth in business jet travel not just in terms of total hours flown but more importantly, in the number of aircraft owners and users.

A Rollercoaster Ride
Between 2000 and 2007, the number of private jets in the US rose 30 per cent to cross 12,000. Comparable growth was experienced in some other parts of the world for obvious reasons. As economies grew, the number of companies willing to buy business jets surged. Correspondingly, the cyclical downturn of the last couple of years has seen a waning of interest. Government regulations and taxes also play a part in helping or hindering expansion. Favourable depreciation rules can provide significant tax savings on business jets and, thereby, act as a strong incentive to buy.

On the other hand, heavy taxes impede growth. Take last year’s dispute over evasion of customs duty on import of private aircraft into India. The Union Budget for 2007-2008 imposed duties of around 25 per cent on all aircraft imports. However, feverish lobbying succeeded in obtaining complete exemption for aircraft imported under Non-Scheduled Operator Permits. A year ago, customs authorities began probing allegations that companies and individuals were posing as non-scheduled operators to purchase aircraft for personal use without paying taxes. While some aircraft were seized and heavy fines imposed, other cases are still under investigation. Having been penalised, it is not clear whether the owners can now legally offer non-scheduled services on such aircraft.

At present there are five major manufacturers of business jets: Bombardier, Cessna, Dassault, Gulfstream and Hawker Beechcraft. These offer a wide variety of over 30 models that can be conveniently categorised by size. In addition, there are VLJs like the Embraer Phenom 100 and the Eclipse 500. At the other end of the spectrum, converted Boeing 737s, 777s, 787s and even 747-8s are marketed under the family name Boeing Business Jets while converted Airbus A319s are called Airbus Corporate Jets. Aerion, a supersonic business jet, is likely to take to the skies by 2014 and promises an unmatched experience of speed and comfort. While the cheapest of the light category can be acquired for around $4.5 million (Rs 21 crore), buyers aspiring to own a long range jet should be prepared to shell out as much as $50 million (Rs 240 crore).