IN FOCUS: Indian business aviation snagged by constraints

New Delhi
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With no clear policy framework, the growth of India's business and general aviation - growing at double digits every year - is being increasingly stifled by limited infrastructure, regulatory hurdles and high taxation.

India has the second-largest business jet fleet of 154 in the Asia-Pacific region, after China's 215. Even as the spectre of infrastructural restraint haunts the industry, new aircraft sales of about $12 billion are expected to be struck by 2020.

embraer phenom 100, embraer

©Embraer

The Phenom 100 was the first light jet to gain traction in India

India's potential cannot be ignored, with an economy expected to maintain strong and sustained growth. Its GDP in 2011 was $1.84 trillion. At 7.5% annual GDP growth, this will reach $15 trillion by 2040.

"The US GDP in 2011 was $15 trillion. Within the space of a single generation, India's economy could grow to be as large as the US economy is today," says Kapil Kaul, chief executive India and Middle East of the Centre for Asia Pacific Aviation (CAPA), a Sydney-based advisory.

"If India's business aviation sector was to grow from where it is now to become the equivalent of its US counterpart in less than 30 years, we can only imagine the pace and scale of change that is required," Kaul adds. However, major structural challenges continue to be a brake to growth of a business jet fleet that has increased from 26 in 2005 to 154 in 2011.

REGULATORY TYRANNY

The industry is voicing an urgent need for recognition of the role of general aviation at policy level, application of high, consistent regulatory and training standards, and relaxation of heavy taxes.

"Arduous regulatory directives are an antithesis to growth. There is no plan nor policy, no framework for moving forward. Besides, there is limited parking and hangar space for general aviation," says Rohit Kapur, president of the Business Aircraft Operators Association (BAOA), which comprises 44 members.

"We need more heliports. Despite having world-class airports like Mumbai and Delhi, there is no significant fixed-base operator in India, which is a roadblock to the growth of the sector," says Karan Singh, vice-president of BAOA. The country, with a fleet of more than 500 helicopters, still lacks a public-private partnership policy to develop heliports and standardise route operating procedures for the aircraft.

Unfortunately, India's business aviation suffers from the perception it is elitist. Cumbersome procedures for buying, importing and operating business aircraft do not help. It takes three months to get security clearance for qualified pilots. Added to this are arbitrary customs duties, high duties on spares, sales tax on aircraft transactions and high ground handling charges. Time-consuming customs and immigration procedures straddled in red tape prevent smooth operations.

"Being an international operator, we don't have direct connection with the DGCA [Directorate General of Civil Aviation]. It takes seven working days to get a permit to land," says Navdeepak Vaid, director of compliance and contracts for MJets, which is based in Don Muang International Airport, Bangkok.

Mumbai, the city with almost half of corporate turnover and the highest absolute profits, has its airport slots constrained because of lack of space. Kaul says it is "actively discouraging business aviation movements with the imposition of peak-hour curfews".

"GA parking bays are exhausted. The situation is unlikely to improve for five years until the second airport opens. Given the central role of Mumbai in Indian business, congestion at the airport will almost certainly depress the growth of the sector," he adds.

Lex den Herder, vice-president (government and industry affairs) at Universal Weather and Aviation, says in most cases pilots must go to air traffic control to file flight plans and obtain air data computer, and the flight information centre for weather clearances. "This is not required in virtually any other country," he says.

INTEGRATED FRAMEWORK

Increasingly, there has been a call to develop guidelines for the regulation and support of business aviation in the draft civil aviation policy, expected to be released by mid-July. While a more favourable tax regime and import guidelines may fail to appear, an integrated plan for business and general aviation in India - covering helicopters, seaplanes and fixed-wing operations - is being worked on by a team of nine, including representatives from the International Civil Aviation Organisation and Ministry of Civil Aviation.

An official says that once completed in April, the plan will incorporate a strategy for the sector taking into account its present infrastructural and regulatory constraints.

MAINTENANCE WOES

At a recent USA-India aviation summit in Delhi, den Herder related the customer experience of his client, General Electric. "The overall sense I get is bureaucracy is clogging things up. My dispatchers and crew tell me that the flightplan filing process is very cumbersome, with several government hoops that do not exist elsewhere.

"From what I gather in the industry, the leadership of many OEMs [original equipment manufacturers] say it is actually easier to ship something from outside India to India than within. That has actually held up some OEMs from placing a parts depot there."

Diverse models in India's fleet and a lack of volumes have made certifications and maintenance by OEMs difficult to handle. However, there is hope: Air Works India Engineering has become the first independent general aviation MRO to obtain European Aviation Safety Agency Part 145 approval for its Delhi hangar.

"[This] opens our Delhi hangar doors to carrying out maintenance on European-registered aircraft. This beginning will allow us to release Hawker 750-900XP family aircraft to European operators, but it is just the beginning as we will quickly add additional aircraft types," says Nick White, vice-president, general aviation at Air Works.

White says Air Works has been focused on enhancing capabilities through accreditations and services so the company can handle all aspects of aircraft maintenance.

A YOUNGER FLEET EMERGING

The growth of business jets in India has been driven primarily by private corporate aviation rather than commercial charters. Hawker Beechcraft has the largest share in the market at 28%, followed by Cessna and Bombardier. India has the largest Embraer fleet of 15 in Asia-Pacific, followed by China's five.

Gulfstream's fleet of 23 in India is growing rapidly, says Kapur, who is also managing director and partner at Arrow Aircraft Sales and Charters, which was appointed by Gulfstream Aerospace last year as its authorised independent sales representative for aircraft transactions in India .

According to the DGCA, there are about 1,166 business and general aviation aircraft in India. However, given inconsistency in data sources and records, CAPA estimates the number to be about 834.

More than 60% of India's fleet is less than 10 years old. The recent rapid growth in the business jet market is reflected in the young profile of aircraft in the country. More than 45% of jets are five years old or less, with more than 70% 10 years old or less. Aircraft in the 6-10 seat category dominate the segment, accounting for 73% of the fleet. However, the sub-five-seat category is expected to gain a greater share, reflecting the growth of light and very light jets, with the Embraer Phenom 100 being the first of this size in India, says Kaul.

Similar to the profile for business jets, more than 40% of helicopters in India are aged five years or less, reflecting strong recent growth. However, the distribution of older equipment is more even: almost 25% of the fleet is 16 years or older. Again, the 6-10 seat category dominates the fleet. Bell Helicopter has the largest share of the market at 39%, followed by Eurocopter at 25% and AgustaWestland at 14%.

AFFLUENT MARKET

Opportunities abound for business aircraft growth in India. Of the 332 billionaires in Asia-Pacific, China has 115, followed by India with 55, an Embraer report states.

India's leading 500 companies generate almost $1 trillion in annual revenue and have been reporting strong growth in revenue, profitability and assets. Corporate profits have increased almost 50% in only 3 years. Mumbai accounts for close to 49% of the total revenue and 37% of total net profit for the top 435 companies, followed by Delhi which accounts for 22% of total revenue and 37% of total net profits.

Indian corporations with extensive global operations are looking at medium- and long-range aircraft for senior executive transport. This could drive up to 50 aircraft transactions during the next three to four years, CAPA estimates.