Facilitating Private Aircraft Acquisitions

In countries where bureaucracy plays havoc and rules and regulations are aplenty, aircraft acquisitions could be ‘nightmarish’

Issue: 10 / 2016By R. ChandrakanthPhoto(s): By Aerosource

From one country to another, laws differ with regard to aircraft acquisitions, some are liberal while others are rigid. Going through the quagmire of rules and regulations can be an unnerving experience and the faint-hearted are likely to give up the pursuit of aviation. The West with its capitalistic and liberal outlook has shown the way on how user-friendly laws can benefit the community at large. The United States, it is reported, alone accounted for 67 per cent of business jets and 63 per cent of the global fleet. In 2014, it was estimated that the US, ranked number one, had a fleet of 12,051 private jets, whereas the second ranked Brazil was way behind at 764, followed by Mexico at 704. India was placed at 14th spot with 140 jets.

That the US is a mature market is to state the obvious. How has this come about, besides the liberal laws? One thing for sure, aviation consultancy firms have helped accelerate the growth of the segment. But in countries where bureaucracy plays havoc and rules and regulations are aplenty, aircraft acquisitions could be ‘nightmarish’. In India, there have been instances of individuals waiting for their private aircraft to arrive for couple of years.

It is in this background, the concept of ‘aviation consulting’ took birth but there is no date indicating the same. However, aviation consultants assist intending aircraft owners to source aircraft, pricing, maintenance services, interior and other services including pilot and other crew appointments. Importantly, they help in navigating through the acquisition and registration processes in that particular country. We find out what aviation consulting is all about from a player who has been in this business for over 15 years. In an interview to SP’s Aviation, Vinod Singel, Managing Director and founder of Aerosource India, talks about the concept and the challenges. Excerpts of the interview:

SP’s Aviation (SP’s): The concept of ‘aviation consulting’ is fairly nascent. What are the challenges that you face in the aviation industry?

Vinod Singel (Singel): Aviation consulting is not really nascent. We started way back in 2000 and at that time I would say probably that in India no one had started a professional end to end service in this segment. I was already very involved in the aviation sector with several years of experience under my belt and advising my clients on select segments that fell under our scope of work within the job that I was at. The idea of helping corporates in the process of buying aircraft came across my mind during my interactions with them. While maintaining and servicing an aircraft can be done, the right buy can give an owner immense pleasure. A right buy is when it is suited to their lifestyle, requirements and budget as for most it is a one-time buy, to start with.

The biggest challenge is lack of knowledge about this sector in the corporate vertical. The information regarding the right procedure of buying to what specifications to look at to where to procure it from to the licences that one requires to operate a business aircraft was and is still missing. Educating the clients became a primary and uphill task before taking up the consulting role in helping them buy one.

IN INDIA THERE IS HUMONGOUS AMOUNT OF EXTRA WORK LIKE - IMPORT PERMISSION, FOLLOW UP, FILE APPLICATION, FOLLOW UP AND DO THE ROUNDS OF DIRECTORATE GENERAL OF CIVIL AVIATION (DGCA) WHICH THE OWNERS WOULD NOT WANT TO DO

When we started this it was a new thing in the market, so getting business was difficult in this niche segment. In 2004-05, things changed for us in a positive way and in 2006 we were working on some exciting projects at full capacity. From 2006 to 2008 it got busy and in 2009-10 we became business aviation specialists wherein corporates and HNIs (high net worth individuals) bought business aircraft. In 2006-07 we certainly saw many companies like Sun TV, Usha Martin and Bajaj Auto to name a few venture into this segment through us. We have also paved the way for the industry to grow as a whole making it easier for other companies to enter market and offer consulting services.

One of the biggest challenges that we face is bureaucracy and red tapism. Add to this the vagueness in the rules laid out or rather not laid out for this segment. There is no clear path to procure a plane. Yet, enough to land one into trouble if not done properly. Today, if someone wants to buy a plane they have to start to at least a year in advance.The government so far has ignored business aviation as a segment and there are no clear policies to govern it. That poses a unique challenge in itself. A lot more can be done in this segment if there are more friendly policies or a clear road map to it.

Corruption has scared a lot of corporates in the past giving them the impression that this is a no-go area. About a year ago if you wanted to buy a local plane based and registered in India, you could probably send money to the company and take over the plane and change the certificate of registration or make a title transfer. It was just a few days job, but today it is impossible.

SP’s: Acquisition of aircraft is said to be very cumbersome. Is that one of the reasons for birth of ‘aviation consulting’?

Singel: Yes, the cumbersome effect of aircraft acquisition is one of the reasons for birth of aviation consultancy. Let’s take an example of America, where they have 100 times more planes than India, the consultant or broker owns a plane, and they just get into the cockpit and fly off, but in India it’s impossible as we need to have a pilot. In those countries also if somebody needs to buy a plane, they will hire a broker or consultant, then a lawyer who will get all the approvals and they formalise the deal. But in India there is humongous amount of extra work like - import permission, follow up, file application, follow up and do the rounds of the Directorate General of Civil Aviation (DGCA) which the owners would not want to do.

In such a scenario companies such as Aerosource India play a crucial role, getting involved in the acquisition and registration process till it is delivered to the end customer. This includes finding the right aircraft (pre-owned or new), getting all permissions, paperwork, legal work, international air purchase agreement, letter of intent, meetings, etc.

We have legal consultants in international markets like United States and UK. After the purchase, we help the client find a pilot and a co-pilot and also the cabin staff which is not an easy task.

SP’s: You claim to be the largest aviation consultancy services provider in India, could you substantiate the same? How many aircraft (fixed and rotary) deals have you been able to close in India since inception?

Singel: Yes, that is true, Just by the sheer number of years in the business we are the oldest and the number of clients we have on our roster make us the largest. Till date we have closed 37 aircraft induction projects. Some 40 more are in the process of closing.

SP’s: Do you think business aviation aircraft sales will pick up in India, considering the aviation friendly policies of the government such as NCAP and RCS?

Singel: Yes, business aircraft sales will pick up in India and we hope the concerns of customs duties are addressed.

SP’s: The number of high net worth individuals in India is increasing, does that reflect in buying of aircraft or are these HNIs cautious?

Singel: HNIs are cautious as they invest into charter categories. At this point we are noticing that the charter industry is taking a lead now.

SP’s: What is the trend of buying in terms of aircraft – is it very light jets, mid-size or large?

Singel: The trend is changing and we have moved one step up. Few years back the trend was for turboprop aircraft but with changing times, people have upgraded to small jets and also mid-size and super mid-size.