How Business Aviation Contributes to the Economy?

Facts and figures offered by the BAOA study unequivocally point to Business Aviation being a necessary and indisputable asset for national economy, contributing significantly to its growth and sustenance

Issue: 5 / 2019By Group Captain A.K. Sachdev (Retd)Photo(s): By SP Guide PubnsIllustration(s): By Anoop Kamath

One of the several incongruencies associated with Indian civil aviation is that while aspiring to be the world’s third largest commercial civil aviation market in less than a decade from now, India continues to treat Business Aviation as a ‘luxury item’, imposing an extortionate import duty on aircraft and spares, heavily taxing Business Aviation operations and stifling it with constrictive regulations. Aviation infrastructure and regulatory mechanisms are primarily designed around scheduled airline operations which have a larger constituency and hence a louder, more audible voice.

Ironically, Mumbai, often flaunted as the commercial capital of India, has inadequate parking space for Business Aviation aircraft wanting to visit it with business magnates and managers flying to meetings. Aircraft have to entreat the Operations Control Centre (OCC) for ‘slots’ for short periods of stay. Overnight stay is largely ruled out for aircraft based at airports other than Mumbai. The Business Aircraft Operators’ Association (BAOA) has been struggling as the unified voice of Business and General Aviation, to create a favourable environment for the sector’s growth by ensuring better coordination amongst industry stakeholders, regulatory authorities and the Government. One of its key objectives has been to bring about a change in the mindset of the government to get General and Business Aviation its rightful place and recognition by projecting the industry as an enabler of economic growth. Success in the pursuit of that objective has been unexceptional. This article looks at the contribution of Business Aviation to national economy.

GLOBAL VIEW

The US Business Aviation market is decidedly the world leader. Its National Business Aviation Association (NBAA) and the General Aviation Manufacturers’ Association (GAMA) jointly launched an undertaking called ‘No Plane, No Gain’ designed to make the general public and the government, more aware about the importance of Business Aviation to the US, its communities, companies and citizens. Every alternate year, the NBAA carries out studies relating the use of business aircraft to the performance of the companies they serve. The last study entitled ‘Business Aviation and Top Performing Companies 2017’ used facts and evidence to reach the conclusion that, “...Business Aviation contributes meaningfully to a company’s enterprise value and continues to be a powerful tool of the best-managed companies in America”. The Standard & Poor’s 500 Index (S&P 500) is widely regarded as the best single gauge of large-cap US equities and includes 500 leading companies and captures approximately 80 per cent coverage of available market capitalisation. The study examined the financial performance of the S&P 500 companies between 2013 and 2017 and found that, when sorted into “Users” versus “Non-Users,” those companies deploying aircraft to support their missions out-performed those that did not in several metrics. The most important measure of impact is a company’s enterprise value, by both share amount and share appreciation. In this respect, Users outperformed Non-Users by about 70 per cent over the study period and the study concludes that business aircraft leverage key employee productivity, accelerate transactional closings and boost customer interaction. The study finally concludes that Business Aviation delivers extraordinary value for America’s top performing companies and contributes across the board, in both financial and non-financial measures. The report produces document-based evidence that Business Aviation contributes directly and significantly to national economy.

In India, possibly the perception about Business Aviation has remained jaded because there has actually been no macro level approach to it

There are indirect contributions as well. Employment is an important determinant of the national economy and Business Aviation, as a sub-set of civil aviation, contributes significantly to the creation of jobs. Cockpit and cabin crew, maintenance engineers and technicians, operational and administrative staff, air safety and security personnel are needed to support a Business Aviation entity. Business aircraft are manufactured by a handful of aircraft Original Equipment Manufacturers (OEMs) and maintained by Maintenance Repair & Overhaul (MRO) firms that have hangar and maintenance facilities on the airside at airports. All these sub-sectors of aviation employ reasonably well-paid professionals and are thus indirect contributors to national economy. To support operations at airports and heliports patronised by Business Aviation, there are fuel suppliers, Fixed Base Operators (FBOs) with business lounges operated by them, medical staff, ground handling companies, security personnel and commercial outlets for transiting passengers and working staff. Some more can be added to this list, but suffice it to say that Business Aviation creates significant employment opportunities and thus contributes to national economy.

Employment is an important determinant of the national economy and Business Aviation, as a sub-set of civil aviation, contributes significantly to the creation of jobs.

Due to constraints of space and time, it is not possible to discuss some more academic and professional studies carried out globally to highlight the importance of Business Aviation in this context.

INDIAN PERCEPTION

In India, possibly the perception about Business Aviation has remained jaded because there has actually been no macro level approach to it. There is a need for coordinated roles of the Ministries of Civil Aviation, Finance, Tourism, Commerce, Environment and Petroleum amongst others, towards understanding and subsequently reaping the full rewards of aviation for the benefit of the national economy. From the civil aviation industry’s point of view, the current disposition is that the parent Ministry of Civil Aviation and the other Ministries impacting civil aviation, have singly and collectively produced policies unfavourable and even hostile to the industry. Unfortunately, Business Aviation continues to be the worst afflicted out of all segments of Indian civil aviation. In contrast, the US has fewer than 500 airports served by scheduled airlines while Business Aviation uses more than 5,000 public airports.

While the Indian scheduled airline market has been witnessing a double digit growth for the last four years now, the number of business aircraft and Non-Scheduled Operator Permit (NSOP) holders who operate small aircraft for commercial charters, has been going down. While the details of business aircraft owned and operated by business houses or private individuals are not easily available in the public domain as the DGCA has stopped displaying details a few months ago, the NSOP figures show that the latest number of operators (DGCA site accessed on May 4, 2019) is 98 as compared to the highest figure of 147 around five years ago. The disincentives to Business Aviation and NSOP operations include steep airport charges, inadequate slots in metros, shortage of hangars and exorbitant tax regimes for MRO facilities and Aviation Turbine Fuel.

CONCLUSION

The BAOA had, in the past, commissioned Martin Consulting LLC to carry out a study on Business Aviation in India. Mark D. Martin, its CEO, had reportedly stated, “What emerges from this report is a powerful message that Business Aviation is the catalyst India needs to grow and attain its regional and global supremacy.” The facts and figures offered by the BAOA study as well as other studies unequivocally point to Business Aviation being a necessary and indisputable asset for national economy, contributing significantly to its growth and sustenance.

Internationally, this realisation appears to have come about in varying degrees and use of Business Aviation is in the ascendant. Governments of developed nations all over the world are striving to nurture Business Aviation through incentives and motivations. In India, however, only the users appear to be clamouring about this aspect while the establishment appears oblivious to the contribution of Business Aviation to the national economy. It is high time the Indian government launches an objective, impersonal and unbiased inter-Ministerial study on the benefits of Business Aviation so that its contribution to national economy can be comprehended.

The next logical step would be a much needed liberalisation of Business Aviation in India. It is also time for the Ministry of Civil Aviation (MoCA) to introspect on its role vis-a-vis Business Aviation. So far, the MoCA has been preoccupied with regulating Business Aviation. But the former should now look at itself as a stakeholder in the progression of Business Aviation as a contributor to national economy.