Transforming India’s On-demand Air Mobility Market Through FBOs

By SUDHIR S. RAJESHIRKE, CHIEF OPERATING OFFICER, JETCLUB EUROPE

The biggest untapped ancillary market opportunity in the aviation sector that has the real potential to create a large impact, is in the fixed-base operator (FBO) industry. So far, the airport developers in India have played the role of ‘catching-up’ with meeting the infrastructure demands of predictable passenger growth in the commercial aviation industry. Hence the focus in the last decade and a half has been on enhancing airport capacity and executing airport modernisation projects which catered to improving the basic air passenger travel experience. However, developers have hardly looked beyond the traditional aviation market and have been slow in anticipating the possibilities of airport e-commerce and other ancillary infrastructure industries such as the FBO industry which now have the potential to take the Indian aviation market to the next phase of growth and innovation.

In this article, I will focus on delivering a perspective on the promising FBO industry in India and will provide the reasons why this industry can not only transform the existing business aviation market in India but can also lay the foundation for the growth of the future on-demand air mobility market.

Simply put, an FBO is an independent facility that operates at an airport to provide aeronautical and non-aeronautical support services to general aviation aircraft and passengers. General aviation aircraft such as business aircraft and helicopters require several services such as dedicated ramp and hangar parking, fueling, repair and maintenance, flight planning, coordinating last minute special requests for business aviation flights and most important, passenger processing systems for domestic and international flights. Sounds pretty basic set of activities, but FBOs deliver high quality and time-critical functions in the entire business aviation ecosystem. Further, they deliver superior services during the most frustrating part of the business aviation passenger experience, i.e. the pre and post-departure processes. Hence there are several factors that will contribute to the growth of this industry:

• Large gap in demand-supply mismatch: In 2018-2019 (prepandemic), business aviation carried approximately 1,32,000 domestic passengers over approximately 30,000 domestic flights. By then, only Mumbai airport had a small dedicated general aviation terminal facility. Delhi airport developed its first truly dedicated general aviation terminal in 2020, followed by one at Sardar Vallabhbhai Airport at Ahmedabad in 2022. Business aviation flights from other tier 1 city airports such as Bengaluru and Hyderabad still operate from separate dilapidated HAL and Begumpet airports respectively. This shows India has just one FBO for every 44,000 on-demand business aviation passengers. Based on city pair traffic, this represents a large opportunity to establish dedicated FBOs to not only meet the existing business aviation demand but also to service the growing demand for on-demand aviation growth.
• Opportunity size: As per NBAA, there were an estimated 3,000 FBOs in US, generating more than $16 billion in annual revenue in 2019. This was close to eight per cent of total US airline revenue in the same year and almost of the size of India’s airline market at that time. Secondly, the global market is $23 billion as of 2021 and is expected to reach $30 billion by 2030. While it would be not be fair to compare a matured and sizeable US airline industry, even a small possibility of establishing an FBO industry which is one per cent of India’s airline industry, would mean a business revenue potential of approximately $100 million or 700 plus crore. This is again a sizeable market.
• Increasing access to business aviation: The Government of India is now actively working on regulations that will make business aviation accessible to large number of customers. Fractional ownership is one such model that will multiply the number of business aviation users in the Indian market. Such users will be attracted to and will be able to pay a premium for the pre and post departure time saving advantages and convenience that an FBO provides over a conventional and time consuming airline processes at airports.
• Value realisation post pandemic: Post lockdowns, while airlines have seen single digit growth compared to 2019 levels, business aviation showed a remarkable recovery backed by the need of businesses and HNWIs to travel safely for undertaking their businesses in the safety of private aircraft and operators opening up new business models of selling seats on private jets. Per WingX, business aviation has experienced double digit growth post pandemic and continues to set record level sales growth globally.

The future: One big opportunity that will change the nature of the FBO business would be the demand generated by eVTOL aircraft for urban air mobility (UAM) markets once such aircraft are certified. How come? Well, if we understand the nature of FBO operations, it consists of creating a takeoff and landing infrastructure for on-demand aircraft which is similar to that of creating a vertiport/skyport. FBOs can provide eVTOL battery charging, replacement and maintenance stations that can help safe and consistent operations of eVTOL aircraft. Further, UAM depends on seamlessness of air travel which requires a technology based passenger processing systems which the FBOs are experienced in. UAM service providers require partnerships with FBO companies to process their passengers for efficient pre-boarding procedures, provide comfortable waiting areas and smooth vertiport departure experiences.

Blade Urban Air Mobility has sort of pioneered this model in which the company provides dedicated predeparture facilities where Blade’s passengers get a branded check-inexperience even before they board the helicopter flight.

Leading FBOs such as Jetex and Signature have realised the similarity in operations and have identified UAM as a market that they could participate in. For example, German startup Volocopter is partnering with Jetex to deploy and operate permanent vertiport infrastructure for passenger services. In 2018, Signature had partnered with Uber Elevate (now defunct) to provide skyport operations for Uber’s air mobility platform.

The hurdles: Developing such a potentially large, but a nascent market requires making the first few steps and crossing a few barriers before India can make advancements in developing the FBO market. A few of them are as follows:

• Airport developer returns: Developers are tied within the framework of airport concession agreements which are regulated by Airport Economic Regulatory Authority (AERA) and can make investments in airport infrastructure only when they see certainty of tangible returns over a fixed period of time. It is similar to chicken and egg situation. Developers are unwilling to dedicate airport space and invest in FBOs unless they see certainty in demand. And demand from business aircraft users won’t arise unless they experience the value provided by FBOs.
• Investments in AAI managed airports: Majority of the airports where demand from business aviation user arise and will continue to arise are managed by Airport Authority of India (AAI). Further, many of India’s small airports are only serviced by small business aircraft and helicopters. AAI’s process requires approvals from Ministry of Civil Aviation to provide justifications and then make necessary investments in FBOs. This again slows down the process for establishing FBOs for lack of sufficient demand.
• Lack of ‘dedicated’ business aviation infrastructure: Indian airports have been designed and developed primarily for commercial aviation traffic. The airport master plans for most of the airports don’t even have a dedicated space for business aircraft parking, let alone have a dedicated FBO terminal. Mumbai does not have sufficient overnight parking slots for the business aircraft demand, that the city can generate even as of today. Such physical constraints are a natural impediment to any form of growth in business aviation at such airports.

The solutions: The long term approach for exploring the potential of FBO industry requires three pronged approach which can be driven by the Ministry of Civil Aviation:

• Take advantage of the existing infrastructure to increase FBO facilities using regulations and financial incentives: Airports in several tier 1 cities such as Hyderabad, Bengaluru, Lucknow etc which are operated and managed by private airport developers have the space and management wherewithal to create dedicated FBOs which require long term investments. Their airport concession and O&M agreements can be modified to ensure that their returns on equity obligations are met with.
• Reserved space for business aircraft operations at airports: Whenever any airport traffic gets close to saturation the business aircraft operators get the first boot. Further, as new airports expansion plans are put in place there is little or no consideration given to allocate space for parking of business aircraft and an FBO. Hence when Airport Authority of India (AAI) plans new airports or considers expansion of existing ones, parking space should be allocated for business aircraft for current and future aircraft inductions. A dedicated space should also be allotted to small or large FBO depending on historical and potential business aviation traffic. Promoting business aviation should now figure in the civil aviation policy making process. New airport operators should be encouraged to develop exclusive terminals that help in capacity building of business aviation infrastructure of India.
• Budget for building FBOs and then engage in operation, management and transfer contracts with FBO providers: As FBOs require significant CAPEX to establish operations, AAI can invest in developing basic FBO infrastructure with industry consultation and then provide it to FBO companies under operation and management agreements over long term concession contracts. The model could replicate the airport privatisation methodologies in which AAI builds the infrastructure and then hand over the operations to experienced industry players.
• Formulating and delivering a holistic plan to develop ondemand aviation infrastructure: Developing future aerial transportation models requires taking a strategic view of where we want to be (our North Star) and creating a platform to bring together Government, regulatory, infrastructure and industry stakeholders to discuss and implement required measures. For example, to create a physical infrastructure to deliver urban air mobility within cities or inter cities, would require forming a panel of experts (“Tiger Team”) from Ministry, FBO industry, AAI (air space design and management) and infrastructure segments to plan and implement work streams that bring such projects into reality in a defined timeline. Such Tiger Teams could work under the guidance of the Ministry of Civil Aviation and deliver actionable plans that can truly create a vibrant ondemand aviation infrastructure.

Today, the Ministry of Civil Aviation has the most ambitious mindset to supercharge the next stage of growth in the business aviation sector. Beginning with the physical is the first and the most logical step towards the North Star mission of building the on-demand aviation industry in India.