Unlocking Potential

Indian aviation, be it commercial or general aviation, is at the cusp of major transformation, with all the hiccups. That India is said to become the third largest aviation market, after the US and China, by 2020 is a clear reflection of the forward movement. The potential is getting unlocked.

The growth story of Indian aviation is the growth story of India. The more the people travel by air, whether it is by commercial airlines or by general aviation aircraft, it is indicative of a resurgent India, where the per capita incomes are going up and the economy is set to flourish. As India Inc is emerging as a global force (Indian companies are making acquisitions the world over) and the number of high networth individuals are increasing, the general aviation sector, specifically business jet market, is set to grow nearly double in the next five years.

10 PER CENT GROWTH

A report by global consultancy firm PricewaterhouseCoopers (PwC), commissioned by the Federation of Indian Chambers of Commerce and Industry (FICCI), has said: “The domestic general aviation market is on the threshold of catapulting itself into the global arena. It is expected to grow at 10 per cent per annum to cross $4.5 billion by FY 2017. It is estimated that around 120 business jets, 150 small aircraft and 180 helicopters will be added by FY 2017.”

In 2012, the country became the second-largest business jet market in the Asia-Pacific region, after China’s 220, with a fleet of 165 (up from 26 in 2005). Despite this, the report notes that the domestic general aviation market is small and underdeveloped compared to its global peers, with a meagre 15 per cent of the total aircraft movement. Compared to the US, which has the largest number of general aviation planes at around 2,55,000 operating from across 5,110 airports, India has only around 150 active airports and around 700 such planes. As per the Directorate General of Civil Aviation (DGCA) there are 121 non-scheduled operators with 364 aircraft (business jets, turboprops, rotary-wing, etc).

Quoting report of a working group on civil aviation, PwC states that over $40 billion investment is expected to be made in the general aviation during the Twelfth Five Year Plan. This has indeed raised interest in India among the original equipment manufacturers such as Dassault Falcon, Bombardier, Embraer Executive Jets, Gulfstream, Textron (Cessna and Beechcraft) and others. In anticipation of the growing opportunities in the general aviation segment, aircraft makers are either setting up offices in the country or expanding their existing businesses.

The President of BAOA Rohit Kapur is optimistic that the new government will make course correction and help the aviation sector, particularly general aviation, to grow to its potential. The government’s intent to expand pan-India connectivity (through its regional and remote air connectivity policy) is a sign of that. There is a growing realisation that general aviation is directly related to the health of the economy. In fact, during last year’s general elections, the use of General Aviation aircraft reached unprecedented levels, reflecting how effective they have been in criss-crossing the nation.

Having said that we know how the last few years have been when about 30 Indian-owned helicopters and some 15 jets were sold outside India. These were small aircraft owned by charter companies and also from big corporate houses such as Larsen & Toubro, Essar Group, Jindal Steel & Power, etc.

Rohit Kapur states that this trend needs to be arrested and it is imperative to bring in consolidation. In this direction, the BAOA is urging the DGCA – to recognise aircraft management companies that offer an integrated asset management approach to owners.

NIGGLING ISSUES

There are many niggling issues that the government has to address for the general aviation sector to optimally contribute to the economic development of the country. First and foremost, the government needs to streamline taxation. Presently, there are two categories of taxation on import of aircraft (18.5 per cent on private aircraft and 2.5 per cent on charter aircraft) and rationalisation of the same will help the industry.

While there are huge gaps in infrastructure for general aviation, the government/airports need to relook at their approach to this sector, starting with withdrawal of tax/royalty on MRO and services provided at airports. The general aviation operators are seeking a separate safety management system for general aviation, different from the ones for scheduled airlines, as is a worldwide practice. They are suggesting that international standard for business aircraft operations which is followed globally should be adhered to here.

The aircraft handling charges are passed on to the end customer, thus making it unattractive for business to grow

No doubt, airports give preference to airlines as they are revenue earners (even airlines are complaining about high cost of operations at some of the metro airports), but neglecting general aviation does not augur well for either the airports or for the general aviation community. It should be made mandatory to provide between 10 and 20 per cent parking space for general aviation aircraft, considering that the new airports have created vast infrastructure.

That the government has initiated a regional and remote air-connectivity policy, the faster the smaller airports are developed, after analysing their potential, the better it would be for both regional airlines (some of which are on the cards) and general aviation segment. There are over 400 airports many of which are unused or underused and there are airports in major cities which can act as secondary airports for the benefit of non-scheduled operators. For instance, the airports in Bengaluru (HAL airport) and Hyderabad (Begumpet airport) can straight away be used for regional and general aviation aircraft.

HIGH HANDLING CHARGES

The general aviation sector is further burdened by aircraft handling charges which are not commensurate with viable business models at all. The aircraft handling charges are passed on to the end customer, thus making it unattractive for business to grow. It is reported that the current aircraft handling charges in Mumbai and Delhi airports for a B200 aircraft is around Rs. 15,000 in addition to service tax of 12.36 per cent and for a Gulfstream V aircraft it is Rs. 42,500 plus service tax. Such taxation is on the premise that those using business jets can afford it, while not realising that rationalised tax structure facilitates growth of the sector as well as the economy. Those at the helm of affairs should realise that general aviation is a business enabler, among other plus points such as search and rescue, relief operations capabilities, air ambulances (though there are no dedicated air ambulances as yet in India), etc.

Presently, the maximum utilization of business aviation is in corporate charters, followed by offshore operations through helicopters. However, realising the benefits of business aircraft with their accessibility to remote areas and areas not covered by scheduled airlines along with their easy access to small air strips and helipads, these are becoming popular among corporate travellers.

IMPROVING EFFICIENCY

Efforts are on to ensure that NSOPs start publishing flight schedules and put flights on routes not served by existing scheduled airlines. To give effect to the proposal, Section 134-A of the Aircraft Act, 1934, which is an elaborate set of rules governing NSOP operations, would have to be amended.

MANPOWER SHORTAGE

Also staring in the face is the acute shortage of trained manpower. With demand for jets going up, the gap is likely to widen, unless efforts are made to enhance skill-sets across levels.

All said and done, general aviation is looking for recognition from the government/airport operators/regulators as an enabler for stronger economic growth of India, and an essential component of developed India of the future. All the stakeholders need to get their act right. The time is now.