According to experts, India’s fleet of business aircraft shrunk two per cent in 2015, the first such contract in 25 years. There are reports that the markets may contract further as about 40 per cent of the planes are said to be up for sale, hit by poor infrastructure, high taxes and other regulatory issues. As per the Directorate General of Civil Aviation (DGCA), as of June 22, 2016, there are 121 non-scheduled operators with 355 platforms that include fixed-wing aircraft, helicopters and hotair balloons. There has not been any significant growth in the aircraft numbers in the past few years. It is hoped that the new policy, notwithstanding the absence of any mention of business aviation, will do good for the industry as a whole and business aviation in particular.

No doubt, the business aviation segment has been hit, with charter taking quite a brunt of it and it calls for immediate support by the government. According to media reports, Business Jets India, owned by Tata Sons, has reportedly returned all four planes (three Hawker Beechcraft and one Cessna Citation) to leasing companies. The Director of Operations of Taj Air, Atiesh Mishra in media interviews attributed it to ‘combination of high costs and poor infrastructure.’ “For instance a business jet can only park for 48 hours at Mumbai airport, post which there is a penalty. So an operator has to park the plane in Ahmedabad or some other neighbouring airport. This burns extra fuel and makes business unviable,” he said.

India Still an Attractive Market

Despite such trends, international players are still hoping that India will do well, if not in the short term but medium and long term. Global Jet Capital, a provider of financing solutions for large-cabin, long-range business jets, expects demand for business aviation in India to increase as a result of the country’s strong economic growth. Simon Davies, Vice President, Sales–India at Global Jet Capital, is currently in India meeting prospective clients who are looking for finance to support potential acquisitions of mid to heavy business jets. New research from Global Jet Capital reveals that over the last decade (2006-15), 70 mid to heavy business jets were delivered to India, with a combined value of around $3.5 billion. Global Jet Capital says these aircraft typically cost between $25 million and $75 million each and up to 80 per cent of the funding used to purchase these is sourced through external financing.

The Indian business aircraft fleet has a greater proportion of mid-sized to heavy jets than the global average. 44 per cent of the Indian fleet is classed as mid-sized to heavy, compared with a worldwide figure of 31 per cent, indicating that demand for finance from Indian buyers is likely to be greater than from other regions. The aviation finance specialist, which recently completed the purchase of the aircraft lease and loan portfolio of GE Capital Corporate Aircraft in the Americas representing approximately $2.5 billion of net assets, has around $1 billion to lend to clients to purchase relevant business aircraft in India and elsewhere around the world.

THERE ARE REPORTS THAT THE MARKETS MAY CONTRACT FURTHER AS ABOUT 40 PER CENT OF THE PLANES ARE SAID TO BE UP FOR SALE, HIT BY POOR INFRASTRUCTURE, HIGH TAXES AND OTHER REGULATORY ISSUES.

Simon Davies said: “For the fiscal year 2015-16, India’s GDP growth was around 7.6 per cent and some market commentators are predicting that growth will gain momentum in 2016-17, with GDP growth of around 7.8 per cent. “Demand for business aviation is closely correlated to economic growth so we believe that in the long term, India will see a significant increase in demand for business jets. This is already a very attractive market for us and we expect it to become even more appealing in the coming years.”

Global Jet Capital, which was launched in 2014, is capitalised by three global investment firms – GSO Capital Partners, a Blackstone company in partnership with Franklin Square Capital Partners; the Carlyle Group and AE Industrial Partners. The company’s current management team and executive committee is composed of leaders from business jet manufacturers, maintenance and service providers and leading financial institutions who have served the private aircraft industry for a combined 200-plus years and have completed over 3,500 aircraft transactions.

Jonathan McDonald of International Bureau of Aviation, a UK-based consultant, said, “There is a business jet market in India but it is sporadic in terms of demand. Few are actually owned by ultra high net-worth individuals, more by corporations. In terms of size-category, there is no set trend either—everything from Mustangs to Boeing Business Jets—unlike say Brazil where you have a lot of very light jets or Russia where they love super mid-size/heavy aitcraft such as the Legacy, Falcon 900, Challenger 604/605RE, etc”.

Bombardier’s Outlook for the Region

In its 2015-24 business aircraft outlook, Bombardier has pegged the numbers at 310 aircraft for South Asia valued at $12 billion. It said that the region continues to develop its regional business aviation market and that there was slow improvement in infrastructure and regulatory environment. The average annual economic growth in India is seven per cent and the fleet compound annual growth rate is 12 per cent. The region is forecast to receive large category aircraft, accounting for over 50 per cent of total deliveries. The outlook pointed out that delivery of aircraft would be 80 in the light category, 70 in the medium category and 160 in the large category.

Stable Market as per Embraer

Claudio Camelier, Vice President Sales and Marketing, Middle East and Asia-Pacific, Embraer Executive Jets, said that Indian executive jet market is stable which has not gone in the extremes. During India Aviation 2016, he said: “We are not seeing any kind of relevant movement, either up or down since the last two years. However, factors like high GDP growth rates, diversification of businesses, and the growing acceptance of executive jets by the business community in this country which has expanded geographical distances, make us confident that we will keep growing here.”

Embraer has a strong presence in India with a total of 28 aircraft of different market segments, including 21 executive jets across six different models. The company had emerged as the market leader, delivering 35 per cent of the total executive jets into India over the last five years. Stating that Embraer forecast 490 executive jets to be delivered by all manufacturers in the Asia-Pacific region, excluding China, over the next ten years, he said a major portion of this would be from Embraer’s stable.

Global Shipment Trends

While India’s market movement is laggard due to poor infrastructure, high taxes and regulatory policies, the global scene is also not too encouraging. The General Aviation Manufacturers Association (GAMA) published the first quarter 2016 aircraft shipment results. The general aviation industry shipped 614 aircraft in the first three months of the year for a total value of $4.5 billion.

“The entire industry is feeling the impact of retrenchment in the energy sector as well as global geopolitical and economic insecurity,” GAMA President and CEO Pete Bunce said. “Despite these headwinds, our industry continues to invest in research, development and certification of more efficient and safe products. Therefore, actions taken by elected officials to stimulate R&D and improve regulator efficiency have a farreaching impact on the economy.”Shipments of general aviation aircraft were soft across the board with only a handful of bright spots. Piston engine airplane and rotorcraft shipments were stable at 191 and 60 units respectively in the first quarter compared to last year. Business jet deliveries declined by 4.7 per cent from 128 in first quarter 2015 to 122 in first quarter 2016. The turboprop airplane segment’s deliveries slowed by 6.8 percent to 109 units. Turbine rotorcraft also declined from 141 to 103 units.