Saturday, August 13, 2011

New Delhi, India: Mid-tier firms in small towns buy aircraft to save time and improve efficiency.

NEW DELHI: Doing business from Bhopal has its challenges. Ask RC Agarwal, chairman of the 1,700-crore Dainik Bhaskar Group. Over the past few years, the diversified group, with presence in media, FMCG and textiles, has spread its business from five to 13 states. The business now requires the top management to travel frequently to tier-II cities such as Jaipur, Ranchi, Aurangabad and Chandigarh.

This was not easy since connectivity to mid-tier cities is poor. So, the Agarwals had to travel to Delhi or Mumbai first to hop onto a flight to any of these smaller cities. This meant wasting an entire day shuttling between airports for a two-hour meeting.

Things have changed since last year when they bought a new Learjet 60 for 50 crore. "Now it is possible for managers to leave at 9 am, finish meetings and be back in Bhopal by 4-5 pm," says RK Pal, aviation head, Bhaskar Group.

With growing revenues, spreading business empire and surging aspirations - all this at a frenetic pace - India Inc is now budgeting to buy private aircraft to ease pressure and save time for the senior management.

The demand is strong from mid-tier firms in relatively remote places such as Aurangabad, Coimbatore, Tirupur, Surat and Lucknow.

The total number of private aircraft in the country today stands at 650 and is expected to soar to 2,000 by 2020. In 2003, the number stood at 350. About 40-50% of the demand is coming from small towns, says Rohit Kapur, MD, Arrow Aircraft, which sells Gulfstream in India.

Kapur is also the president of Business Aircraft Operators Association. "With poor roads, poorer connectivity and spread of businesses to interiors of India and overseas, there is a strong demand," he adds.

It is estimated that 40% of the private aircraft being bought in India are brand new and the rest are used.

Recently, Airworks - a firm that helps corporates buy and maintain aircraft - got an invite from auto vendors in Aurangabad to make a presentation. At the end of the session, the company had received 100 confirmed enquiries.

"Private aviation in India is going to boom, long-term. Nothing is going to stop it," says Todd Hattaway, regional sales director (India), Hawker Beechcraft, which set up its India office last year. Today, there are 99 orders in the pipeline for private aircraft. A large number of them are from mid-tier companies.

Three factors are fuelling demand. For entrepreneurs from small towns, it is about business productivity as air connectivity there has not kept pace with their ambitions. Two, many Indian companies are spreading their business overseas - from Africa to eastern Europe, where direct connectivity is poor

Three, India Inc has grown in size and can afford to buy aircraft, especially since they enhance productivity. Add to this growing demand from the government, especially state governments, which have become stronger and feel the need to stay connected to even remote regions. Also pushing up demand are MNC bosses, lawyers and doctors flying to far-flung areas to meet clients.

This also marks a distinct shift in the reasons why Indian companies buy private aircraft. Earlier, a private aircraft represented a certain flamboyant lifestyle and was more about the CEO's status and statement. "Today, it is about boosting productivity and efficiency of the senior management. This is especially true for mid-tier companies from small towns," says Vivek N Gour, MD, Airworks.

What does India's private aircraft population look like? There are around 375 helicopters, 150 business jets and the rest are small turboprops. A big business jet, typically used for long-haul flights, including international travel, costs upwards of $25 million. Small business jets, used for short flights, like, say, to the Middle East, Singapore or even within India, come for $6 million or more. Helicopters, used for difficult terrain with poor landing/takeoff infrastructure like, say, oil rigs, cost $2-3 million.

Source:  http://economictimes.indiatimes.com

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