Sunday, September 25, 2011

India: Jet, set, take off!

Mukesh Ambani might have reportedly gifted his wife a $60-million Airbus A-319 with all the bells, whistles and frills as a birthday present, but for most corporate high-flyers, there's a hard underlying economic reason to take to the skies in their personal aircraft. Back-of-the-envelope calculations suggest that a business jet can save a chairman's time worth up to $1.2 million a year (calculation based on one chairman and five executives travelling 400 hrs/200 trips a year).

So it's not surprising that more Indian corporates have been getting on the private runway in their own little jets. As a result, global aircraft makers such as US-based Gulfstream, Boeing and Hawker Beechcraft Corporation, France's Airbus Industries and Brazil's Embraer have all begun training their eyes on India in right earnest.

The Indian market

For the global jet-makers who have run into air pockets since 2009-10, when jet prices plunged, it makes sense to fly into India, as this is one of the regions where future growth is expected. Deliveries to the Asia-Pacific region have been on an upward trajectory with more buyers expected. According to aviation data firm JetNet, India already has the second-largest fleet of business jets in the Asia-Pacific region and demand has been picking up.

With the skies opening up, even the Mahindra Group has got into this space. On September 1, it successfully test flew its maiden aircraft C-NM5, the first indigenously-produced utility jet, estimated to cost around $400,000.
The sky's the limit

The demand surge is not just from the corporate fiefdom. From healthcare (as air ambulances) to cargo operations, small jets are being requisitioned in a number of other areas. State governments are placing orders, as always. But increasingly, private aircraft are also being used by special mission task forces, charter companies and training institutions.

“India's vast coastline and recent developments in internal security are areas where the growth is going to come,” says Mr Nigel Harwood, President and Chief Executive Officer, THE ESTD.

THE ESTD, an Interglobe company, has a product portfolio ranging from selling executive jets to luxury yachts, sports cars to mini-submarines. “I strongly believe that this year is going to be a driving factor for growth in India especially when it is probably the only country in the world which is currently buying aircraft,” says Mr Harwood.

Mr David Velupillai, Product Marketing Director, Airbus Corporate Jets (ACJ) says that the demand in India would probably be a little less than China's. “But the need is there. Historically we have sold the most ACJs in the Middle East and Europe. But that is going to change because China is such a fast-growth market. Just as on the airline side, the Asia-Pacific region, including India and China, will be the big growth market for ACJs,” he adds.

The convenience factor

Besides the cost factor, another reason for this renewed interest in private jets is the convenience angle. “In India there are more than 400 airports and air-strips. Scheduled airlines operate to less than 100 airports. This opens up a huge opportunity for private aeroplanes and helicopters to operate and land as per a customer's choice and time, subject to airport restrictions,” says Mr Debashis Saha, Member Council, Aeronautical Society of India.

Contrary to myths, aircraft-makers point out that it's not too expensive to own and maintain a private jet. The price of a jet can vary from $7-8 million for a small aircraft to $35 million (for larger aircraft) depending on how the interiors are done up.

The running expenses of a private jet are not intimidating either. The monthly cost of maintaining a super mid-size jet is around Rs 5 lakh, and the monthly salary of a pilot operating a private jet is around Rs 300,000. No wonder then that a private jet is considered a must have by many corporates.

According to the latest report of the Centre for Asia Pacific Aviation (CAPA), the utility segment of general aviation could see new aircraft sales — business jets, helicopters, turboprops and piston engines — of up to $12 billion over the next decade. The Centre also estimates that the direct and indirect economic contribution of general aviation could be close to $4 billion an per annum by 2020.

http://www.thehindubusinessline.com

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