India shows promise despite slowdown

India, one of the fastest growing economies, has 55 billionaires – the fourth largest in the world – owning approximately $250 billion in wealth. This is compared with China’s 115 billionaires valued at $230 billion.

25th Mar 2013


Business Aviation

India shows promise despite slowdown


India, one of the fastest growing economies, has 55 billionaires – the fourth largest in the world – owning approximately $250 billion in wealth. This is compared with China’s 115 billionaires valued at $230 billion.

A study by global consulting company Deloitte suggests that in the current decade, the number of high net-worth individuals (HNI) in India will grow by 143 per cent, adding substantially to the pool of potential clients for business aircraft. The market potential for business aircraft, especially jets, hinges to a large extent on these segments of the society, says a report by Lithuania-based AB Avia Solutions Group.

But India’s budget for fiscal 2013, starting in April, brought little cheer to operators of business aircraft, who are already facing infrastructural challenges and sluggish economic growth. Regulatory bottlenecks, rising fuel costs and tax laws not in sync with market realities, are stifling a sector that grew at a double digit rate two years ago but has seen few aircraft purchased and more sold.

In a positive step, the 2013 budget did accede to industry demand to allow customs duty exemptions on maintenance, repair and overhaul operations for private aircraft. Maintenance providers got relief on imported spares from three months to a year. Despite this, MRO costs in India continue to be much higher than taking an aircraft abroad for overhaul due to a 12.5 per cent value added tax rate on spares and maintenance services. A royalty on parking and numerous other taxes still hound the beleaguered sector that continues to be seen as ‘elitist’ in contrast to the corporate world that sees a business aircraft as a management tool to enhance productivity.
Business aviation has been growing. From around 40 business aircraft in 2005, today there are around 600 private aircraft in India, half of which are fixed-wing, including 154 business jets.
Global manufacturers, as a result, in a relatively short time have established their presence and tied up with local maintenance providers. Embraer, for instance, has signed a memorandum of understanding (MoU) with Mumbai-based Indamer, one of two authorised service providers for Embraer in India (the other being Air Works Engineering) to provide maintenance support for the midsize Legacy 500, which is expected to enter service in 2014. Embraer has delivered 18 of its business jets to India, including three Legacy 650s that arrived this year – accounting for more than 10 per cent of the Indian-registered fleet of just over 160 aircraft.
Dassault Aviation has sold approximately 20 aircraft to India and recently opened a new Falcon liaison office in New Delhi. Last July, Mumbai-based Taj Air was named a Falcon authorised line service station at Mumbai’s Chhatrapati Shivaji International Airport. The facility provides scheduled and unscheduled maintenance and inspections for the Falcon 2000 series and holds a parts inventory. “The Indian market is becoming more conducive to consistent growth and the investments in our support network will place us in an excellent position to benefit in the future,” says Dassault Falcon president and chief executive officer John Rosanvallon.
Cessna too sees growing demand in India for both its Caravans and Citations and believes business applications for the aircraft will increase in response to anticipated government reforms intended to improve infrastructure and free up market access. “India is expected to be among the world’s fastest-growing economies this year and stands to benefit hugely from the national expansion of business aviation, both for domestic and international travel,” says Bill Harris, sales vice president for Asia and Asia-Pacific. “Cessna is optimistic that legislative and regulatory reforms this year will remove several barriers to India’s aircraft market development.”
The slow growth is a passing period and the industry is expected to get back on track next year. “The pace of growth in business aviation has outgrown the infrastructure available for the industry. We will be seeking support and co-operation from the regulatory bodies to develop adequate infrastructure and facilities for business aviation and further help on policies, regulations and custom duties. We aim to create a favourable environment for business aviation in India,” says Rohit Kapur, president Business Aviation Operators Association (BAOA).
One step in this direction is a recent announcement made by the Director General of Civil Aviation (DGCA) to set up a separate general aviation wing. Concerned over lack of safety facilities, "it is the most difficult task for the regulator as the number of operators are 144. Many of them have one or two aircraft and they don't have a proper safety department," says DGCA chief Arun Mishra. "We are on the verge of a breakthrough in our bid to follow best international practices." - Neelam Mathews


 

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