Rain Bakshi, research analyst at Ken Research, explores how the industry could be affected by the likes of fractional ownership, seaplanes and air ambulance needs in India.
Business aviation in India has been successful in overcoming numerous indigenous and foreign obstacles over the past decade. Operating an air charter company has been more of a surviving business, with major companies striving to break even. The struggling nature has opened avenues for change in operating models, thereby laying immense potential for future growth. Lack of trained and qualified staff, a complex regulatory structure and work process, inadequate infrastructure and mounting operational costs are major barriers for growth in the industry.
Fractional ownership
Operational transparency, consolidated and harmonized compliance-controls among various analogous regulatory organizations, simplification and standardization bought in licensing and documentation, and digitization are some of the key changes expected in the regulatory framework in the coming five years. This shall require high level of engagement and coordination among compliance professionals.
It is crucial for players to adopt already successful business models, among which fractional ownership and aircraft management could be a win-win engagement model. It is necessary to allow different owners and operators of an aircraft.
Under the current policy, the owner and operator of an aircraft should be a single entity. This has resulted in higher operational cost and restricted operations for both service suppliers and customers. Under fractional ownership, an aircraft’s cost and utility can be divided into numerous owners, enabling more people to acquire this service.
Similarly, owning a business jet would soon be made independent of managing and maintaining it. Currently, companies in India have separate wings registered under the Non-Scheduled Operator’s Permit (NSOP) category to manage and operate business planes.
Maintenance is a complex and technical process, which usually discourages businessmen to invest in these operations. This calls for regulators to rationalize who should own the depreciation cost of the asset. Fall in Goods and Services Tax (GST) rates charged on imports to 18% for private owners similar to NSOP operators is expected to come into effect soon.
Exploring untapped avenues
Analyzed as a simple solution to issues pertaining to lack of airports, pollution and heavy air-traffic, various state and the central government have proposed extending aviation services to remote areas through seaplanes.
Kerala government has already worked on this model. It is expected that in the coming years, seaplanes would be introduced to mainstream water bodies such as Yamuna and Ganga. Furthermore, it has been proposed that 10,000 seaplanes would be brought into operation in the coming two years.
More companies such as Maritime Energy Heli Air Services – which operates seaplanes to the Aamby Valley and to islands in the Bay of Bengal – shall enter the business aviation landscape, enhancing charter income.
It is also expected that aerial survey, aerial photography, crop spraying/dusting (agricultural pilots), banner towing, aerial display, aerial advertisement, law enforcement, border monitoring, power line or pipeline inspection and laying, offshore wind turbine farm maintenance, electronic newsgathering, and helicopter slung-load operations (HESLO) would be carried out using business planes and helicopters in the next five years.
Air ambulances
Global helicopter manufacturers Airbus Helicopters, Bell Helicopter, Agusta Westland, Sikorsky and Russian Helicopters have high hopes in the future development of a helicopter emergency medical services (EMS) sector in India. This would be accompanied by changes in regulations, infrastructure and taxes and inclusion of air medical services in health insurance claims.
It is expected that major metros – especially Mumbai – shall introduce this service in the coming two years. In the longer run, the government could plan to develop a solitary, comprehensive EMS that can be accessed throughout the country.
Business aviation contributes more than US$580m to India’s GDP, representing 0.028%. This is expected to grow to more than US$790m by 2024.
The key to growth is in the hands of the Indian government, which shoulders the responsibillity to unlock infrastructural and policies barriers restraining the industry. With India becoming a superpower in the aviation sector in times to come, it is yet to be seen how the future of the business aviation sector unfolds.
Rain Bakshi is a research analyst at Ken Research.
