India begins to establish a business aviation network

 - October 30, 2006, 6:24 AM

As demand for commercial air travel increases in India, business aviation entrepreneurs are clamoring for position in a classic chicken-and-egg scenario. Those who will be successful must make an early entry into the market, but they are severely limited in their ability to operate because the infrastructure to support general aviation is still being developed.

Several charter operators and others in India told AIN it is a shortage of aircraft and facilities to receive and service them, not a lack of capital, that in the near term tempers the growth of business aviation in this country of 1.1 billion people.

Though poverty and open sewage canals run rampant nearly everywhere you go, signs of wealth and Western influence abound on the busy streets of major cities such as New Delhi, Mumbai and Bangalore, India’s information technology hotbed. In Bangalore, laptop-toting software developers hustle past fancy glass-front hotels to the corner Barista for their morning cup of coffee. Shiny new Hondas and the occasional Lexus SUV thread their way down the road amid scores of auto rickshaws, past billboards advertising designer clothing, diamonds and luxury retirement homes.

This summer, sportplane maker IndUS Aviation opened a showroom in downtown Bangalore featuring the two-seat trainer that its developers hope will get India’s growing middle class thinking about learning to fly just for fun, and perhaps even about owning an airplane.

IndUS is selling the concept of general aviation in India today, and the same can be said of those who are trying to earn a living in business aviation there. While helicopter charter operators such as Deccan Aviation, based at Bangalore’s Jakkur Aerodrome, have for years successfully marketed scenic tours to visiting executives and same-day pilgrimages to remote religious temples for well-to-do Hindus, private jet ownership, and especially the concept of fractional jet ownership, has been slow to emerge, in part because there are few good places to land, park and store a large business jet–at least for now.

The Indian government continues to churn away at plans to upgrade the nation’s airports to support the booming airline industry, which is expected to more than double its annual passenger volume, to 70 million by 2010. But charter operators and corporate users aren’t holding their breath, as the target dates for the opening of new airline terminals at New Delhi, Bangalore, Mumbai, Hyderabad and Chennai slip further into the future. The business aviation community is hoping, however, that these projects will pave the way for the development of private hangars and FBOs, which are virtually nonexistent in India.

“General aviation is not a priority for the government,” said Kapil Kaul, chief executive for India and Middle East studies at the Centre for Asia Pacific Aviation (CAPA) in New Delhi. The group hosted a two-day symposium in Mumbai in October to discuss the nation’s “low-cost” airline industry, which is rapidly moving to reshape India’s aging transportation infrastructure as Boeing or Airbus passenger jets lure travelers off the nation’s crowded, old railway cars.

Obstacles to General Aviation

General aviation as it exists in the U.S. is essentially a foreign concept to most Indians. In the U.S., there are approximately 320,000 civil aircraft operating out of more than 19,000 airports and heliports, 5,500 of which are publicly available for use by general aviation aircraft. According to registration data published by India’s Directorate General of Civil Aviation (DGCA) as of July 31, there were only about 1,000 civil fixed-wing aircraft in the country, including everything from gliders to Boeing 747s and about 200 helicopters. CAPA forecasts the addition of 250 to 300 airliners over the next five to seven years.

All of these aircraft operate out of between 100 and 300 of India’s 449 airports, depending on who you ask. Some of the nation’s business aviation professionals say that most of these airports are unusable by business jets due to poor surface conditions, scant radar coverage or lack of instrument approaches, while others say they can land a Citation at almost any field, provided they check with the government first to make sure the runway is in good condition. There are also an unknown number of private airstrips in use.

The Airports Authority of India owns and manages 92 airports and “civil enclaves” at 28 military airfields. Security is tight at these quasi-military locations, and it is not uncommon to see a soldier with a machine gun strapped to his chest standing guard on the tarmac. Pilots familiar with the restrictions at Ronald Reagan Washington National Airport can imagine how challenging it would be to integrate general aviation into this type of environment.

It’s not just the airports themselves that are in need of repair, but also the roads leading to the airports. Riddled with gaping potholes, choked by traffic and its resultant pollution, and with critical lanes often blocked by lounging livestock, India’s roads are notoriously difficult to navigate in anything less sturdy than a Hummer, though most drivers muddle through with compact cars, motorcycles and scooters.

In some urban areas things are improving, however. A six-lane fully lit highway connecting Delhi to Agra (the site of the Taj Mahal) is under construction, and the stretch that is complete so far is wide and well maintained. There is talk that a new airport to serve as a reliever for Delhi might one day be built along this highway in the up-and-coming Greater Noida suburb, but there are no firm plans yet.

Still, some aviation professionals are hoping to spin the ground transportation situation into a positive marketing tool. “India’s poor infrastructure is our selling point,” said Karan Singh, managing director of KuBase Aviation in New Delhi. The company has an agreement with Air Partner International to provide aviation consulting, sales and acquisition services throughout India.

When asked whether very light jets (VLJs) such as the Eclipse 500–which can operate from short, grass runways–might do well in India, most business aviation professionals said it’s too early to be thinking about VLJs when most customers don’t even fully understand what general aviation is or what it can offer them.

“People still don’t know their Falcons from their Hawkers. The market isn’t that educated yet,” said Rohit Kapur, general manager of Indo Pacific Aviation in New Delhi, which provides air-taxi and non-scheduled charter flights and aircraft management services for KuBase. However, KuBase is clearly aware of the potential for jet air-taxi services in India. Kapur said that the company had plans to seek out representatives from Eclipse at the NBAA Convention in Orlando, Fla., last month.

Kapur said that in addition to creating awareness about the benefits of personal air travel, one major challenge he faces as a helicopter pilot is fitting into the flow at major airline airports, which are not designed to handle general aviation traffic.

“On the roads you will find a cow, a car and a cycle all in the same lane, and they all proceed at the speed of the cow. That’s what is happening in air traffic,” said Kapur. At the Delhi airport, helicopters are required to use the same taxiways and runways as airliners, which can result in extensive departure delays. “There have been times when you start up and by the time you taxi down two kilometers you’ve burned so much fuel, you say to the controller, ‘No thanks, I have to go back because I can’t make my destination.’”

But air traffic controllers say there is little they can do about such problems because of the way the nation’s airspace is designed and managed.

“We have limited resources at our airports,” said Joy Bhattacharya, a Delhi air traffic controller and council member of the Air Traffic Controllers’ Guild of India, an independent professional membership organization. “Our priority becomes the bigger jets carrying many passengers.”

With as many as about 15 aircraft stacked in a hold, 10 more on the ground waiting for departure and only one of Delhi’s two runways in use at any given time, Bhattacharya said delays are inevitable and only getting worse.

He said that simultaneous use of Delhi’s almost-parallel Runways 10-28 and 09-27 is restricted because the departure and missed-approach paths conflict and the airport is surrounded by military no-fly zones and other prohibited airspace that limits controllers’ options for vectoring traffic into and out of the terminal environment.

R.K. Singh, general secretary of the guild, said that at Delhi, peak demand is for as many as 40 operations per hour in a system designed to handle only about 25.

“The potential for business aviation is high,” Singh said. “But there is no defined mechanism to deal with it.”

The face of the typical business aircraft user is also changing. While the handful of business jets in India today are owned mostly by large utility, energy and manufacturing corporations such as Reliance (which, according to DGCA records at press time, owns a Global Express and a Gulfstream IV) and Tata Iron and Steel (which owns a Falcon 2000 and several King Airs), Karan Singh is also seeing increasing interest in new aircraft purchases from “a bunch of people you wouldn’t consider,” such as construction companies.

“People are looking at acquiring serious jets” in the $15 to $20 million range, he said–aircraft capable of nonstop service from India to Europe. Singh said he anticipates increased demand for midsize to super-midsize jets, such as the Embraer Legacy.

Dedicated General Aviation Facilities

Yet despite this apparent demand for business aircraft, one of the biggest advantages of general aviation in the U.S.–the ability of passengers to avoid the crowds and public exposure of the main passenger terminals–has not been realized in India because there are no separate facilities for general aviation.

But this is likely to change, Kubase’s Singh predicted, as deep-pocketed corporate users demand more and more services, but he cautioned that the change would be gradual. He expressed confidence that civil aviation minister Praful Patel’s initiatives for modernizing airports, reducing fuel taxes and allowing private companies to sell aviation fuel bode well for the industry.

“I think he’s a sensible guy, but he has to work within the constraints of the system,” Kapur said of Patel.

At the CAPA conference in Mumbai, T. Srinagesh, COO of Hyderabad International Airport, told AIN that the master plan for the new 5,500-acre airport includes provisions for general aviation facilities. “We are looking for people in the hangar business to come and set up hangars,” he said.

Aviation businesses in India are also realizing that they must offer a range of services to remain competitive. Indo Pacific is awaiting approval from the Indian government to become a certified aviation maintenance provider. Kapur said that historically, much of the heavy maintenance for large aircraft has been outsourced to Singapore because there have not been qualified repair facilities in India.

“People have not had the vision to get into it,” Kapur said. “We want to have the global standards in place. The infrastructure will catch up with us.”

Building aCivil Aviation Network

The future of civil aviation in India may well rest with the hardy individuals who are able to ride the wave of the airline boom and blend traditional Indian values with Western-style business management practices.

Arun Sharma, managing director of Aviators (India), is a native of Mumbai but spent seven years in Texas after earning a degree in business management and law. As an Indian businessman for more than 20 years, he has nurtured relationships that have allowed him to attract and keep a steady stream of clients. But the years he spent in the U.S. taught him the relationship between time and money and the value of written contracts, something he struggles to communicate to his clients in India.

“The challenges of doing business in India are legal,” he said. For example, potential clients will sometimes expect him to honor a verbal agreement to hold a charter time slot and may become upset if he asks them to submit their reservation in writing or put down a deposit. He spends a lot of time on the phone or meeting with clients in person, instead of conducting what would otherwise be routine business over the Internet.

“That personal touch in India has to be there,” he said.

In 1988 Sharma moved to Fort Worth, Texas, to learn how to fly. He became a flight instructor and, through some contacts at the airport, got a job selling Jeppesen products in India. It was this exposure to the general aviation business in the U.S. that compelled him to develop the business plan that would launch what has become a $4 million a year charter and aircraft management business in India.

The company operates a pair of Beech 1900Ds, both based at Mumbai. Sharma says the aircraft log about 60 hours a month, flying mostly short, hour-long legs. The company also provides logistics support and ground handling services for Jet Airways.

“There’s a gap between nine seats and 50 seats,” Sharma said of the nation’s charter fleet, adding that his company’s 17-seat Beech turboprops satisfy a niche market for customers who would otherwise have to hire two smaller twins at a higher total operating cost.

For now, Sharma is content to stick with two aircraft. “There are so many people coming into the market. We want to let it stabilize,” he said. “The government takes a lot of time to get things moving. In India, you have to have patience.”

Fractionals' Day in India Yet To Come

Though the concept of fractional aircraft ownership has existed in the U.S. for nearly 20 years, companies such as industry pioneer NetJets have learned that while their business is ultimately based on aircraft sales, what keeps them in the black is providing excellent customer service. Club One Air was launched this year as the first fractional share provider in India, and managing director and founder Manav Singh told AIN that after four years of mulling over his business plan, the timing could not be better for starting a company based on providing luxury service to wealthy individuals.

“The Indian entrepreneur is doing well,” said Singh, who has about 10 years of experience in helicopter sales. “People have become ambitious, and they are willing to spend the money.”

Singh compared flying charter to riding in a taxi and said that India’s wealthy individuals demand more attention but do not want the responsibilities of owning an aircraft outright. “We’re trying to give them the experience of an FBO,” he said.

“We feel it’s about 80 percent business and 20 percent status,” said assistant sales manager Anvita Das of the reasons people would purchase fractional shares from Club One Air. “We are trying to convert those people who are on the verge of picking up their own aircraft.”

As of early October, Club One Air operated two Cessna Citation IIs and two Citation XLSs; Singh said he plans for the company to acquire a mix of 30 jets and helicopters over the next two years. Because helicopters are widely used for charter in India due to the relative lack of hard-surfaced runways for fixed-wing aircraft, Club One Air’s Singh said offering fractional shares of helicopters is a viable option in India.

“We have found a bit of skepticism,” Das admitted, but she insisted that the company is backed by more than $20 million in investment capital and will not take on more fractional owners than it has aircraft to support.

One of those skeptics is Indo Pacific’s Rohit Kapur, who said it is difficult to own a business jet in India not only because of the lack of appropriate facilities but also because of a subtle yet powerful nuance in the way business is done.

One reason fractional ownership has not taken hold in India until now, he said, is that “the Indian consumer is a little more possessive of his asset.” For example, a wealthy businessman is not easily convinced that he should share “his” airplane–a fractional share in which he has invested a considerable sum–with complete strangers, the other fractional members, Kapur said. Instead, the customer is more likely to go into an aircraft partnership with a small group of people he already knows and trusts. Still, Indo Pacific expects to have another five aircraft under management contracts by year-end.

“I think in the next couple of years, the customer will evolve,” Singh said.