India’s New Corporate Jet Set
India’s newly rich are acquiring that increasingly contentious totem of the western corporate world, the executive jet, in record numbers. At a time when it is becoming de rigueur to be concerned about the carbon footprint – the contrail of greenhouse gases that jets that spew across the stratosphere -- India’s 100,000 high-net worth individuals, those with more than US$1 million in assets, are snapping up spiffy aircraft at mind-boggling prices for their personal and business use.
Until very recently, corporate jet travel was a rarity in Asia overall as tightfisted titans eschewed private aircraft as an unnecessary frivolity. That has started to change, with India and China at the forefront, giving succor to manufacturers such as Cessna, Bombardier and General Dynamics and others as the US and Eurozone economies start to flag.
Driving the demand in India is impressive annual economic growth of 8 percent. The country is ranked fourth this year in the Forbes ranking of world billionaires, with 53. And, according to the Economist Intelligence Unit, India is expected to host 411,000 US dollar millionaires by 2017, emerging as one of the world’s fastest growing markets.
These developments are seriously impacting consumer spending patterns. So after experiencing the luxury of Rolls-Royces and Bentleys, corporate India is going after corporate jets. From just two dozen-odd five years ago, the number has spiraled to 200 this year, according to the Center for Asia Pacific Aviation (CAPA). In the past year, the Director General of Civil Aviation (DGCA), the chief regulatory body under the civil aviation ministry, has given the green light to about 70 Indian companies to buy 100 corporate jets. The organization estimates that over the next decade, India will host the world’s largest number of private jet owners, with demand for planes set to rise as much as 50 percent per year.
From sleek VLJs (Very Light Jets) tagged at US$5 million to the US$50 million Gulfstream, a smorgasbord of business jets, helicopters and turboprop aircraft fitted with boardroom-like interiors and plush seating are now available in the Indian market. Last year too, the government granted about 100 permits to import private jets and helicopters. According to Ernst & Young, there are over 30 air charter companies operating in India including Singapore’s Bjets, NetJets, Club One Air, GMR Aviation and Invision Air, to name a few.
Some of the biggest private craft, such as the Global Express from Bombardier, owned by industrialists Mukesh Ambani and Lakshmi Niwas Mittal, for instance, have a range of more than 6,300 nautical miles and are equipped to hold board meetings. Many feature private showers, king-size beds, internet and satellite phone connections and of course a dedicated service crew.
"The number of wealthy people in India is on the rise and their needs are also growing,” Air Deccan Managing Director Captain G R Gopinath told a local reporter recently “Over the next decade, the private jet market in India will boom even though it will largely remain the preserve of a select few."
This view is buttressed by NetJets, a wholly-owned subsidiary of Warren Buffett’s Berkshire Hathaway, considered to be the most profitable aircraft company in the world, which entered the Indian market recently. NetJets expects wealth creation in India to help it tap a potential 5,000 Indian customers, the highest for any single country.
However, the spurt in demand is also linked to the fact that India has largely been an under-served market for executive jets for many years. Now, with economic growth in Asia shifting the focus of global business, demand. Also, while earlier this segment had travel agents chartering planes for the super-rich, aircraft manufacturers are targeting their sales pitches directly at the executives. The new corporate jets ordered by Indians primarily include Gulfstream, Bombardier Global Express, Citation XL, Embraer Legacy, Beechcraft, Falcon and Airbus and Boeing. Companies operating in sectors like mining, oil and gas, manufacturing, construction and retail are some of the major demand drivers.
Sensing this business opportunity, many international business jet firms entered the fray to tap India’s fast-growing market this year. Among them is US-based Aerion which is developing a high-end supersonic business jet (SSBJ). The company claims to have received orders from five Indian customers, with deliveries to begin from 2014.
“There are at least a million Indians who can afford to buy private jets in India right away,” says Ankur Bhatia, Managing Director, Bird Air Group, which sells and leases aircraft to individuals and corporations. The group currently services 500 clients across India and has also entered into a tie-up with Regourd Aviation in France which will help it offer a wide variety of aircraft to Indian corporations and individuals on an 'on-demand' business basis.
“Private jets have become the travel method of choice for Indians who can afford them, cutting down on wait times and delays at airports that impact commercial carriers,” added Manav Singh, CEO Club One, India’s first fractional ownership airline venture. "With many Indian corporates having a pan-India footprint, there is a greater need to travel more and at short notice. This has boosted the demand for business jets in India.”
The status a corporate jet endows upon its owner and the flexibility it offers him to travel to remote places at short notice are the primary reasons propelling the demand for private and corporate jets in India, Singh says. A Bombardier study says that for every 400 hours a businessman flies his jet, he saves almost a month’s time. Another reason driving growth is that while India’s commercial airports are notoriously overcrowded and ill-equipped, business jets can tap a network of already existing airports and defense airstrips.
Singh launched India’s first Aircraft Fractional Ownership company – “Club One Air” -- which introduced the ‘Aircraft Management and Maintenance Program’ to cater directly to the business aviation community. Club One Air operates air charters on a fleet of eight light, medium and large aircraft, both turboprops and jets as well as helicopters. Singh is also launching a low-cost air charter service by acquiring 10 Eclipse 500s, a very light jet (VLJ) from Eclipse Aviation.
For NetJets, which operates over 750 aircraft worldwide, of its 20 Indian customers, 18 are high net worth individuals and the other two are companies. Each of these clients has shelled out a minimum of Rs8.7 million to fly in luxury. To augment its presence in India, NetJets has also tied up with Shreyans, which represents luxury brands like Porsche, Fendi and Van Cleef in India. “To book a VLJ for 25 hours, a customer would have to shell out around Rs8 million. This sum is quite within the reach of many
But despite the frenetic activity in this sector, experts feel freshly levied duties on imports of airplanes, helicopters and their parts levied during this year’s budget may act as a dampener. These levies will collectively push up jet prices in India by about 20 per cent even though manufacturers insist that their impact on the demand for private jets in the country will be minimal.