The Corporate Jet market is ready to Fly again as companies are increasingly looking at Small Jets as a growth engine.
From a utilitarian standpoint, corporate jets should always be insulated from economic cycles. They take their owners or users closest to a final destination in the fastest time possible. Travel is unavoidable. So even if economic conditions are biting, corporate jets are not really politically incorrect possessions.
TS Kalayanaraman of Kalyan Jewellers agrees. He purchased a seven-seat Embraer Phenom 100 in, of all places, Kerala. The private jet helps him supervise his 30-odd jewellery stores that span Kerala, Tamil Nadu, Karnataka, Andhra Pradesh and Puducherry.
"A private jet is not a luxury; it is a necessity," he told ET in an earlier interview, referring to the poor air connectivity in India. Kalayanaraman had trouble reaching small towns like Hubli, Belgaum and Tirupati. Travel took days — one flight a day, a couple a week or no flights at all — but now thanks to the jet, he zips from Bangalore to Hubli in half an hour.
The jet has set back the jeweller by Rs 30 crore. Flying itself costs nearly Rs 50,000 an hour and annual maintenance costs run up to Rs 2.5 crore. These are peanuts for Kalayanaraman because he heads a Rs 8,500-crore group. More importantly, he is able to run his business efficiently. "Time is money," he said.
Buying Principle
It is the same principle that makes business jets a lodestone for companies, according to Rohit Kapur, president, Business Aircraft Operators Association: "Money doesn't matter to people like Mukesh Ambani and Ratan Tata. What is it that money can't buy them? It is time." For an Ambani or Tata, two days are worth at least millions of dollars, says Kapur.
As there are many Kalayanaramans, if not Ambanis, in India and with their tribe increasing manifold, corporate jets should be enjoying a stupendous growth. They did. The number of business aircraft grew at a steady clip of 10-15% from 2002 to 2005. In 2006, growth peaked to 26%.
More and more Indian companies were then expanding aggressively, says Kapur. The new generation of business leaders understood how they could use business aviation as a growth tool, he says. But the halcyon days were short-lived. In 2007-08, growth fell to 10%. A few things happened that became barriers to growth, says Kapur.
"One, the government imposed an import duty of 25% on acquisition of aircraft. The next year, the world economy collapsed. India was not affected but the sentiment became weak." To make matters worse, some companies came under government gaze for evasion of import duty on aircraft. "People backed off," says Kapur.
Today, there are nearly 1000 business Aircraft [ Small and Big ]
in India. It is by no measure a small number because India is home to the second-largest business jet fleet in the Asia-Pacific. Yet, a sizeable part of this fleet is made up of helicopters.
If one were to count only the private jet fleet in the country, it would be no more than 160, according to data by aviation regulator, the Directorate General of Civil Aviation ( DGCA). However, the number of business jets in India is actually much higher because many Indian customers choose to register their aircraft abroad due to red tape and taxation.
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