Karan Singh, Kubase Aviation managing director and president of the Business Aviation Association of India, is optimistic about growth in India
Business aviation ought to be taking off in Asia, given the booming economies and growing number of rich individuals and companies. Yet, shackled by red tape and high taxes, growth is much slower than expected.
"Our selling point is flexibility, convenience, security and total control," says Logan Ravishankar, chief executive of Singapore-based Myjet Asia. "Yet we cannot provide our Asian clients with what we preach. We're grappling with issues like permits and landing costs."
China is still seen as having the most potential. Much has changed in a country where rich industrialists were once anathema to its communist principles and paranoia about individuals flying small aircraft still persists. "All the ingredients for success are there," says Ricky Leung, general manager of Hong Kong-based BAA Jet Management. "China has a large land mass, a booming economy, and rich companies flush with cash after successful listings."
While China has only about 50 business jets, the replacement of older aircraft is accelerating and there are more first-time owners. The authorities are helping by introducing Part 91 and Part 135 equivalent regulations and letting unscheduled flights get permits in about 24h.
Existing domestic operators are mainly linked with the national airlines, but foreign operators - particularly from Hong Kong - are keen to get in. BAA is one of the most ambitious, with a joint venture in Shenzhen at the industrial heartland of Guangdong Province. It eventually wants bases at several cities offering charter services with a fleet of Chinese-registered aircraft. "It is a risk, but the potential returns are enormous," says Leung.
TAX BUGBEAR
One bugbear is a tax of 22% on aircraft imports. And while China is building an average of five airports a year, there remains a shortage of proper facilities. "It does not make sense that China has only 100 airports while the USA has 10,000. Corporate aviation is a business tool that brings in investments, so high taxes are counter-productive," says Chuck Woods, chief executive of Macau-based Jet Asia.
India is potentially bigger than China - it has twice the number of billionaires and 150 business jets, and Karan Singh, managing director of Kubase Aviation and president of the Business Aviation Association of India (BAAI), says annual growth will be 30-40%. The Directorate General of Civil Aviation reportedly has around 200 aircraft registration applications pending.
Business is booming and Viren Gupta, chief executive of Multi-Track Air Charters, says: "I'm getting bookings six months ahead of time. I've been in the business for 15 years and not seen anything like this before." New charter and management companies want to take advantage, with a potential investor saying: "Indians love flaunting their wealth and a private jet's 'bling' factor is very high."
But they could learn from Jupiter Aviation, an Indian aviation services provider. It announced plans to set up a fractional ownership company in February, but dropped them in April. "We underestimated the hassle," says chief executive Ravi Narayanan. Its problems: taxes, red tape and woeful infrastructure.
FLEXIBILITY PLEA
"There is a tax of 25% on aircraft and it can take up to six months for approval. That discourages a lot of people," says Singh. Foreign- registered aircraft must also apply up to seven days ahead for landing permits. Gupta says this should be cut to a day and that the DGCA should have an office open 24h to process applications. "They should realise that corporate aviation needs flexibility."
Plans for new airports in major cities could take years to materialise. Gupta suggests that numerous underused airstrips could be converted into business aviation hubs, saying: "It would be cheaper than greenfield facilities."
Japan has top-notch facilities - and a restrictive bureaucracy that curtails the industry. Operators must get permission for flights over a week in advance, and airports in Tokyo impose severe restrictions on their use - business aircraft are allotted only 21 slots a week at Narita, while they can use Haneda only from 23:00-05:59. Neither airport has fixed-base operators, so passengers are bussed to the main terminals to queue with regular travellers.
The Japan Business Aviation Association's proposal to convert a smaller airport at Tokyo into a corporate aviation hub has fallen on deaf ears. The world's second largest economy had fewer than 63 registered private aircraft in mid-2006, compared with over 15,500 in the USA, and that number is falling. Yoichi Kubota, the association's chairman, says: "We are talking and can only hope for the best."
But countries such as Indonesia, Malaysia, Thailand and Singapore welcome business aviation. Businessmen with regional operations help drive growth, says Jon Evans, chief executive of Asia Corporate Jet. "They want to see the coal mines and plantations they've invested in, and business jets help make that happen." Ravishankar adds: "People talk about China, but where's the growth? There's more happening in Indonesia and Malaysia, where you can spend $30 million on an aircraft and won't have problems taking off or landing."
The authorities are playing their part. Singapore is expanding business aviation facilities at its Seletar airport, with two companies looking to build FBOs and maintenance firms expanding their operations. There are similar plans for Subang airport in Malaysia's capital Kuala Lumpur, and at the old Don Muang International airport in Bangkok, Thailand.
CORPORATE SAVVY
Throughout Asia, users of corporate aviation could become savvier. For example, around 75% of the aircraft in Indonesia and 90% in Malaysia are used exclusively by their owners. "People fly for a year before realising the high costs, and then they let it go for charter. There's little understanding of how a corporate jet can work for you," says Ravishankar.
There is also a long waiting time for new aircraft, with some suggesting that a NetJets-type fractional ownership concept could work in Asia. "Someone could take a punt and put two aircraft in each country and market it to everyone," says Evans. But Ravishankar says that there may not be enough demand. "Each aircraft needs 700h of flying time to break even and 1,000h to make a decent profit. I doubt the market has matured by that much."
The industry could also do a better job of lobbying governments to reduce taxes, free up airspace and lower landing restrictions. Some say that the Asian Business Aviation Association, which has 50 members, is too fragmented and focused on north-east Asia.
But Woods, who became its president in February, says: "I'm reaching out to everyone in Asia-Pacific, but the members must be more active in trying to convince the governments in their area. Business aviation has great potential, but it can be realised only if everyone works together."
Source: Flight International
