DARE - Because Entrepreneurs Do

As corporate India lines up to buy aircraft, Rs 1,500 crore every year is in the wings waiting to be made. Are you game to catch this wave?

If it was not for a friend who sought his help in buying a personal jet four years ago, Karan Singh would still have been a pilot on commercial aircraft. “He wanted me either do it for him or get it done through someone else. I chose the former,” says Singh, CEO of Kubase Aviation, the company he started four years ago to help his friend buy that plane.

Kubase has subsequently diversified into aircraft management and maintenance. And Singh is currently negotiating a JV with a global major.

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Segment: Corporate Aviation

Size: Rs 1,550 Cr ($30 million) per year

What’s in it?: From buying to management and maintenance, there is many an opportunity for entrepreneurs in the country’s sunshine sector

Limitations: Stringent regulations, manpower shortage, poor infrastructure

Walk into any airport in the country and the roar of an industry on the upward curve is unmistakable. And if you look carefully, you will see that it is not just the commercial aircraft, an increasing number of private aircraft are also jostling for landing slots and space at every airport.

Corporate India has taken to flying in its own aircraft in a big way. Mukesh Ambani and Vijay Mallya own fleets, but the others, including the smaller corporates are in no way behind. Bizjet owners include GMR Group, Punj Lloyd, Hindustan Construction, Venkateshwara Hatcheries, and Jaiprakash Associates. NDTV has helicopters. An increasing number of corporates across the country are queuing up to buy their own aircraft. A wide variety of aircraft, ranging from helicopters to small and medium range propeller driven craft like the Beachcraft King Air to business jets like the Cessna Citation to full-fledged Boeings are all there in this shopping list.

Buying and maintaining an aircraft is no easy task. First of all you need to identify the right type of aircraft that fits your needs and budget. Then you need to find one that is on sale.

Unlike with, say cars, aircraft have very high resale value and it is more likely that someone buys a used aircraft rather than a new one. You also need to ensure that the aircraft you are purchasing has a clean record—that it has not been used for drug-running or arms-smuggling. As you can see, buying an aircraft is not only costly but also not easy for the uninitiated.

Once a corporate house decides to buy an aircraft for its use, the deal could translate into a number of business opportunities for an entrepreneur to explore. Buying and selling alone could mean big business as an aircraft may cost anywhere between $1 million (over Rs 4 crore) and $70 million (Rs 300 crore). An industry average of 2.5% brokerage means that even one deal per year can be good business. Add to this manpower provisioning, catering, fuelling, maintenance, certification, etc. and you can figure out how big the business can get!

DARE/industry size
Current strength (no.)	271
Expected increase in 5 years (times)	3
Number to be purchased	813
Average cost per aircraft (Rs Cr)	20
Total value of purchases (Rs Cr)	16,000
Brokerage (%)	2.5
Total value of brokerage (Rs Cr)	400
Monthly expenses per aricraft (Rs L)
Crew	6
Management	4
Maintenance	2
Other Misc.	3
Sum Total	15
Annual/aircraft	180
For 813 aircraft	1,46,340
Annual size (Rs Cr)	1500

Aircraft maintenance again is a very specialised area, requiring very high -level skills, certification and investments. The big daddy in maintenance in the country is Airworks International. Established in 1951 out of Mumbai, the company also operates in Pune, Chennai and Delhi. Operating out of 50,000 square feet of hangar space, Airworks offers both maintenance and modification services besides training in aeronautical engineering.

Now capture this. There are 271 corporate aircraft in the country and experts believe the figure would treble in the next five years. According to industry sources, 50 per cent of these are owned by non-scheduled airline operators (charter service providers) and the rest is with corporate houses, government and high net worth individuals (HNIs). According to K-Air Charters, there are 203 corporate aircraft in the country while some others put the figure at 150 aircraft and an equal number of choppers. Now, not only is the demand growing but also, there is a shortfall in the supply of available aircraft.

Some believe the demand supply gap is 5:1. The gap, to some extent, is a reflection of the situation in the West. Many of US companies, which are in the business of buying and selling corporate aircraft, are themselves looking for inventory.

If these figures are to be believed, the exponential growth of demand for corporate aircraft would lead to a rise in demand for experts who can broker deals and carry out due-diligence. It would also lead to a growth in the requirement for management and maintenance of aircraft besides trained manpower.

According to Koshi Vergese of K-Air Charters, “over the last three years, we have seen a sudden spurt in purchase of aircraft, especially by corporates, resulting in our Indian office renewing its focus on the market.” “There is a huge opportunity in the corporate aviation sector but lack of proper infrastructure acts as a deterent,” says L Morris, Operations Manager of Ventours Aviation, based out of Delhi.

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