Consolidation only way to make general aviation economically viable, The Economic Times, 27/5/15

Link- http://articles.economictimes.indiatimes.com/2015-05-27/news/62719131_1_...
With the business jet and general aviation industry clocking a two per cent negative growth last fiscal, consolidation seems to be the only way out to make the business economically viable, the new head of an operators' body said today.

Business Aircraft Operator Association's newly-appointed president Jayant Nadkarni told PTI that the process has already begun, though at a smaller scale, as people have realised that flying an aircraft and setting up a company with a non-scheduled operator permit (NSOP) are not conducive.

"Consolidation has already started but it is happening in a small way. When consolidation happens, slowly growth takes place, it gives you economy of scale besides making your business more focused," he said.

Nadkarni, who is also the co-founder and chief operating officer of the Mumbai-based air charter company Invision Air, said the jet operators need to adopt aircraft management business model, in which several NSOP holders collaborate with one operator, for a long-term viable business.

"There are so many compliances, liabilities and other issues that an individual NSOP holder come across while operating a company. In the aircraft management model, a concept which is quite popular in the Western world, you have several (flying permit) owners and one operator.

"The advantage of this concept is that a single operators get the fleet, he works on scale of economy and he runs it more efficiently and safer manner than an operator having just one or two aircraft," he said.

According to BAOA, there are a total of 122 NSOPs which cumulatively have around 365 aircraft. This is in addition to another 180 functional aircraft, which are owned by private firms and individuals.

Also, more than 90 operators out of the total 122 NSOPs, have three or less than three aircraft.According to the Association, these NSOPs together hold a total of about 150 aircraft.

"Running the business has become all the more difficult in the face of duty differential," Nadkarni said.

Currently, an aircraft imported for personal use attracts import duties between 19 per cent and 21 per cent, while one imported for commercial operations attracts duties of 2.5-3 per cent only, as the latter is not subject to countervailing duty and special additional duty.This differential tax structure has led many private jet owners to import aircraft through the NSOP route to save on customs duty.

The association in its pre-budget demands had sought uniform and lower duty on both non-scheduled operator permit and private category to encourage import of more aircraft for enhancing regional connectivity.This, demand, however, remained in unaddressed in the 2015-16 Union Budget.

Emphasizing that his efforts as the head of the industry body would be to bring the industry closer to the regulator and government through regular meetings and dialogues, Nadkarni said, "Its not going to be of blame game but a free and fair discussions to understand each others' concerns and work together for the betterment of the industry."

Terming the Government's proposed policy of prodding the airline industry to enhance regional connectivity and floating proposing changes in the existing route dispersal guidelines in this regard as "a good step", Nadkarni batted for simplifying the proposed domestic flying credits formula.

"DFC rule is complicated and needs to be simplified. But this would certainly help the Government in its achieving its objective of promoting regional connectivity," he said.

Date: 
Wednesday, 27 May, 2015
Publication: 
The Economic Times