Bullish Indian Market

The Business Aviation Association for India predicts that there will be 1,400 private aircraft including helicopters by 2015, compared to some 550 today. Considering only jets, Bombardier forecasts that the Indian business fleet will grow at a CAGR of 13 per cent over the next decade, and account for around 440 jets by 2019.

When will the globa l business aviation industry emerge from its prolonged slump? Demand for new aircraft is still lacklustre, partly because pre-owned ones are piled up everywhere awaiting new owners. According to a Honeywell Aerospace forecast of October 2010, global sales of new jets would be down about 17 per cent in 2010, following a 34 per cent tumble in 2009, when just 849 jets were delivered compared with an all-time high of 1,313 in 2008. When will the 2008 record be equalled? Few analysts are willing to bet on any time before the last few years of the decade. One expert even recalls a fall of this magnitude between 1981 and 1983 when sales of business jets shrunk by 40 per cent. It took another 16 years for deliveries to regain its former peak. Scary thought!

Part of the problem is the hangover following the party of the last few years. The industry enjoyed a superb run in the period between 2003 and 2008, with global deliveries more than doubling during this time. What goes up must come down; too many aircraft are now chasing too few buyers. What is remarkable is the bifurcation in the market. While the large-cabin aircraft category witnessed a production fall of just four per cent, in the bottom half of jet categories—medium- to small-cabin aircraft—production dropped by a whopping 43 per cent. Could it be because the lighter end of the business aviation market is highly dependent on third-party finance, which has practically dried up as a result of the financial meltdown? The top end of the market, on the other hand, is far less tied to external finance, which explains why sales of large-cabin, long-range aircraft suffered nary a dip.

There is no need to lose heart. Honeywell expects expansion to resume next year and forecasts that 11,000 new business jets will be required from now until 2020. Experts tell us that by then the world’s top three economies will be China, USA and India in that order. India has been largely unscathed by the woes of the business aviation industry, mainly because its economy quickly shrugged off recessionary blues and returned to high growth. Good reason for the world’s major business aircraft manufacturers to flock to the country in the hope of clinching lucrative deals. And what better platform could there be than an air show?

Aero India Rising

The first edition of Aero India, held in 1996, was a modest affair. Since then, the premier air show has gone from strength to strength and is now reputed to be Asia’s largest. It has gradually earned international recognition with the number of exhibitors, including the leading lights of the business aviation industry, going up in each edition. The eighth edition, Aero India February 2011, may have lost some of its attraction for business aviation, mainly because the biennial India Aviation air show—last held at Hyderabad in March 2010—is gradually luring non-military exhibitors away. But the Indian market’s growing potential and Bengaluru as the hub of the aerospace industry has raised expectations of seeing many aircraft including business jets on display. Aero India 2009, for instance, hosted Embraer’s Legacy 600, Dassault Aviation’s Falcon 7X, Hawker Beechcraft’s King Air and Premier IA and Cessna Aircraft’s 172 Skyhawk, Cessna CJ2 and Citation XLS.

No doubt it is the big-ticket deals that hog the headlines at air shows—like multibillion-dollar government-to-government agreements for combat aircraft. Huge orders placed by the airline industry for scores or a hundred jumbo jets also make waves. But what of the aam admi at the air show—the mere millionaire or basic billionaire, anxiously poring over catalogues and squinting at exhibits in the hope of becoming the proud owner of a beautiful business jet?

This is one area where India is still way ahead of China. China accounts for just 60 private jets against India’s current tally of 130, which constitutes the largest business jet fleet in Asia. These numbers pale into insignificance considering that the global business jet fleet was approximately 14,200 at the end of 2009. The good news, according to Bombardier business aircraft’s market Forecast 2010-29 is that the world’s total is expected to grow by a compound annual growth rate (CAGR) of 3.6 per cent to approximately 29,000 jets by 2029, net of aircraft retirements. Another 150 or so business aircraft are expected to be acquired by Indian owners this year; perhaps half of them will be jets. At least 40 will be light jets—small-cabin types that can seat four to six people.

A 2010 report by Capgemini and Merrill Lynch Wealth Management revealed that the number of high net worth individuals (HNWIs) in the country with minimum investable assets of $1 million (Rs. 4.5 crore) grew 51 per cent in 2009 to 126,700 individuals. As for the super rich, Forbes India estimates that there already are 69 dollar billionaires in the country. HNWIs and private corporations generally account for approximately 2/3 of business aircraft sales globally, so they will be eagerly courted at Aero India. Surely, almost anyone can afford a Cessna Citation Mustang at just over $3 million (Rs. 13.5 crore) or an Embraer Phenom 100 for $3.75 million (Rs. 17 crore).