Demand for charter flights saw uptick last year amid curbs, safety concerns: Experts
MUMBAI: The Covid-19 pandemic outbreak last year led India, much like the rest of the world, to place curbs on visas and travel to contain the transmission and spread of the virus. The ongoing second wave of the pandemic, which is more infectious, means that the status quo is likely to be maintained in the months to come.
In the absence of regular international and domestic flights and preference for safety, health and hygiene coupled with the need to adhere to social distancing norms for travel, industry experts said international private or business jet operations that were so far considered a travel mode for the “elites” by policy makers in the country recorded an uptick last year.
“We ended 2020 better than 2019 with a 10% increase in business in spite of the loss during the lockdown period. We see this trend continuing in 2021 as well,” said Rajan Mehra, chief executive officer, Club One.
The private aircraft charter firm witnessed a gradual rise in business from August and saw a perceptible rise during September to December.
“The percentage of international bookings has increased because before the pandemic, the ultra-wealthy would use private aviation for their domestic journeys but preferred first or business class on commercial airlines when it came to trips outside the country. This has changed dramatically post-pandemic as they now prefer safety, convenience and hygiene of a private jet over money,” said Mehra.
The segment performed better than the scheduled airlines business – which suffered a much larger impact in Covid-hit 2020 – as private charters were a preferred mode of transportation by customers during lockdown that kept their businesses afloat for companies across the country, said industry insiders.
Many first-time travellers are also using charter flights to fly to their destinations, keeping safety in mind.
Jetsetgo Aviation recorded a nine-fold increase in its bookings’ queries with around 70% from new fliers, said Kanika Tekriwal, its chief executive officer and founder. Stating that the demand for charter aircraft in India has been growing consistently – backed by more than 6,000 ultra-high-net-worth individuals (UHNWIS) residing in the country – Tekriwal said compared to the growth in 2019, the company was unable to match their progress in 2020.
“However, considering 2020 was a dent to all normalities, the industry saw a tremendous growth in its business, as private flying was considered to be a more suitable option due to Covid-19 safety measures with less touch points,” she added.
However, KM Unni, chief operating officer, Reliance Commercial Dealers Private Limited, said nearly 95% of private charter fleet was grounded in the first quarter of 2020, owing to government restrictions on flying commercial and general aviation aircraft. “Just about 5% fleet was under service as air ambulances ferried medical supplies and medical staff. The largest customers for private charter operators are corporate houses, especially in auto, real estate, power and infrastructure sectors. But due to the pandemic, none of these sectors seem to be doing well in the current circumstances,” said Unni, adding, “There is a chance of revival only if the economy does well.”
‘Unfavourable rules’
Though “favourable changes” in regulations governing the private charter segment in the past two-three years have helped boost the business further, industry leaders said high tax structure, high cost of operation, dearth of MRO (maintenance, repair, and overhaul) capabilities in the country are contributing to the stagnation in private charter business.
A 15% IATT (inland air travel tax) was levied on air tickets/ charter flights in the 1990s, which was a big hurdle in promoting aircraft charter industry in India. This was abolished in January 2005 with protracted efforts from the industry. However, a 10% service tax was introduced in May 2008, which later increased to 12% and finally culminated into GST (goods and services tax) in the year 2017.
“Currently 18% GST is being levied on aircraft charter flights, which is a major hurdle in the promotion of the aircraft/helicopter charter industry in India,” said Sanjay Malhotra, president, Jubilant Enpro Pvt Ltd, while pitching for 5% GST on aircraft/ helicopter charter flights.
“Aircraft/ helicopter import/ acquisition procedure needs to be re-looked at with a view to ease the procedures, if possible, and promote aircraft/helicopter charter industry and tourism in India,” he added.
Stating that there have been numerous barriers in the Indian private aviation industry, Tekriwal said about 25-30% costs, excluding fuel, are dollar denominated, and the rupee depreciation falls back poorly on the industry.
”When there is a rise in crude prices, it increases the fuel cost, which eventually increases the operation cost of the airline. It compels airlines to go for an upward fare revision. No GST should be implemented on fuel as it hits cost of operations very high,” said Tekriwal.