Demand for charter flights saw uptick last year amid curbs, safety concerns: Experts

The outbreak of Covid-19 pandemic 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 outbreak of Covid-19 pandemic 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.

HT Image

In the absence of regular international and domestic flight services and preference for safety, health and hygiene coupled with the need to adhere to social distancing norms for domestic 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 Mehta, 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 prior to 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 their trips outside the country. This has changed dramatically post-pandemic as they now prefer the safety, convenience and hygiene of a private jet over money,” said Mehta.

The segment performed better than the scheduled airlines business – which suffered a much larger impact in the Covid-hit 2020 – as private charters were a preferred mode of transport 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 regulations’

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% percent 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 again 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% on aircraft/helicopter charter flights.

“Aircraft/ helicopter import/ acquisition procedure needs to be relooked 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 as operators 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 aviation industry. These challenges handicap the industry to grow rapidly in the country.

Aviation turbine fuel (ATF) is one of the important sections of the aircraft/airline industry. The jet fuel prices are not reduced in proportion to the fall in international crude oil prices.

“When there is a rise in crude prices, it increases the fuel cost, which eventually increases the operation cost of the airline. Besides, it compels airlines to go for an upward fare revision to offset the increased cost of operations. No GST should be implemented on fuel as it hits cost of operations very high,” said Tekriwal, adding the need to work around the ease of purchasing the aircraft into India.