Club One Air has seen a 30-40% decline in demand over the last four months, while Taj Airs private charter flights have hit an all-time low. Experts say if this trend continues many of the air charter companies (about 89 have permits to run the services) will face a tough time and may have no option but to shut shop or sell out.
There are about 250 charter aircraft in India out of which 150 are privately owned. Companies use these charters for the purpose of business travel and private trips. With slowdown in business, the need to avail of the services of these expensive charters has seen a drop.
The corporate jet segment is not as badly hit as the civil aviation sector but the business is definitely slower than what it was a few months back. Consequently, there has been a decrease in the demand for new jets, says Captain Karan Singh, president of the Business Aviation Association for India.
Corporate flying in India is expensive compared with other countries. In the Middle East, a corporate business jet costs around $6,000 per hour, while in the US it costs around $5,000 per hour. On the other hand, in India, the cost goes up to $8,000-9000 an hour.
Given the present scenario where companies are cutting costs, availing services of a charter is proving to be a luxury they cant afford. As a result, there is a fall in the demand for these jets. Our sales have slowed down by 30-40% in the past three months. Some companies are considering selling off their charters because of the slowdown in the business, says Manav Singh, MD, Club One Air.
Conditions are no different for Taj Air, another private charter flight provider, with its sales hitting an all time low. There has been a 30% dip in our sales in the last four months. But we havent done away with our ongoing projects. This a temporary phase which has hit all the sectors more or less and by next year, business is likely to improve, says Jim Vimadalal, head of sales, Taj Air.
For a company to own a charter plane, it has to shell out an exorbitant amount as the price of the business jets varies between $10-30 million. So, when the plane is not in use it means the asset is lying unutilised. Hence, unused charters and lack of funds with the companies are prompting them to sell these charters off.
According to Mr Manav Singh, the only thing that will help in driving the expansion of the overall market is the growth of fractional jet ownership. Incidentally, Club One Air flies on the fractional ownership model, where the cost is shared both by the user and provider of service. Its not feasible to own a plane as it costs a lot. So the only way to minimise the spending and still enjoy the benefits of the charters is fractional ownership of the jets, he said.
The nascent air charter sector has been caught unawares in the current business environment, as it had anticipated only a modest dip in sales. But the fall in the sales has been much more than they expected. Four months back we had predicted a slowdown but not as grave as it has turned out to be. However, by next year we foresee the mood of the market changing and a growth in our business, said Captain Karan Singh. But for the moment dark clouds are hanging over the over charter business.