Friday, May 08, 2020

Private jets industry wrecked; only 5% fleet flying, 40% aircraft to remain grounded after lockdown

New Delhi: The nationwide lockdown has crippled the business aviation sector over the past two months. With the government restrictions on flying commercial and general aviation aircraft, nearly 95 per cent of the private charter fleet has been grounded. Just about 5 per cent fleet is currently under service which is used as air ambulances, and ferrying of medical supplies and medical staff. Some demand is generated by state governments.

So while the business has crashed to almost negligible level, the sector doesn't hope to get back on its feet even after the lockdown is lifted. Why? There are three reasons: potential seizure of planes by the financing companies, lower demand from corporates, and over-dependence on foreign ecosystem.

Some private jet operators have started to default on their instalments. Realising the current financial distress caused by the pandemic, the aircraft finance companies are closely monitoring the situation. They haven't really acted upon on the payment defaults. In the event of more repayment defaults, financers would likely seize the planes. Since all of these financiers are overseas, the scope of any relief is minimal.

"Indian banks, including NBFCs (non-banking financial institutions), don't finance private charters because they consider it as a risky asset class. Hence, most aircraft are either financed or leased outside of the country. GE Capital Aviation Services, Credit Suisse, SMBC Aviation Capital and others are large global leasing and financing companies," says promoter of a leading business aviation firm.

In general, there's a belief that demand for private charters would rise among ultra HNIs (high net-worth individuals) post-Covid since they would avoid travelling in crowded commercial airlines. But there are some arguments that suggest that the demand will actually fall.

"If the economy is not doing well, the demand would fall. The biggest customers for private charter operators are corporate houses, especially in auto, real estate, power and infrastructure sectors. None of these sectors seem to be doing well in the current circumstances," says Kanika Tekriwal, founder of private jet service JetSetGo.
07/05/20 Manu Kaushik/Business Today
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