Business charter segment flies low on fuel price hike
The impact of the fuel price hike is being felt in the business charter segment as well, which has made chartering a business jet or a chopper dearer.
By ET Bureau |
NEW DELHI: The impact of the fuel price hike is being felt in the business charter segment as well, which has made chartering a business jet or a chopper dearer. According to the Business Aviation Association for India, the direct cost of operations for charter operators has gone up by 35% in the last 6-9 months.
Fuel, which constitutes almost 70% of the direct operating cost for charter players, has gone up from about 55% six months ago. As a result of this, players such as Taj Air, Pawan Hans and Deccan aviation have hiked rates by 10-15%, while others are contemplating a hike. There are about 200 business jets and over 100 helicopters used for civil operation in India.
���So far, rates were low thanks to competition, but now we have reached a stage when we will have to increase prices,��� says Capt Karan Singh, president of the Business Aviation Association for India.
Fuel, which constitutes almost 70% of the direct operating cost for charter players, has gone up from about 55% six months ago. As a result of this, players such as Taj Air, Pawan Hans and Deccan aviation have hiked rates by 10-15%, while others are contemplating a hike. There are about 200 business jets and over 100 helicopters used for civil operation in India.
���So far, rates were low thanks to competition, but now we have reached a stage when we will have to increase prices,��� says Capt Karan Singh, president of the Business Aviation Association for India.
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Corporate flying in India is already expensive compared to other countries. In Middle East, a corporate business jet to be used for an hour costs around $6,000 while in US it costs around $5,000. In India, on the other hand, the cost goes up to $8,000-9000 an hour.
Even in such a scenario, companies are forced to hike rates. As Mr Singh, whose company Indo Pacific Aviation, is planning to hike rates, says, ���We are under pressure to increase rates by at least 10-15%.��� Taj Air has increased rates from Rs 325,000 to Rs 375,000 an hour, informs their head of sales, Jim Vimadalal. Deccan Aviation, which offers helicopter charter services, too has added a ���little over 10% to its rates,��� says its director Col Jayanth Poovaiah.
Even the state-run Pawan Hans is not immune to the rising costs. With its ATF bill going up, the charter operator is passing on the additional expanses to the customers. The rates for its ad-hoc customers have gone up by 10-15%. ���For long term contracts we try and offer an ATF neutral price but for others, we have already increased the rates,��� says a Pawan Hans official. The demand for helicopters is not expected to be affected much as ���those who opt for the service do not have a second option,��� explains the official.
For helicopters, fuel as a percentage of overall direct operational cost has gone up from about 7% to 10% over the last six months with fuel prices going up by a whopping 47%. Helicopters consume less fuel compared to business jets but component costs for helicopters are higher. Even at Club One Air, an executive airline based on the fractional ownership model, increased operational cost is putting pressure on the bottom lines.
The operator has currently not increased its rates but given the current scenario, say industry analysts, they will be compelled to re-look at their pricing model.
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The demand though is still going strong for charter services. Mr Poovaiah believes that a person who can afford to use a helicopter will not stop using it if the rates go up by 10% or so. Even for Taj Air, the demand has only hit marginally, says Mr Vimadalal. ���In this segment, one wouldn���t go in for a cheaper service as safety is paramount. They would come back to us,��� he explains. But this cannot be sustained indefinitely. ���Demand is strong but it���s getting to a point where pricing will start impacting demand,��� says Singh.Interestingly, fuel is not the only worry for charter players. Costs are going up on every front, be it the pilot salaries, maintenance and even catering costs. The CEO though has to reach his meeting or ferry his clients around in style. It remains to be seen if he sticks to chartering flights in these times of rising costs.
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