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How to own a plane, cheaply
September 27, 2005
Giving India its first aircraft fractional ownership programme, Manav Singh, managing director of Club One Air, has pioneered the concept in India that has been in existence in the West for the last two decades.
Having completed his graduation in the United States in finance and marketing, Singh returned to India to start Aerostar Aviation 10 years back, a company providing engineering services to aircraft in India and the Middle East.
Seeing the concept of fractional ownership of an aircraft work well in the United States, he contemplated starting a similar venture in India. He launched Club One Air in August 2005, giving corporate India the opportunity to have its own, exclusive and premier airline.
Is India ready?
Fractional ownership of an aircraft is a mature concept and India has opened up economically in the last 5-6 years. There are more millionaires and billionaires in India today than ever before.
Young entrepreneurs from old business houses have aggressive growth plans. While the country is not very well connected, this isn't crucial for even the United States is not. Fractional ownership is a great idea for those who want travel with flexibility and access to a jet of their own.
Besides the flying charges, the fractional ownership costs between Rs 50 lakh and Rs 2 crore (ranging between one-eighth and one-fourth of an aircraft cost). The concept, highly popular in the West, enables the owner to own an aircraft at a fraction of the cost.
The firm, which now has a fleet of five Cessna Citation business jets, would grant financial and legal rights commensurate with the share of the fractional owner.
The project was started with an investment of Rs 100 crore (Rs 1 billion). The fleet of Club One Air has five aircraft and five more will be added to its fleet before the year ends.
Starting the venture was a little difficult, mainly because it was the first time that such a concept was being introduced to India. Explaining the concept of fractional ownership of an aircraft to the authorities and clients was the most difficult part.
How it works
One usually does not fly for more than 200 hours a year, even if one has a personal aircraft, which has the capacity to fly for 800 hours. So ultimately one uses only 25 per cent of its capacity, and 75 per cent goes to waste, even though one has to keep up the costs on maintaining it.
Also, aviation is a very specialised field so one may not get the best people to manage the whole show, which can be dangerous.
In fractional ownership of an aircraft, one pays in proportion to the hours used. If you want to buy 1/6th share of an aircraft, then your cost of acquiring that share will be generally 1/6th of the cost of the entire aircraft, including the induction costs and overheads of standby aircraft.
Depending on the percentage of your share, you will be entitled to a certain number of flying hours each year. This is an opportunity for people to buy into a share of an aircraft and avoid wastage of funds.
The wider perspective
This concept has worked phenomenally worldwide. There are today approximately 8,000 fractional owners of aircrafts across the world, from a meager 110 in 1991. Every two years the number of fractional owners is doubling. The demand is huge.
Expansion plans in the pipeline
By the end of this year we plan to be in three cities, Mumbai and Chennai apart from Delhi where we are headquartered, and in six more cities by next year. We have made a projection that in the next two years, at least 100 people in India would like to be fractional owners of an aircraft.
Also, to break even in about three years, we will require around 30 aircraft to make money. Currently, we have priced ourselves low. The idea is to get people familiarised with the concept.
It's a great business tool for anybody to have, since you don't have to be a slave to delayed departures and other stressful travel hassles. You are the boss and decide the timing of your travel in luxury.
As told to Nanditta Chibber