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| Time-share in
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Club One Air offers Indians
the chance to partly own a personal jet. Will
others soon follow? |
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| samar
srivastava |
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| Manav Singh in Delhi
with a Cessna Citation II in his fractional
ownership
fleet | |
 | While the new flock of
low-fare airlines is busy pleasing the masses,
Manav Singh is chasing the rich. His new
company, Club One Air, offers time-shares on
personal jets: all the prestige of flying to
lunch in Mumbai after your business meeting in
Chennai, but with none of the hassles of keeping
a flight and maintenance crew on the
payrolls.
Though the first service of its
kind in India, Singh is certain to meet some
pent-up demand. Currently, 33 charter plane
operators cater to industrialists, political
parties and others who can afford about Rs 3
lakh for a quick jaunt from Delhi to Mumbai.
It's a highly fragmented industry with most
operators having a fleet of just one or two
planes, so flights must be booked well in
advance. Only a few months ago, Bill Marriott
(of the Marriott hotels) had a tough time
getting a plane during his India sojourn.
Perhaps that's why big businesses like
Reliance have their own aircraft. For businesses
who aren't behemoths though, owning and
maintaining an aircraft is simply too expensive
and too troublesome.
Manav Singh, who
also runs charter flights and has almost a
decade of experience in aviation, wants to give
India's high-flyers another way of reaching
their far-flung appointments - what is known as
fractional ownership.
Typically, a plane
has about 800 flying hours a year. In Club One's
model, these hours are divided into small
shares, or 'fractions'. The minimum fraction
offered is 100 hours (for those who prefer hard
goods, that's about one eighth of the plane),
with 150-hour and 200-hour slots available as
well.
For more time, customised options are
allowed.
And what exactly do you buy with
your hours? Delhi-based Club One now has three
Cessna aircraft (a Citation Excel, a Citation II
and a Citation S-II), with seven more joining
soon. They come equipped with the latest
avionics, multimedia facilities as well as a
pantry which can cater to the owners' tastes.
But the key advantage for businesses like Club
One is rather unglamorous - it's safety.
Employing
expert maintenance and flight staff and keeping
up with stringent safety norms for just one
plane is a big headache. With professionals
handling their entire fleet, Club One's
customers will never have to worry about paying
parking fees or ordering obscure engine repair
parts. Singh has 15 pilots and 110 employees
overall.
"A big challenge for us will be
to persuade our current clients to shift from
chartering to being fractional owners," says
Singh. "I am personally involved in marketing
the concept and make regular calls on customers
with safety and reliability being our key
marketing planks." He aims to have 40 clients by
the end of this year, but expects that the
market is much larger and sees himself selling
100 shares in two years.
While charters
have to be booked months in advance, for Club
One a simple two-hour notice is sufficient.
Singh believes, like other fractional ownership
companies, that it is likely that customers
won't all ask for the same planes at the same
time. However, if there are scheduling
conflicts, he plans to fly in extra planes that
he owns from other locations at his own cost.
Even without scheduling conflicts, the actual
aircraft that an owner may be given depends upon
the availability and on the requirements of the
flight. For instance, if an owner wants to fly
to the Gulf and has a share in a Citation C II,
he will be offered a Citation Excel aircraft
which can fly longer distances. However, he will
be charged more.
Singh's new venture
starts off with Rs 100 crore (there is a
slightly larger component of debt than equity).
Apart from Singh, a venture capitalist fund has
a stake in the business too. Though still a
small operation, what's most important for Singh
is speed - the first mover advantage is key,
since the market of people who can afford even a
part of a plane is finite. Says Singh: "We have
aggressive expansion plans, to at least 15
planes by the end of next year. I am absolutely
certain that a market exists."
Still,
Singh had better scale up fast, as others are on
his tail. Deccan Aviation, the Captain
Gopinath-promoted charter operator, also plans
to enter the market. Jayant Pooviah, director,
Deccan Avation, says that Deccan Aviation will
enter the fractional ownership market by the end
of this financial year with Learjets. Another
operator, Faija Air (set to be based in Delhi)
will be entering both the charter as well as the
fractional ownership market by January
2006.
Aviation analysts in India are
bullish on the concept. Kapil Kaul of the Centre
for Asia Pacific Aviation, a specialised
aviation consultancy, feels: "The current
[aviatioon] boom has largely left out non-metro
towns and businesses like chartering. These
businesses also have huge potential, and before
long there could be a clamour to enter this
segment as well. We would expect the top 500
companies in India to be potential clients in
the long run."
This concept has come
rather late to India. Richard C. Santulli
pioneered the concept of fractional ownership in
1986. He started NetJets, which began as a
charter operator and then evolved into a
fractional ownership firm that took the market
by storm. From 10 initial owners in 1986, the
worldwide tally now totals close to 7,000.
Twelve years after its inception, famed
investor Warren Buffet bought the company. He
said of the deal: "We knew we were purchasing
the premier provider of aviation solutions in
the world." Clearly, he was sold on the concept.
Hugely popular with its intended market
(businessmen and corporations) several
sportspersons like Pete Sampras and Andre Agassi
have also picked up shares.
But be sure
- even if it is only a 'fractional' share,
owning any part of a plane is an expensive
proposition (see 'Comparitive Costs'). The
ownership cost, which is the initial down
payment for your share of the plane, can be
financed. Singh is in the process of partnering
with a bank to offer financing for 75 per cent
of these costs.
To come close to matching
the success of NetJets, a fractional ownership
service must have bases across the country to
provide an on-demand service. Though Singh is
starting out in just Delhi, he plans to launch
the ser-vice in Mumbai soon. Also, Club One will
get at least two helicopters to transport its
clientele to remote places without airstrips.
Whether a business convenience or
necessity, prestige and luxury is obviously a
factor for prospective owners. Catering to the
huge egos of business tycoons will be a delicate
task, and it will bring huge rewards if it is
carried off well - NetJets claims that 70 per
cent of its business comes from owner referrals.
Customer satisfaction, it seems, may be the
fastest way up for Club One. |
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