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On Private Wings
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But faced with the decision to spend $23 million on a super mid-size Hawker 4000 long-range jet, or even $4.1 million on the basic turboprop King Air C90, businessmen facing a cash crunch might put off purchases and use scheduled airlines. Vick makes no bones about the fact that, like other luxury product makers, HBC too has been badly mauled by the recessionary conditions. HBC's revenues are down from a $4 billion peak in 2006 to the current annual range of $1.8 to $2 billion. The Wichita, Kansas-based company is now selling just 250 planes a year compared to 450 in its happier days in 2006. It has shed half its 12,000 employees over these trying years.
The recession has split the business jets market in the West with HBC, Cessna, Learjet and others in the lower segment having taken a deeper dive vis-a-vis the upper end of Dassault, Bombardier and Gulfstream jets. The smaller jets faced the squeeze to a greater extent as they were bought through third-party finance and banks' willingness to lend declined. The larger jets were financed by credit facilities available within the bigger corporations. "The slowdown also gave rise to a large second-hand market that has hit companies such as Hawker Beechcraft," says Vick.
It is in this context that the HBC team is making a massive push into India, as it is into other emerging markets like China, Africa and South America. Though the US still accounts for 60 per cent of its aircraft sales, emerging markets will play a key role as HBC fights to do a turnaround. In the business planes segment, India is already HBC country. "We command 60 per cent of the business planes market and as much as 85 per cent of turboprops in India," says Daniel Keady, vice-president-sales for Asia Pacific and India.
This is borne out by JETNET Research that says 58 per cent of total business aircraft registered in India are from HBC. In the luxury segment of private business jets, India started from a virtually non-existent base, but is witnessing fast-expanding numbers. In its first biannual report in 2011 on the subcontinent's jet market, US consultancy Firestone Management said India's private jet fleet had grown 50 per cent in three years by adding 43 business jets to a total registration of 136 aircraft. Hawker Beechcraft tops the list with 35 jets (26 per cent) followed by Cessna with 31. Others include Bombardier (24), Dassault (17), Gulfstream (15) and Brazil's Embraer (9). In the turboprop arena, too, HBC flies high with 120 aircraft in Indian skies. "India is embracing the need for safe and efficient business jet travel," says Firestone Management founder, managing director Justin Firestone.
The HBC line-up for India is a set of three business aircraft straddling different points of the affordability index. At the high end is the flagship Hawker 4000 that has a range of 3,500 km. At the mid-level is the lighter Hawker 750 jet , and there is the best-selling King Air turboprop series — the 350, which can carry 11 passengers, the 250 with room for seven and the smallest King Air C90 with capacity for five. This series has been around since 1994 and is chosen for its dependability.
Hawker Beechcraft holds 85 per cent of the turboprop market in India, and the King Air line is its mainstay. "There is no competition to King Air as the others cannot match its fuel performance and its ability to access areas with underdeveloped airstrips. Smaller jets cannot venture into these adverse conditions," Keady told BW. There are cheaper Hawker aircraft too, like the 6-seater, single-piston Bonanza, which sell well in South America. But these are owner-flown and are, hence, not marketed in India.
The business planes maker has gone through a chequered history. It was initially set up in 1932 as the Beech Aircraft Company by Walter and Olive Beech in the US. Electronics giant Raytheon bought it out in 1980 and later, in 1994, merged Beech Aircraft with the Hawker jet business it had separately acquired from British Aerospace. Raytheon Aircraft Company, the new merged entity, finally emerged as Hawker Beechcraft Corporation in 2007 after a $3.3 billion buyout by G.S. Capital Partners and Onex Partners. "We have inherited a debt of $2.2 billion and our main concern is to manage it well," says Vick. The strategy includes downsizing and transferring some operations to Chihuahua, Mexico.
Keady says India compares well with others on ‘hard infrastructure' — airports and parking facilities. He says clearances to put an aircraft in the sky take 3-4 months from purchase. "India has invested a lot in infrastructure, but we face a crunch when it comes to parking space," he says. But ‘soft infrastructure', by which Keady means training facilities for pilots, is woefully short here and can be a drag on growth, he says. Talking of the ‘chopper' segment in private aviation, Keady says while there are 250 privately owned helicopters in the country, their slower and short-haul profile will ensure they are not competition for the longer haul private jets and turboprops. Keady, Vick and HBC also hope chopper owners will graduate to business jets soon.
(This story was published in Businessworld Issue Dated 16-04-2012)