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Joint ventures

Joint ventures

With air fares shooting up, frequent fliers are pooling in resources to travel privately. This not only helps them bypass the delays and hassles of a commercial airline, but they also end up saving more.

As the dust settles after a spate of mergers and alliances in the turbulent aviation industry, Indians are waking up to a double whammy. Not only are there fewer flights to choose from, but they are also going to cost more. According to Kapil Kaul, CEO, Centre for Asia Pacific Aviation, the recent Jet-Kingfisher Airlines alliance, meant to rationalise operations and reduce costs, could result in a 15% hike in fares. With the economy slowing down and both corporates and holiday-makers trying to cut corners, many think it’s time to shift to the railways. However, there are still a few options that allow you to fly for less.

The most obvious one is a charter flight. Also known as an air taxi, a charter flight is usually booked through a tour operator or by a corporate body. While it works out to be cheaper than a full-service commercial airline, these flights come with little or no guarantees: a flight can be cancelled up to 10 days before departure without a refund.

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One way to avoid this is to buy a plane. No, you don’t have to be a billionaire to do so. But you shouldn’t mind sharing ownership. In fractional ownership, you can buy a block of flying time and pay management fee to a company that will be responsible for the safety, for pilot training, hiring of crew and other things that you wouldn’t know how to deal with.

Club One Air introduced the concept in India in 2005 and is now competing with global entities like NetJets and BJETS. Says Mark Baier, CEO, BJETS: “The decision to go for fractional ownership is timedriven. You save at least 45 minutes on every flight, can do three cities in a day and still be home for your daughter’s birthday. You can’t put a price tag on that.” In the long run, this option can even work out cheaper for frequent fliers (see box).

The latest alternative offered to busy business travellers is flight pooling. Introduced by Airnetz Aviation, this works like a car pool. All you have to do is visit www.flightpool.com and create a pool by specifying the sector you want to fly in and the frequency. You can also join an existing pool—and it’s free of cost. The group size will determine whether you need a helicopter, a small jet or a large aircraft. A flight pool is activated when the individual cost of flying is approved by the group, but it works out to be the same as a business class fare. Currently, the service covers over 25,000 airfields worldwide, less than 30% of which are accessible by scheduled carriers. “This will certainly reduce the cost of an overnight stay in cities where the frequency of scheduled airlines is low,” says Atul Khekade, CEO, Airnetz Aviation.

Besides, it is the most efficient option when it comes to time management. You can set your own time-table, arrive at the airport a short time before the take-off because there will be no queues for checking -in the luggage and security screening. You also bypass the time-consuming landing and baggage claim process.

That’s not to say it’s all gloom and doom for travellers where commercial airlines are concerned. The phase of consolidation in the aviation industry is paving the way for code-share agreements, according to which Airline A can sell the seats on Airline B’s flight. This is becoming popular among major carriers as a way to expand their network of flights without having to serve all the low-volume, high-cost sectors. The commuters, on the other hand, benefit from better coordination between connecting flights, streamlined baggage transfers and the convenience of a single ticket for multiple flights. The best part is that you can notch up—and burn—frequent flier miles on partner airlines. So a Jet Privilege member can not only accrue miles by flying JetLite but, in the near future, also on Kingfisher flights.

Also, with airlines scrapping flights and Greenfield airports coming up, the annoying congestion charge of Rs 150 per ticket is on its way out. SpiceJet has taken the lead and others are likely to follow suit. Last, but not the least, the Jet-Kingfisher pact is expected to lead to a cost saving of about Rs 15 billion for the airlines. In the long run, there is bound to be a trickle-down effect for customers by way of lower fares—even after the players patch up their bleeding bottom lines and safeguard their future.

Comparing cost & benefits

Suppose a group of six businessmen flies regularly from Delhi to Mumbai. Here are some options open to them:

Fractional ownership: If all six take eight flights a week, especially with a stopover at smaller towns with poor connectivity, they could pool in resources and buy a plane. For Rs 8 crore a year, they can get 25 hours of flying time aboard a Cessna Citation. Flying commercial airlines would cost much more, both in terms of fare and time.

Flight pooling and charter: The group can charter a light jet with a six-passenger luxury cabin. It costs Rs 3.4 lakh for a return trip. The per head cost works out to Rs 57,000, but it gives them the exclusivity to fly back any time they are free, thus saving on hotel expenses.

Commercial airline: A return business class seat costs around Rs 42,000. However, if they can’t catch the return flight, they will have to check into a hotel for a night and shell out an amendment fee for changing the flight itinerary.