Red star rising?

In fact, in 2015 the number of business jets based in mainland China, Hong Kong, Taiwan and Macau rose just 4 per cent and 38 aircraft actually left the region to be based elsewhere, according to consultancy Asian Sky Group.

Roll forward to 2017 and this years’ Asian Business Aviation Conference and Exhibition (ABACE) held during April at Shanghai’s Hongqiao Airport. As 180 exhibitors from more than 40 countries touted their wares, with 33 aircraft on display, a new release, The Hurun Business Jet Owners 2017 report, declared that the market for business jets in China has regained altitude after several years of woeful performance. The study – Hurun is an organisation that focuses on researching China’s super-rich – says the business jet market has shown strong signs of recovery since the start of this year, and new models being launched by manufacturers are being snapped up by Chinese billionaires with deep pockets. It adds that based on its financial progress and economic size, there is enough demand for 1,900 business jets to be operational in the country.

At the end of 2016 China had just 466 private jets flying its skies, with 164 of them owned by 114 individual business people. Apart from Jackie Chang, owners include China’s richest man, Wang Jianlin, who flies a Gulfstream 550, and Tencent (an on-line instant messaging platform) founder Pony Ma, who has a Bombardier Global 6000.

It must be said that few firm orders were actually announced in Shanghai (most wealthy buyers don’t want their purchases advertised anyway). Indeed, no-one is suggesting the drought has become a flood. Asian Sky Group actually estimates the private jet fleet across Greater China will grow just 1 per cent this year – with a total of five new plane deliveries – its weakest on record. It says there are currently around 480 private jets in China (actual numbers vary depending on who you ask), compared with 466 in 2015 and 67 in 2007.

There is, however, a definitely new mood of optimism. As Jean-Michel Jacob, president of Dassault Aviation Falcon in Asia Pacific, put it: “The market is waking up after two quiet years. We have seen strong trends. More people are interested, and we are negotiating… they are no longer shy about owning jets… they sign up, when they need aircraft.”

Based in Paris, Dassault is best known for its Falcon 7X jet, and expects to deliver its first ultra-long range Falcon 8X, now its flagship aircraft, to a Chinese customer this year. It will be operated by Hong Kong-based management company HK Bellawings.

Jacob said the company was confident it will “sell many 8X jets to Chinese customers” because they are no longer shy about owning a private jet.

Why the sudden resurgence? Firstly, while efforts to stamp out graft are continuing the heat has gone from the campaign. Most of the worst offenders have now been weeded out and those who have come by their wealth honestly are feeling more confident about flouting their success.

Secondly, major changes have occurred in terms of regulations impacting general aviation and dedicated private business traffic. The days when getting approval for a flight plan could take days, or even weeks, because it not only had to be approved by civil aviation authorities but also by the military, have all but gone. Limitations remain because of the vast areas of military airspace in China but there is better co-operation between civil and military authorities.

And billions of dollars are being earmarked for infrastructure improvements to cater for expected growth. In China’s Five-year Plan for 2016-2020, at least 50 new civilian airports are now being built to facilitate business and leisure traffic. China says it will have more than 500 airports specifically for business jets by 2020, and will further open up airspace for civilian use with a view to grow the country’s general aviation fleet to 5,000 aircraft by that year.

As an example, Shanghai, which currently has two airports, Hongqaio and Pudong, is planning a third specifically to handle business traffic. With the existing airports already congested, it will be needed. There were over 6,000 business aviation traffic movements at the two Shanghai airports last year, 10 per cent more than 2015 and, overall and despite the slowdown in executive jet purchases, business jet traffic across China has still been rising at double digit rates annually.

Finally, the powers that be in Beijing have put their weight behind advancing general aviation. In May last year, in typically convoluted Chinese fashion, the General Office of the State Council of the People’s Republic of China released “the Guiding Opinions of the General Office of the State Council on Promoting the Development of General Aviation Industry”. It was a breakthrough because it is the first official document issued from a national strategic perspective with guidance on the development of the sector.

And at the annual gathering of the all-powerful Communist Party earlier this year the Civil Aviation Administration of China (CAAC) issued its Thirteenth Five-Year Plan for General Aviation Development. CAAC director Feng Zhenglin emphasised that the country is promoting the development of civil aviation, saying that has become a crucial component in the development of China’s civil aviation industry and the country’s economy.

All in all, it is a green light for high flyers and big business to ramp up their spending on such luxuries as executive jets, as well as sweet music to the ears of business jet manufacturers. They are all in the game, with the likes of Embraer, Dassault, Bombardier, Gulfstream and others, not to mention Boeing and Airbus, beefing up their China operations. In its forecast covering 2016 to 2025, Bombardier sees the fleet in Greater China growing at 10 per cent annually with a demand for 700 business jets worth $25 billion. Embraer is a little less bullish, saying that while demand for executive jets from Asia-Pacific (excluding China) between 2017 and 2026 will reach 460 aircraft worth an estimated US$13 billion, China alone would require 570 new aircraft in the 10-year period, valued at $22 billion.

Embraer’s current campaign in Asia-Pacific focuses on the new Legacy 450, a mid-light business jet that was certified in August 2015. Starting at $16.7 million, it is the first business aircraft in its segment with full fly-by-wire technology, featuring side-stick flight controls, the state-of-the-art Rockwell Collins Pro Line Fusion avionics suite and a heads-up display system. The jet is powered by two fuel-efficient Honeywell HTF 7500E turbofan engines and has a range of 5,371 kilometres, carrying up to nine passengers and cruising at Mach 0.83.
New research also released at ABACE by Global Jet Capital, a provider of financing solutions for corporate aircraft, revealed there are around 1,077 midsize, large and jet airliner private aircraft in the Asia Pacific region, and over a third (34% or 363 aircraft) of these are in China, more than any other country in the region.

Overall, 38% of the region’s fleet of business aircraft is mid to large cabin, a significantly higher proportion than in the global fleet, where the corresponding figure is 32%. Nearly all (92% or 128 aircraft) of Hong Kong’s 139 business aircraft are mid to heavy in size. This is followed by Singapore, where 75% of its fleet of business aircraft are in this category, and China where the corresponding figure is 70%.

According to Bombardier data, as it stands today, around 15 percent of the global business jets are light aircraft, 34 per cent are medium-sized and over 50 per cent are larger bizjets.

Global Jet Capital believes Asia offers strong opportunities for growth in the business aviation sector. It is seeing a growing number of enquiries in the region to help finance the purchase of large to mid-sized jets, and it has recently appointed Violet Kwek as Sales Director, Greater China. It is also looking to recruit more people to bolster its team in the region.

“A number of the Asian economies are currently some of the best performing in the world, and we expect this to contribute to strong growth in the business aviation sector here. This, combined with the fact that the market has a high concentration on mid to heavy jets, makes this region very attractive for us, and we anticipate enjoying strong growth here over the next few years,” said Kwek.

At ABACE the manufacturers weren’t only negotiating aircraft deals, they were also showing their determination to gain market share by strengthening their after-market support systems. Airbus Corporate Jets announced a new initiative, Easystart, to offer tailored support to buyers of its corporate jets already in service. There are more than 180 Airbus corporate jets in service globally, with about 20 in China, according to Airbus chief operating officer customers John Leahy.

Leahy says Easystart will help buyers understand how an Airbus corporate jet can perform on their key missions, how it can be attractively affordably upgraded, and how services, such as training, support and upgrades, are available to ensure a smooth entry into service.

Similarly, Boeing Business Jets recently signed an agreement with Aircraft Maintenance & Engineering Corp Beijing to serve as an official BBJ warranty service center. The BBJ and Ameco agreement allows BBJ customers based in China customized and fast support for their aircraft. BBJ says it is seeing unprecedented growth in China, where the fleet size has tripled over the past five years. There are now 29 BBJ aircraft in operation there.

Boeing says the success of the BBJ fleet in Greater China (China, Hong Kong, Macau, Taiwan) is driving strong interest in the newest members of the BBJ family, the BBJ MAX 7 and the BBJ 787.

“The Greater China BBJ Fleet continues to grow because our customers know Boeing Business Jets offer unbeatable versatility and reliability,” said Greg Laxton, BBJ’s vice president.

“We are very confident that strong growth will continue in Greater China. We expect the new BBJ MAX family to be very popular in this market with additional cabin space and significant range increase.”

The Greater China BBJ fleet will continue to expand this year with two BBJs, one BBJ 2 and one BBJ787 entering into service in 2017. In 2018, two BBJ MAX 8s will be delivered to customers in the region. BBJ recently also signed an agreement with Ameco Beijing to serve as an official BBJ Warranty Service Center.

Bombardier in April also opened its Tianjin service center, Bombardier Business Aircraft’s first service center in China, and its eighth globally.

“With a growing fleet of more than 110 aircraft in China out of 280 in Asia, Bombardier Business Aircraft’s Service Centers offer comprehensive capabilities and flexibility to our customers. Our priority is to ensure that we are ready to support our customers wherever their needs arise,” said Lanny Schindelmeiser, general manager of Bombardier Tianjin Aviation Services Co Ltd.

Also in April, Malta-based VistaJet, a company specializing in premium long-range private jet travel, launched its sales platform on WeChat, a popular social media platform in China. It made the move because 17 per cent of its global customer base is represented by China, according to Ian Moore, the company’s chief commercial officer.

Gulfstream Aerospace continues to add resources for operators in the Asia-Pacific region, home to the company’s largest and fastest-growing international fleet.

“Our Asia-Pacific fleet grew by 25 aircraft in 2016 and is now well over 300,” said Derek Zimmerman, president, Gulfstream Product Support, who was in Shanghai for ABACE. “Strong customer response to our aircraft over the past several years in the region, especially Greater China, has resulted in us building a significant support presence there, which we enhance and supplement whenever possible. As always, we are committed to providing our customers first-class support throughout their Gulfstream ownership experience.”

Of the 314 Gulfstream aircraft in the Asia-Pacific region, more than 180 are based in Greater China. Accordingly, the company has strengthened its depth of customer support in the area, doubling the number of field service representatives (FSRs) in Hong Kong from two to four. Gulfstream also has two FSRs in China and one each in Japan, Singapore, Australia and India. At Gulfstream Beijing, the first factory-owned business jet service center in China, technicians have serviced more than 600 aircraft in the facility’s four-plus years of operation at Beijing Capital International Airport. Gulfstream’s super-midsize Gulfstream G280, high-performance Gulfstream G550 and company flagship Gulfstream G650ER were on display at Shanghai.

“We’re exhibiting three outstanding Gulfstream aircraft well-suited for missions connecting the Asia-Pacific region to the world’s financial and industrial hubs,” said Scott Neal, senior vice president, Worldwide Sales, Gulfstream.

“With more than 300 aircraft in service in Asia Pacific — over 100 of those in Mainland China alone — we are more dedicated than ever to supporting our customers in the region.”

The Gulfstream G650 and G650ER, which can connect New York and Beijing nonstop, recently received type certification validation from the CAAC.

If there is one damper on the optimistic outlook of original equipment manufacturers (OEMs) it is a trend that was evident at ABACE. Chinese buyers are becoming more interested in buying second-hand jets and refurbishing them. Jackie Wu, president of Hong Kong-based plane broker JetSolution Aviation Group, told reporters during the show that when the economic climate is going down, there are fewer buyers in the market and the depreciation rate on planes is higher. A new jet typically lost around 15 per cent of its value last year, faster than the 10 per cent loss in 2015.

“Now pre-owned aircraft are a better buy,” she said. The bottom line: in the current market, where new planes quickly lose their value, second-hand jets are simply a less risky alternative. And David Dixon, president of Jetcraft Asia pointed out that a new Gulfstream 550 cost around $50 million but you can get an extremely adequate (used) aeroplane for $30 million… so $20 million is a lot of money to anybody”.

Executives attending Shanghai said second-hand executive jets now made up more than half of sales to wealthy Chinese and corporations, up from under a third two years ago.That aside, there is universal belief the drought is nearing an end and it won’t be too long before the orders start rolling in.

“Now pre-owned aircraft are a better buy.”
Jackie Wu

“China has become the second-largest business jet market (after North America and Europe), and it also enjoys the fastest growth in the world,” Liao Xuefeng, chairman and chief executive of China Business Aviation Group, said at ABACE. There is little doubt now that will continue to be the case.