Charter Capacity Falls Short in Asia’s Growing Market

 - March 28, 2012, 1:25 AM
AsiaJet offers charter and card services. Its seven aircraft will be joined by two more.

No one doubts that demand for business aviation is growing in Asia, but is the available aircraft capacity being developed sufficiently to meet this demand? It is not, according to Jean Noel Robert, president of the Asian Business Aviation Association (AsBAA), who believes that the lack of available charter aircraft is a real impediment to growth. “We need for companies to be brave, put their hands in their pockets and take the risk of buying aircraft,” he told AIN.

There are several companies throughout Southeast Asia that offer both management and charter services, however, AsBAA believes this just does not satisfy demand for lift. The good news is that applications for aircraft operator certificates (AOCs) are coming in thick and fast to the various regional aviation authorities.

Jeff Lowe, general manager of Asian Sky, a Hong Kong-based business aviation consultancy, believes there is room for growth all over the region, not just in China. Looking at China, Lowe pointed out that there are only 221 business jets in service in Greater China (including Mainland China, Hong Kong, Macau and Taiwan) and 156 of these are privately owned large-cabin business jets. Of these, only a few are available for charter, with many owners preferring to keep their aircraft for themselves.

In China, local B-registered aircraft can operate into some 200 airports, plus additional military airfields. Owners there pay far less for permits, have fewer issues with slot restrictions and receive more direct routings from air traffic controllers.

Foreign-registered aircraft, including those in Hong Kong and Macau, may receive more indirect routes, adding time and fuel to a trip. On the plus side,new Chinese government legislation allows private companies to apply independently for an AOC, and five to 10 of those could be issued per year.

Of the charter providers, Hainan Airlines subsidiary Deer Jet owns 23 business jets and manages a further 20. Other Mainland China operators offering charter include Shenyang-based China First Mandarin Group, which offers charter under the name of LilyJet. This company, which operates a Bombardier Challenger 604, is in discussion to set up a joint venture with TAG Aviation Asia covering charter, aircraft management and aircraft maintenance.

As things stand, there are not many other aircraft available. Beijing Capital Airport-based CITIC General Aviation offers aircraft under management for global charters, while Nanshan Jet, which is based at Yantai Laishan International Airport, offers a Bombardier Challenger 605, Global 6000, a Gulfstream G450 and a G550, plus a Boeing Business Jet for charter. Meanwhile, Shenzhen’s Donghai Jet took delivery of the first Challenger 300 into China last year.

Foreign shared-use program operators, such as NetJets and Vistajet, are also seeking to operate in China with strategic partners that already hold AOCs here. Vistajet, for example, has stated it is to focus on fast-growth markets, including China.

State-backed Chinese airlines have entered the market, and Air China and Shanghai Airlines both provide some charter. As well, Shanghai’s China Eastern Airlines teamed up with Hong Kong’s Asia Jet last year to offer a 10-seat Gulfstream G200 for charter. At the time Asia Jet CEO Mike Walsh said, “This really opens up domestic China for us.” The Gulfstream will be based at Shanghai’s Hongqiao International Airport and Beijing’s Nanyuan Airport.

Regional Offerings

In Hong Kong, Asia Jet offers jet charter and card services. Its fleet of seven aircraft will be joined by two more aircraft, scheduled for delivery in the third quarter of 2012. Although there is a great deal of demand, new owners should not be deceived by promises of high charter usage, Walsh cautioned. “I have witnessed some unrealistic expectations on charter utilization in some providers’ models,” he told AIN. “For example, mid-size jets of 600-plus hours per aircraft, per year predicted–excluding the owner’s usage. This would be hard to achieve within Mainland China.”

However, Jolie Howard, director of business development at TAG Aviation Asia, takes a different view. She said private aviation usage is up around 70 percent year-on-year in the Greater China area, Singapore, Malaysia and Indonesia. She added that most owners do not want to charter their aircraft. “Clients in this region are not usually so concerned about offsetting costs by chartering,” she explained. TAG Asia offers only two of its aircraft under management for charter, and then only when the owners do not wish to fly them.

Hong Kong-based Metrojet also offers management and charter services. The company operates a fleet of more than 20 business jets and is part of the Kadoorie Group, which owns the famous Peninsula Hotel. CEO Bjorn Naf said the operator is very busy, as are its competitors.

The only pure charter provider in HK is Hainan Group subsidiary Hong Kong Jet, which last year took delivery of its first aircraft, a G550, which is available purely for international charter from Hong Kong.

There are a few foreign operators with bases in Hong Kong: Jet Aviation Asia, for example, and U.S.- headquartered Pegasus have aircraft available for charter based out of Hong Kong International Airport.

Over in nearby Macau, Jet Asia has operated a fleet of business jets since 1995 offering aircraft management and charter services. Today it operates 11 aircraft, and also bases aircraft in Kuala Lumpur and Bangkok. Macau Jet International also offers charter with two Dassault Falcon 2000s and a Falcon 900 from Macau International Airport. Bangkok-based also bases aircraft there, along with its sites in Thailand and Malaysia.

Outside China, Indonesia is the fastest-growing country for the sector. The installed fleet is predominantly fairly elderly or made up of smaller types. Susi Air, for example, operates Piaggio Avanti 180s, Cessna Caravans and helicopters. One of the larger companies, Premiair charters Fokker 100s and bases three Legacy 600s out of Halim Perdanakusuma Airport in Jakarta. Premiair also handles the first Lineage 1000 in Asia, which entered service last year.

In February the country’s fastest growing charter operator, Enggang Air Service, was at the Singapore Airshow drumming up business and eyeing more aircraft for its managed fleet. CEO Donnie Armand told AIN that his company had ordered 12 Cessna Caravans last year to serve charter customers in eastern Indonesia and Papua New Guinea.

“There has been amazing growth in Indonesia over the last year driven by the growth in GDP,” said Armand, adding that the growth of personal wealth had created demand for new bizjets and that customers are requesting newer models rather than preowned aircraft. He anticipates announcing several new orders over the next few months, possibly during the ABACE show this week.

Strong Potential

Elsewhere there is a thirst for growth. Today, Australia’s business aircraft fleet comprises mostly smaller Cessna jets and turboprops, but Essendon, Victoria-headquartered Ausjet offers a Gulfstream G450, an Embraer Legacy 600, as well as a Hawker 900XP and seven Citations for charter. The company said it has recently added a base at Bendigo, “due to the requirements of one of our clients.” This is home to a Citation IISP that can fly direct to Sydney or Adelaide.

Japan, too, is fairly active, but also has few larger aircraft available for charter, although Burbank, California-headquartered Avjet bases a Gulfstream G550 in Tokyo.

Thailand and Singapore are also potentially strong growth countries for the charter market. Advance in Thailand offers a Gulfstream G200 for hire, while Royal Sky offers a Citation X, both based in Bangkok. In Singapore, Jet Edge and Singapore Air Charter both offer charter services. Last year Singapore Air Charter took delivery of its first Gulfstream business jet. The 14-seater is based at Seletar Airport.

Just next door in Malaysia several operators have aircraft for hire. Australia’s Vistajet bases a Challenger 850 and 605 out of Kuala Lumpur, for example.

Lowe is bullish about the market and believes Southeast Asia will prove profitable for the business aviation industry as time goes by. He said, “Apart from China, the rest of the region is really interesting. More and more people are wanting to get into private aviation.”