ABACE 2005: Asia welcomes business aviation

 - October 2, 2006, 5:41 AM

Wu’s words were music to the ears of the Asian Business Aviation Association (AsBAA) and NBAA, which organized the inaugural ABACE show. AsBAA president Jason Liao, Raytheon Aircraft’s regional sales director for north Asia, told the conference’s opening general session, “Business aviation in Asia, and China in particular, is lagging behind.”

Speaking in Chinese to a largely Chinese audience, Liao pointed out that while Asia is the world’s largest continent in terms of geographical area and population and boasts the world’s strongest rate of growth for gross domestic product (GDP), it still has just 2.44 percent of the global fleet of turbine business aircraft (with 591 aircraft).

Obstacles to Business Aviation

“So why not Asia, which has every reason to need business aviation?” asked Liao rhetorically. Access problems and costs, he explained, remain big but not insurmountable obstacles to growth. “Too many airports are still not open to business aircraft and there are serious air traffic control issues,” he explained, referring to the region’s notoriously inflexible slot-allocation processes (with China having arguably the least user-friendly arrangements).

Liao didn’t pull any punches. He told ABACE delegates that where operators can fly into airports they face inflated landing fees and handling charges. That said, he conceded that standards for ground handling services are improving.

He explained that fiscal discrimination is hampering sales of business aircraft in China. Non-commercial aircraft that weigh less than 55,114 pounds (25 metric tonnes) are subject to a 4-percent sales tax and a 17-percent value added tax. By contrast, the equivalent taxes on airliners are 1 and 5 percent, respectively.

So, to buy a $10 million business jet, a Chinese client would also have to hand over $2.1 million to the government. The 25-tonne weight limit means that rival aircraft such as the Falcon 900EX and Challenger 604 would be subject to the taxes, whereas a Gulfstream G450 would not.

Liao called on the communist state to allow private investors to develop airports suitable for business aviation use. Five airports are now being built in China each year but, evidently, business aviation simply does not figure in the planning for these facilities. The Raytheon executive pointed out that while the U.S. has about 19,816 general aviation airports, there are no more than 164 in China.

Pointing to China’s 9.1-percent GDP growth (versus the current U.S. rate of 4.4 percent), Liao declared, “The Asian economy is soaring. It is now 35 percent of the global economy and we need business aviation.”

And, just in case the assembled Chinese officials didn’t yet see what was in all this for them, the AsBAA president argued that business aviation growth generates taxes and new jobs. He told them that even in 2001, general aviation generated more than $100 billion and one million jobs for the U.S. economy.

According to Liao, China hasn’t followed the traditional growth model for business aviation, wherein market growth closely follows economic growth. “Under a normal (economic) model there would be several hundred aircraft in the country by now,” he stated. “If we can get rid of the obstacles, we will see growth. For example, China’s automobile industry used to have similar problems and these are now fixed.”

Concluding on an optimistic note, Liao maintained that Asian governments are now adopting a more supportive attitude to business aviation development. For example, he said that whereas it used to take several days for aircraft operators to get approval for a trip to Asia, now it often takes just one day.

Selling Business Aviation in the Asia-Pacific Region

Liao and NBAA president Ed Bolen pressed all the standard points in the bizav evangelist’s repertoire of sermons: corporate aircraft make for improved productivity and security for executives. They even maintained that aircraft advance a company’s image–an attribute that is not often trumpeted in other regions of the world that have discretely embraced business aviation.

Bolen declared that ABACE will prove to have been a catalyst for business aviation growth in Asia. He urged Chinese executives and officials to see this mode of transportation as a key tool in the country’s plan to develop its distant western provinces.

The NBAA leader last visited Shanghai in 1993 and admitted that at the time he had found the city’s ambitious growth plans hard to believe, but that he had been glad to have been proved wrong as he glanced at the forest of skyscrapers and the ultra-modern Pudong International Airport. “Let’s do for business aviation in Asia what Shanghai has done for itself,” he concluded.