Asia embraces business aviation

 - July 8, 2008, 5:37 AM

“I don’t think I’ve ever been so optimistic about the Asian business aviation market, especially in North Asia and China,” Jason Liao, Hawker Beechcraft’s regional vice president for China and Southeast Asia, told AIN.

Liao, who also serves as vice chairman of the Asian Business Aviation Association (AsBAA), said, “Hong Kong has something like 20 aircraft already. Only a few years ago it was primarily charter operators, but we’re seeing a significant increase in the number of corporate owners; it’s very encouraging.”

Liao said he knows there have been “quite a few business jet orders” in China but it’s difficult to say how many exactly because culturally the Chinese are averse to flaunting wealth.

“After talking with my colleagues informally, I think we’re looking at 10 business jets being delivered to purchasers in China in the next year or so,” he said.

Hawker Beechcraft was the most forthcoming of all the OEMs AIN interviewed. “We took orders for 15 Hawkers and delivered two Hawker 900XPs and two Hawker 850XPs in China last year. We will deliver one Hawker 900XP and four Hawker 750s this year in China.” The company also recently selected Hong Kong-based Avion Logistics as its Asia-Pacific authorized parts distributor for Rapid Aircraft Parts Inventory and Distribution (Rapid).

Other OEMs declined to provide statistics about their fleets in Asia. Bombardier said, “We do not break down our fleet statistics by country. In terms of orders, we do not disclose our order books.” John Rosanvallon, president and CEO of Dassault Falcon Jet, told AINtv at EBACE, “2005 was a milestone year. For the first time we went over 50 percent for international sales. In 2006 we went over 60 percent and in 2007 over 70 percent and we’re still growing; I think it’s here to stay.” He provided no specific numbers about Asia.

Airbus is on record as saying, “Around 150 single-aisle and widebody Airbus aircraft are now in VIP and government service around the world, from Asia to Antarctica.” The company didn’t offer a breakdown by country. It did announce a firm order for an Airbus A350 XWB Prestige to be based in Hong Kong and managed by BAA Jet Management.

“We are delighted to be expanding in the VIP widebody field with this latest VIP version of the Airbus A350 XWB. It will join the one that we already manage for C Jet as well as several Airbus Corporate Jetliner (ACJ) family aircraft,” said BAA Jet Management vice chairman Jay Shaw.

Korean hotel management specialist and convention property company Lohas Development Group and TAG Aviation Asia in Hong Kong have announced an agreement in which TAG will operate and manage a new Cessna Sovereign owned by Lohas Development. The aircraft will be based in Korea. Cessna did not provide any information about other aircraft it has in the region.

The General Aviation Manufacturers Association (GAMA) reported the 2007 year-end deliveries to Asia/Oceana as 4 percent of all business jet deliveries (45 aircraft out of 1,138 total) and 8 percent of all turboprops (37 of 459).

Honeywell’s five-year business jet forecast estimates 15 percent of worldwide deliveries are slated for Asia/Oceana and states, “The Asia/Africa/Middle East region once again ranks as the area with the highest purchase expectations for the fifth consecutive year.”

Statistics from Gulfstream show the following breakdown of the business jet installed fleet: U.S./Canada, 10,664 (71%); Europe,     2,107 (14%); Latin America, 1,344 (9%); Middle East/Africa, 510 (3%); and Asia 447 (3%).

The Gulfstream spokesman said that in 2004 the Asia region had 314 business jets of all types installed, 356 in 2005 and (representing a 15-percent increase in a year) 411 in 2006. He contrasted that with 7-percent growth in the U.S./Canada, 13 percent in Europe, 12 percent in Latin America, and 7 percent in the Middle East/Africa for the same period.

Gulfstream has more than 1,600 jets in service worldwide, distributed as follows: 78 percent in the U.S. and Canada, 8 percent in Europe, 5 percent in Latin America, 4 percent in the Middle East, 4 percent in Asia and 1 percent in Africa.

“Our international installed fleet continues to expand with increased demand from emerging markets. Gulfstream sees significant opportunity for growth in the emerging China and India markets,” the spokesman said.

Gulfstream also recently received type certificate validation for its ultra-long-range Gulfstream G550 from the Civil Aviation Safety Authority in the Republic of Korea, opening another portion of the region to the company’s product line.

Chuck Woods, president of Macau-based Jet Asia and chairman of AsBAA, said “We’ve seen tremendous improvements over the past several years. Hong Kong has become business aviation friendly in terms of regulations and infrastructure. Singapore has also put economic incentives in place for business-aviation-related companies, and we’re seeing infrastructure take root there in terms of an FBO and support facilities.”

Despite this progress, he cautioned that the region as a whole still has a long way to go when compared with business aviation in the West. “In general, it is fair to say that business aviation is still treated as a second-class citizen throughout the region. It continues to take too long to get permits, there aren’t enough landing slots and overall there’s still very little infrastructure.”

Woods said AsBAA’s government affairs committee continues to be a work in progress. “We’ve got some good people on the committee and we’re heading in the right direction, but it’s going to take time to establish the proper relationships in places such as Malaysia and Thailand.”

He cautioned that the Western style of lobbying doesn’t work in Asia. “We have to establish personal relationships in each country. If, as an organization, we went to a government aviation entity and said we represent 100 companies, they’d be polite and attentive and not much would happen. Progress will be made only through a membership collective effort, because in Asia it’s all about Guanxi [relationships].

“Our government affairs committee needs to develop to the point where we’ll have at least one person from every country who is well positioned within their country and has access to the important individuals either politically, socially or both,” Woods said.

Jet Asia, an aircraft charter and management company, has been in business since 1995 and operates a growing fleet of Global Expresses, Challengers and Legacys.

“The slow progress is definitely not for lack of demand,” Woods continued. “We have far more charter requests than we can handle; demand definitely exceeds capacity for travel within the region. It’s just still challenging to sell the idea of owning a business jet in Asia because you have 15 different countries with their own sovereign airspace, 15 sets of tax codes and different cultural nuances. It’s not like operating in the U.S. or Europe.”

Chris Buchholz, CEO of Hong Kong-based Metrojet and Heliservices, concurred with Woods about demand exceeding capacity. Metrojet was added to the Kadoorie group of companies’ aviation portfolio in 1995 and operates charter and managed aircraft in Hong Kong, China and throughout Asia. Kadoorie is an Asian business aviation pioneer with roots going back to 1979, when it established Heliservices (Hong Kong) to provide rotary-wing services in the area.

It is also a substantial investor in the Hong Kong Aircraft Engineering Company (Haeco), the first and largest aircraft maintenance organization in Hong Kong, and a major shareholder of the Hong Kong Business Aviation Centre FBO.

Roz Fielding, charter manager for Hunt & Palmer Hong Kong, agreed that demand far exceeds supply in the charter business. “There are about 20 readily available aircraft for charter throughout Asia. One of the criticisms about chartering in Asia is the cost, but you have to realize it’s often directly related to the fact there are so few aircraft available.”

As an example, Fielding pointed out that if a client wants a GV in Singapore, it has to be flown in from somewhere else. When that happens, “You might have a five-hour charter expense before you even get in the aircraft,” she said.

Contributing to the dearth of airplanes available for charter, she said, is the fact that “there’s also still a reluctance to buy a business jet, but we’re seeing quite dramatic growth in the demand to charter one. You often hear people say the region is anti-business aircraft but it’s really more an issue of not fully understanding the advantages of business aviation.”

The void hasn’t escaped Skyjet managing director Judith Moreton. “We’re looking to boost available aircraft capacity by combining with a local partner to buy aircraft to base permanently in key cities such as Singapore and Hong Kong,” she said.

“Although significant numbers of business jets are now being delivered to customers in Asia, in most cases their owners do not want to make them available for charter by third parties,” she explained. “We’re trying to encourage people to see the commercial benefits of having their aircraft available for charter.”

Skyjet now operates about 25 aircraft flown from bases in Asia by its 12 partner operators in Macau, China, India, Pakistan, Australia, Japan, Indonesia and Malaysia.

NetJets is set to launch operations in India, where it believes that fractional ownership will boom. John Colucci, the company’s executive vice president, explained, “In India, wealth creation is taking place at a phenomenal pace. We think we’ll get to our first 100 customers in India quickly, and that will be just the tip of the iceberg.”

Buchholz noted that one of the major impediments is user fees and handling costs, which are generally more expensive than fuel throughout the region.

“Fees are still typically based on airline aircraft, so we’re penalized by paying that level of fee,” he said. As a result, “most charter aircraft tend to be larger because they’re paying the fees anyway. First-class seating on most Asian airlines is exceptionally good, so it’s difficult to sell smaller aircraft like King Airs. Passengers are used to really good first-class service, with flat beds and full gourmet meals. In the U.S. it’s common to use a bizjet or turboprop as a productivity tool, but the value of a productivity tool isn’t fully realized here. Those problems notwithstanding, there is still a lot of demand for charter.”

Gaining Ground in China

China continues to be the focal point of the emerging business aviation market. While Liao’s prediction of 10 business jets to be delivered in the next year isn’t impressive by Western standards, its earth-shaking news in a region where the airspace has been tightly controlled by the military and, until recently, the concept of private aircraft ownership was unthinkable. However, the internal political conflicts are not yet completely resolved.

Within the highest levels of the Chinese government, there are two factions regarding general aviation. One strives to maintain the status quo and loathes the idea that any foreign company might get a foothold in the Chinese aviation sector at any level. These traditionalists aren’t so much anti-aviation as they are pro-state control of all aspects of aviation.

The other faction has embraced capitalism and is eager for hard currency infusion to drive the growth of general aviation. It sees foreign investment as part of the answer to boost the economy and–more important–to open up rural areas that currently are all but inaccessible. This faction so far has appeared to have the advantage.

A study by China’s General Aviation Advisory Board predicted the general aviation fleet will grow to as many as 10,000 aircraft by 2020.

Cao Jingnan, the Board’s deputy manager, conceded that the military isn’t happy but it’s following the edict of a government that has embraced capitalism.

“The CAAC [China’s counterpart to the FAA] opened low-altitude airspace to a limited extent in 2005 and more recently has passed regulations more conducive to general aviation flying,” he said.

According to Cao, when the airspace opened in 2005 there were 582 registered general aviation aircraft in China, mostly in government service for agriculture, emergency services, forestry and other special operations. Within a year that number increased to 714 and a few flying schools began to open near population centers. Cao predicts a 20-percent annual growth rate, with an increasing number of fixed-wing aircraft and helicopters entering private service.

Access Issues

It is difficult to determine the number of business aircraft in China because the Chinese government considers any aircraft not operated by the military or airlines to be general aviation. It does not distinguish between those operated by the government and those operated by private companies.

No one in China is familiar with business aviation as it is understood in the U.S. because China has never known general aviation, with kids washing airplanes for a ride. The result is an uninformed public and almost total lack of available pilots. Military and airline pilots are typically contractually obligated, so there is no pool of trained pilots to transition to business aviation.

To address the problem, a few flight training and maintenance technician schools have opened in China. The oldest and best known is the Ameco Aviation College (AAC) in Beijing.

Andreas Meisel, general manager of Ameco Beijing, said, “With the growth
of Air China as well as China’s aviation industry, AAC decided to expand its training capacity and improve the quality of instruction to foster more professionals for the development of the aviation industry.” AAC is the first civil aviation training organization in China to achieve CCAR147 standards, and the first such organization outside Europe to be awarded the JAR147 certificate when it received that approval in 2002.

In India, CAE has signed a contract to become the managing partner of Indira Gandhi Rashtriya Uran Akademi, the Indian government’s flight training academy. CAE has also formalized and signed a joint venture with the Airport Authority of India to develop the Rajiv Gandhi National Flying Training Institute.

“With our long history of serving the Indian market,” said Jeff Roberts, group president for innovation and civil training and services at CAE, “we understand that India needs to develop a solid infrastructure and implement state-of-the-art standards in flight training. These two academies, together with our upcoming training center in Bangalore, will help us address the urgent need for pilots throughout the region.” According to CAE, there is a requirement for up to 1,000 pilots per year in India over the next five years to meet the growing needs of the industry.

Hunt & Palmer’s Fielding said one of the big obstacles throughout the region continues to be permits.

“One of the advantages of charter is on-demand flexibility, but we are still seeing advance requirements of as much as 10 days. You can often get access to the larger airports with as little as a day’s notice, but smaller airports can require as much as 10 days to arrange for customs and finding a navigator for the aircraft who speaks the language and understands the military requirements.”

U.S.-based charter operator JetEdge has been flying two Gulfstream IVs it manages in Asia. Andrew Gulsrud, the company’s director of flight operations, stresses the importance of using a handler.

“If you’re going to operate in Asia you have to retain the services of a good handler with connections to the right people in each country, and it’s going to be expensive. Landing fees and permit costs in China can be around $6,000. To overfly the entire country of China might cost you $7,000 in navigation fees.”

Air Routing, Arinc, Jeppesen and Universal Weather & Aviation Scheduling all provide flight briefing, planning and handling services. All have offices and/or representatives all over the world.

Universal Weather has opened a scheduling center in Manila, Philippines, to serve the Asia-Pacific region. “We are fully operational and serving clients,” said Jim Reed, the center’s operations manager. “This is the first scheduling center of its type in the region.” The company offers administrative services, pre-trip paperwork and filing, pre-trip arrangements, active trip services and post-trip reporting.

Airport Infrastructure

There are few Western-style FBOs in Asia, but the number is increasing. The Hong Kong Business Aviation Centre and Jet Aviation in Singapore are among the few such facilities.

In addition, an FBO, billed as the world’s largest, is under construction on Beijing’s Capital International Airport in anticipation of the Olympics. A joint venture between Jet Aviation and Deer Air, the operation will also offer line maintenance.

Hawker Pacific is opening an FBO in Shanghai, and Hong Kong’s BAA Jet Management has teamed with Shenzhen Airlines to open an FBO on Shenzhen Airport, not far from Hong Kong.

There is also a flurry of infrastructure activity in Japan, historically a decidedly anti-business aviation nation. JAS recently opened a newly renovated facility at Haneda/Tokyo International Airport that includes a crew and passenger lounge, reception area and the addition of a new crew and passenger vehicle. The renewal program will bring renovation to facilities at Narita, Kansai and New Chitose as well. Nagoya’s Nakanihon Air Service is also expanding its business aviation facility.

Beyond those few, it is wise to lower your expectations for ground handling, services or even finding someone who speaks English.

Of the larger Asian countries, India appears to be devoid of business aviation infrastructure but Louis Smyth, corporate communications specialist with Universal Weather & Aviation, said that’s not the case.

“At present there are no FBOs or MROs in India for general aviation; however, Mumbai and Delhi airports have started the process of setting up FBOs. They should be completed by the end of this year or early next year,” he said.

“Dial, a Delhi airport operator, is keen to set up an MRO along with the FBO and is in the process of putting out an international tender. The Airport Authority of India is also expected to invite tenders for setting up FBOs in Chennai and Kolkatta as part of the country’s airport modernization plan.”

Wherever you land, Gulsrud cautions, don’t expect to be whisked off in a limo shortly after your wheels touch the ground. “Expect a long taxi in, and then you might have to stay on board as you wait for the authorities to come out and do the usual checks, which are not a quick process. At some airports you will have to stop the aircraft at a few places before you’ll be able to get off. Once everyone is clear, there is usually a ‘luxury’ van supplied by the airport or the handler that will take you to customs, immigration and quarantine [CIQ]. Your handler should be pretty fluent in English and the local dialect.”

Gulsrud said some airports offer “VIP” immigration and lounges that allow private aircraft passengers to go through a separate CIQ for which there is always an extra, often significant, charge. “Despite the name, VIP lounges are generally shoddy rooms with some old couches,” he said. “They might bring you some tea while you sit and wait for them to clear your passport.

“Nothing goes quickly in Asia,” Gulsrud said. “The departure process is similar but in reverse order. As a result, crews require a longer duty period and you have to plan accordingly. You also have to have your itinerary carefully laid out. Changes are frowned upon and can take days to implement. We tried to get into one airport in China and the authorities told us we would need an onboard Chinese navigator. When we found one and complied, we were denied entry anyway. And it doesn’t get a lot better after takeoff.”

Gulsrud gave an example of two airports that were 1,000 nm apart as the crow flies but–due to the airway structure in China–required a flight-plan distance of 1,400 nm.

“And then there’s the politics,” he added. “One still cannot fly between mainland China and Taiwan without first stopping in Macau, Hong Kong or South Korea. The Chinese government simply won’t permit it.”