Charter Market: Asian business is good, but pricey

 - October 26, 2010, 11:45 AM

While the latest reports indicate a decline in the worldwide business jet charter market, certain parts of Southeast Asia are bucking the trend. Hong Kong, in particular, is flourishing. With five locally based operators and several international charter brokers in situ, China’s Special Administrative Region is bursting at the seams.

The Hong Kong Aviation Group (HKAG) is the largest local player. A Kadoorie Group company, HKAG owns helicopter charter firm Heliservices and is the majority shareholder in the only executive aviation FBO in town, the Hong Kong Business Aviation Centre (HKBAC). It also owns Hong Kong’s largest charter operator, Metrojet, which has a fleet of more than 20 managed aircraft. The company reported strong growth figures last year.

Sister company AsiaJet offers jet charter cards and has also seen its business expand, although it has discounted its prices slightly. It offers a three-tier card membership program and members also have access to Metrojet aircraft. Rates range from $5,900 per hour for a Gulfstream G200 to $7,200 for a G300.
By the first quarter of next year the company will manage more than 10 aircraft and says it is flying approximately 25 to 30 hours per aircraft per month. “Cards are becoming more and more popular here,” said AsiaJet CEO Mike Walsh. “People were initially skeptical; it has taken time to build our market.”

Jet Aviation also has a significant operation in Hong Kong, managing more than 10 aircraft under its air operator’s certificate there.

Tag Asia also has a Hong Kong AOC. Jolie Howard, its director of business development in Asia, told AIN that the company was badly hit in last year’s first half. However, she added that the market has picked up quickly and that the main problem regionally is lack of aircraft availability. “Clients who own aircraft don’t always want to [make them available for] charter, so supply is a problem,” she said.
Former Metrojet chief executive Chris Buchholz, who now heads Universal Weather & Aviation’s operations in Asia, agrees. “The market has recovered well after last year,” he commented. “Although there is lots of capacity, we need more to stimulate market demand.” He pointed out that charter customers become discouraged if there are no aircraft to hire.

According to Buchholz, prices in Asia are typically higher than in other markets and have not dropped. The market comprises new aircraft, usually of a high standard. To earn their local AOCs players have all had to comply with the same standards as major airlines Cathay Pacific and Dragonair.

Tag Asia charges approximately $5,000 per hour for a G400 or $7,000 to $8,000 for a Challenger 605. Howard concedes that the company has been “more flexible” with its pricing over the last few months. This depends on the location of its aircraft: for example a return trip to the home base of Hong Kong would cost less than a trip to Bangkok.

Walsh, Buchholz and Howard all claimed that Asia offers private charter service superior to that of most regions. “People here expect a certain level of service,” said Walsh. Both AsiaJet and Tag provide multilingual crew, for example. He added that locals prefer to own their jets and like to buy new, and that wealthy Chinese buyers have filled many of the vacated slots on OEM production lines.  

However, staffing is a problem. “It is difficult to find people qualified for Hong Kong requirements,” explained Howard. “Not many aircraft and facilities are approved by the Hong Kong Civil Aviation Department; for example there are only two Challenger 605 simulators we can use–in Montreal and Burgess Hill in the UK.” The Civil Aviation Department is deeply stretched with the proliferation of airlines and their requirements.

Another area of concern is the rise of an illegal gray market predominantly based on old aircraft. “The space becomes cluttered and cowboys come,” said Howard. “It is important to educate clients. If a flight is $200 per hour cheaper, is it worth the risk of going with that?”

“If there is an incident they may well hurt themselves, but they’d also hurt the whole market,” warned Buchholz. Walsh had exactly the same concern and cautions customers should be wary of operators proffering a “significant price difference.”