China's business aviation sector took a leap forward last year when the number of private jets registered in the country went into three figures for the first time, reaching a total of 116. The figure is part of a report published in February by the Firestone Management Group, which advises companies how to break into the emerging Asia-Pacific market. The report, which records jets registered as of January 15, reveals data from the aircraft registers for the People's Republic of China and its Special Administrative Regions of Hong Kong and Macau.
Midsize Aircraft Gain Traction
According to managing director Justin Lee Firestone, the past few years have seen increasing sales of midsize aircraft in a Greater China market previously dominated by large-cabin jets. Firestone told AIN that this trend bodes well for accelerated growth in a market that appears to have been slow to fulfill its potential. He said that sales of light jets in China remain sluggish.
"This is a force multiplier because it means that the psychology of prospective buyers is changing," Firestone told AIN. "Some are taking a step back and saying, 'Maybe we donπt need a GV or a Global Express,' and they are pursuing a more pragmatic approach [to using business aircraft]."
In Firestone's view, the expansion of demand for midsize aircraft could be a strong stimulant for the wider Chinese market for business aviation. He argued that this could encourage fractional ownership providers to start entering the market.
According to Firestone, lighter aircraft such as Cessnaπs Citations and Bombardier Learjets have sold only in limited numbers and for somewhat specialist applications, such as aeromedical charter flying. "The main reason is the psychology of the buyer," he said. "On [scheduled] airline services between Asian cities such as Tokyo and Osaka airlines are operating aircraft as big as [Boeing] 747s. The tycoons ride in first class and so this is their benchmark for service. There is concern that safety could be an issue [flying in small business jets]."
Lack of infrastructure in China has commonly been raised as an obstacle to business aviation growth in the vast country. But Firestone believes Western companies reluctant to take on the challenge of entering the market have overstated the problem.
"Since the Olympics in 2008, the Chinese authorities have done a great job of supporting business aircraft use," said Firestone. He said that the once arduous process of getting overflight and landing permits has become easier, at least for operators who take the trouble to understand how the system works.
Handling fees continue to be discouragingly high. For example, Hong Kong International Airport still supposedly charges as much for a small business jet to land as it does for a 747.
On the customer side, Firestone asserts that what he viewed as a cultural stigma over owning private aircraft has greatly diminished. Private aircraft are now viewed as genuine business tools. Nonetheless, he said that Chinese owners do tend to remain discreet about how they use them and are especially reluctant to have them made available for others to charter under management contracts.
In Firestone's experience, financing aircraft deals is no obstacle to sales in China since many customers are cash buyers. Clients' concern about attracting unwanted attention can result in some transactions being complicated by the need to have an aircraft bought by some sort of intermediary company, he added. "For this concern over scrutiny to go away, the China market needs to get to around 250 aircraft," said Firestone.
According to Firestone, some three quarters of aircraft on the Chinese registry are privately owned. He suggested that this strong preference for private ownership has proved to be a "barrier to entry" for charter operators who generally seek to open new markets by making aircraft available for charter under management contracts.
One other issue Firestone flagged was the embarrassment and difficulty caused when Chinese clients struggle to get U.S. visas simply to allow them to fly to the factory to collect their aircraft. He suggested that U.S. immigration authorities have been needlessly obstructive in situations like this, putting U.S. manufacturers at a disadvantage.
According to figures from the Chinese registry, Gulfstream Aerospace continues to dominate the Chinese market, with 43 aircraft sold there to date, accounting for a 37-percent market share. Cessna has 24 aircraft in China, representing 21 percent of the installed base, followed closely by Bombardier with 21 jets (18 percent), Hawker Beechcraft with 18 (15 percent), and Dassault, Airbus and Boeing with, respectively, six, three and one aircraft in the country.
In the 15-month period between November 2009 and the start of February 2011, 28 aircraft were added to the Chinese registry with an estimated combined value of $1.1 billion. These consisted of the following types: Bombardier Challenger 850, Challenger 605 and Learjet 60; Hawker Beechcraft Hawker 4000; and Cessna Citation Mustang.