Singapore Air Show

Bizav in Asia: Manufacturers bullish on region’s prospect

 - January 31, 2010, 8:19 PM

Asia is set to be at the epicenter of a resurgence in business jet sales, according to Honeywell Aerospace’s latest market forecast. In the most recent survey, 58 percent of operators in Asia indicated that they intend to replace or expand their fleets over the next five years. This was step up from the 2008 survey, when almost 50 percent had said they would buy new aircraft following a nine-point gain that year compared with 2007.

Globally, the Honeywell forecast predicted the delivery of approximately 11,000 new business jets between 2009 and 2019, generating $200 billion in sales. The U.S. avionics and engine maker sees the Asia-Pacific region accounting for a proportionally higher share of this growth than other parts of the world.

“Clearly, the relatively mild impact of the global recession on major Asian economies such as China and India is helping support a more optimistic level of interest in business jets,” concluded Honeywell’s forecasters. “Improved access and ease of use may also be a contributing factor.”

However, the latest Honeywell market study also suggests that the recovery in business aircraft sales will not really kick in until 2011-12, based on the fact that many operators’ purchase plans indicated they likely would close those deals toward the latter part of the current five-year period.

“The relatively stronger levels and timing of international purchase plans suggests that pent-up demand will improve both order intake and new jet delivery rates by 2011-2012, similar to what the industry experienced in the last cycle,” said Rob Wilson, Honeywell’s president for business and general aviation. The replacement of existing aircraft was found to account for more of the projected new sales than purchases of additional aircraft. Worldwide fleet expansion plans actually declined by three points in the latest survey, which was based on 1,200 operators in the second and third quarters of 2009.

Honeywell believes that customers in Asia, along with those in the Middle East, are particularly interested in upgrading their fleets with larger, long-range aircraft. However, along with other regions of the world, operators have expressed concern over new restrictions on crew duty times and regulations to reduce carbon emissions.

Analysis of business aircraft registered in the Asia-Pacific region by UK-based aviation information specialist Ascend has also shown sustained growth over the past decade. Ascend data supplied to AIN showed that the total fleet almost doubled in size from 783 on Jan. 1, 2000, to 1,451 on Jan. 1, 2010. Growth in this part of the world has accelerated since 2005, showing an increase of 57 percent compared with a more modest increase of 18 percent in the first five years of the last decade.

The Ascend data also shows that, in addition to jets, significant numbers of piston- and turboprop-powered aircraft continue to be used for business aviation applications throughout Asia. Ascend’s fleet data spans the wider Asia-Pacific region, including former Soviet republics such as Turkmenistan.

Gulfstream Gears for Growth
“We are very optimistic about the region and continue to put resources into the area,” Roger Sperry, Gulfstream’s division vice president for the Far East and South America, told AIN. “The Asian economic recovery is happening a lot sooner than that in the U.S. and Europe. We’ve had a very good year in the region when you consider what’s been going on in other parts of the world. We have gotten a lot more inquiries, and a lot more deals are being done there.” A lot of this new interest is coming from China and Hong Kong.

Sperry has observed a shift in cultural attitudes to business aircraft in Asia, with wealthy individuals now much more comfortable being seen to use and own jets. “I think the beginning of the change in culture began in about 2005 in Hong Kong when a few high-net-worth individuals purchased business jets,” he explained. “What happened was mainland Chinese business owners watched their Hong Kong counterparts begin to do more business because of it and the lesson wasn’t lost on them. We’ve seen a lot more of that in 2009 and I think we’re going to see it continue to increase. There have been a lot of IPOs [initial public offerings of shares] in Hong Kong and that translates into people with money. I think if there’s a need for an aircraft they are going to respond accordingly.”

In 2005, there were 32 Gulfstream large-cabin aircraft in the Asia-Pacific region, a number that more than doubled to 79 by the end of the third quarter 2009. The growth in sales for Gulfstream’s midsized G100, G150 and G200 has been even stronger, rising from five to 24 over the same period.

The Gulfstream executive also praised Chinese authorities for having made real progress over the past 12 months in clearing long-standing obstacles to the flexible use of business aircraft. “The paperwork delay went from five days to, in some cases, as little as a few hours, but certainly within a day or so,” Sperry explained. “The people I speak to in the Chinese government say they’re planning on implementing greater improvements. Compare that to Japan, where I haven’t seen any indication of that happening.”

The next step for Gulfstream is to increase its product support structure in the region to meet the needs of its growing fleet there. Beijing is next on the list, initially with a field service representative to be placed there to supplement the two the U.S. manufacturer already has in Singapore and the two in Hong Kong. The company also is to open a spares inventory warehouse in the Chinese capital this year. There already are independent authorized Gulfstream service centers in Hong Kong (Metrojet), Singapore (Jet Aviation) and Sydney (ExecuJet).

Embraer Raises Expectations
Embraer shares the optimistic outlook projected by the Honeywell forecast, predicting increases as high as 9 percent in the Asia-Pacific bizav fleet each year over the next decade. That’s four times the growth rate that the Brazilian airframer’s forecasters see coming from North America and Europe and almost twice the rate it expects in Latin America. It would mean about 80 new aircraft being delivered to Asia- Pacific countries each year for the next 10 years.

For Embraer’s Asia-Pacific sales and marketing vice president Jose Eduardo Costas a key difference is that while this region has not been untouched by the global financial crisis, its economies have not been subjected to the traumatic fallout of major banks and corporations collapsing. He sees gross domestic products in Asian countries rising now and believes that increases in aircraft orders and deliveries will follow closely.

This year, Embraer will start delivering the first of its new Phenom light jets into the Asia- Pacific region. It has sold a mix of 40 Phenom 100s and 300s in this part of the world, which will join the 18 Legacy 600s already in the region.

The Phenom 100 is already certificated in Australia, and Embraer is completing the approval process in several other countries. India has proved to be the main market for the very light jet so far, with 18 ordered by Invision Projects and two by Aviators India.

The Brazilian manufacturer also is taking steps to open more service centers in the Asia-Pacific region and is set to announce details of new locations. It already has authorized service centers in Singapore (Hawker Pacific) and India (Indamer).
Here at the Singapore show, Embraer is exhibiting a Phenom 100 and a Legacy 600. It is also showing a mockup of its new Legacy 500.

Bombardier Bullish
After a slow start in 2009, the last six months saw a marked uptick in demand for business aircraft in territories such as Korea, Japan, China, Hong Kong and Taiwan. This is the assessment of Bombardier regional sales vice president David Dixon, who agreed that the Asia-Pacific countries have generally bounced back pretty quickly from the financial crisis. After earlier difficulties with currency valuation, India also is seeing resurgent demand.

“We continue to have some airport access issues, including fees and accessibility, and regulatory problems, though it is getting better,” added Dixon, referring mainly to China and India. “And there are still some issues regarding the perception of private jet ownership. One positive note is that the infrastructure is changing rapidly, although exactly what’s going to happen is very difficult to predict. 

“A major issue here in Hong Kong was the closing of the very restrictive Kai Tak Airport,” he continued. “Once the new airport opened, business aviation skyrocketed. I can’t see anything but significant growth and we expect 300 aircraft sales for China and 250 for India over the next ten years. Who knows? Even that could be hugely understated. We just don’t know at this point. Ten years ago who would have foreseen where we are today?” 

Bombardier claims about a 20-percent share of the Asia-Pacific market and has found its Challenger family to be especially popular. To serve the growing fleet, the Canadian airframer added a field service representative in Hong Kong last year and also has representatives in Singapore, Beijing and Australia.

Dassault Sees Tide Turning
Dassault Falcon Jet president and CEO John Rosanvallon was less optimistic in his assessment of recent Asia-Pacific market conditions, concluding that, “Unfortunately, there’s not much going on for business aviation.” At the same time, he did stress that he feels the tide is turning and in response the French manufacturer plans to increase its sales presence in China and the rest of Asia this year and next. He sees the operational environment becoming friendlier in Asia, with signs of progress on issues such as the high fees charged to operators.

Dassault has a presence in Kuala Lumpur but is shifting its marketing emphasis toward China. “We have a good team in Beijing and will be expanding their presence,” Rosanvallon said, adding that Dassault also has plans to increase its customer service infrastructure in the Chinese capital, as well as in Shanghai and Hong Kong.

“Customer service is always a key element. We have already taken some steps but we will be expanding our coverage in Beijing, Shanghai and Hong Kong. Our main partner in Asia for maintenance is Hawker Pacific and it will be opening a major facility in Shanghai in a few months,” Rosanvallon said.

Dassault is close to achieving Chinese certification for its Falcon 7X, having already secured this approval for its Falcon 2000 and 900 families. By the end of next month, it expects to deliver the first three 7Xs into the People’s Republic. One of the trijets is on show here in Singapore this week.

“What is most interesting is aircraft financing,” Rosanvallon told AIN. “Chinese banking institutions are beginning to enter business jet financing, which is a clear sign they’re opening up to our industry. In 2009, Minsheng Bang, a private bank in Beijing, became active in its support of business aviation. That is very encouraging.”
Compared with other parts of his global sales territory, Cessna’s international sales vice president Trevor Esling sees the Asia-Pacific region as a fairly encouraging place to visit in that it has been less severely impacted by the economic crisis. He told AIN that the long-running process of educating customers here to the benefits of business aviation is starting to pay off.

“In major markets like India and China there have been the beginnings of some real progress in terms of freeing up airspace and improving [the time taken to get] permits,” Esling explained. “There is also talk of [China] dropping taxes [on imported aircraft] from 24 to 6 percent and that could really help to underpin demand. The Indians need to do this, too.”

Here in Singapore, where Cessna has its main sales office for the region, the manufacturer is exhibiting a Citation X and a CJ3. It has had sales success with both types, as well as with the Citation Sovereign and the new Mustang light jet.