Buyers are becoming much more discerning and educated about aircraft purchases as the market matures, said Jason Liao, chairman and CEO of China Business Aviation Group (Chalet 16). During a roundtable Wednesday at ABACE 2018, Liao described the evolving nature of the market in the region.
The first generation of buyers did not care as much about the specifications of the aircraft being purchased, Liao said. Purchase decisions frequently were made based on purchases made by peers and friends. But with the second generation, he added, buyers are now looking for the best airplane to suit their needs, learning about the data and evaluating the costs and expenses.
The China market has been tilted toward the long-range, more costly business jet, Liao observed. Buyers initially sought out the most expensive business jets based on a belief that the higher the price and the larger the jet, the better it would suit their needs. But now, buyers are examining cost much more closely, and realizing that they may not need the largest or most expensive airplanes.
Buyers also are not as swayed by the opinions of their peers, but are looking for what suits them best, said Liao, while he believes attitudes towards aircraft purchases are changing; initially, buyers considered a business jet purchase as a reward for hard work or success–but now there is a growing recognition of the value of the aircraft for efficient transportation. Business leaders are learning about the time savings that come with business jets, freeing them up to better balance their work and personal lives, Liao noted.
While this evolution has occurred, the market has started to pick up again with the fleet growing by 70 aircraft over the past year. The majority of that gain has come since the fourth quarter, Liao said. Of that number 55 percent, or 39 aircraft, were preowned. This increase in the used market comes with a change in tax policy that has encouraged the sale of preowned aircraft.
Despite the promise of sales, the industry still faces three major obstacles to realizing its potential, noted Liao. The first is the lack of infrastructure, although the Chinese government is addressing this with a vision for 500 new airports in its 13th Five-Year Plan. Liao believes that construction on those airports will begin to accelerate this year.
The second major obstacle is restrictive policies, such as the ability to freely access the airspace. Liao noted in the U.S., pilots can get in their airplane and fly. In China there is a permit process and limits on routes and altitudes. Also the costs of flying are much higher in China.
The third obstacle he highlighted is the lack of pilots and maintenance technicians. The cost of getting a license is twice as high in China than in regions such as the U.S. But even more concerning than the pilot shortage is a lack of maintenance technicians to support the growing fleet, he said.