ABACE Convention News

Jetcraft Sees Growing Role Helping Asian Buyers to Upgrade

 - April 12, 2019, 10:00 PM

Jetcraft hit 100 aircraft sales for the first time last year as it continued to grow in 2018 and into 2019. Expansion came mainly in the booming U.S. market, but Asia also played a pivotal role.

David Dixon, president of Jetcraft Asia (Chalet 8), said 2018 was “the best year ever for the [Asia-Pacific] region, partly because of aircraft coming out of China and the opportunity to sell aircraft into the United States.” Because of such sales, Asia became the second-biggest market—“dominated by long-range jets,” said Dixon. It represented 20 percent for the company.

Usually, the biggest markets are the U.S., followed by Europe. But while the former has been doing well, the latter has foundered somewhat—and indeed Dixon admitted, in this case, Asia coming second was “probably more to do with Europe’s problems.”

Another factor Dixon has observed is that the used aircraft coming out of Asia tend to be “younger, with lower time and lower utilization,” making them very attractive to buyers. Also, he said, “China aircraft tend to be maintained under Part 125,” the same as airliners.

Transactions are “pretty straightforward” although taking aircraft out of China’s “B-reg” can be slightly more bureaucratic. However, Dixon said paperwork tended to be “different” from country to country, rather than the amount of work varying that much. “It’s not by any means insurmountable.”

The Asian market is at a significant juncture with respect to the second-hand aircraft market as “it’s the first time that there have been sellers who have replacements coming in” from OEMs, for example. “OEMs had their hayday for a while,” he said, but now unless they manage to find new first-time buyers, they are reliant on owners of used aircraft upgrading to new ones. Jetcraft has been very active, and sees a growing market, helping such buyers sell their existing aircraft so they don’t have an expensive “overlap.”

He observed that there are a lot of new options for long-range aircraft and they’re all “really appealing to this market”—from the Gulfstream G500/600 to Bombardier 7500 and Dassault’s Falcon 8X, and upcoming 6X. “And most likely they’ll be replacing something.

“For me, I see this dynamic as strong, and OEMs are trying to find homes for [the replaced aircraft]. Our role as brokers is important, and we do have credit lines [too]. We can sit in the middle and help facilitate the transaction [for the customer] who doesn’t want to own two aircraft at once; and the OEM.”

And there are buyers for the used aircraft—both in the U.S. as the dollar is strong and tax regime favorable—and in Asia where “people are getting more confident in their understanding [of operating business aircraft].”

He added that there is also a steadily increasing level of infrastructure and support—for example, airports, FBOs and aircraft management companies, such as TAG and Jet Aviation.

On maintenance, he noted the OEMs increasing their maintenance offerings in the region and beyond—“Gulfstream is very present, and Bombardier [expanding in Singapore, for example], and Dassault will be soon too.” He added, “Textron hasn’t made a move, yet.”

In respect to MRO capacity, he admitted that “Singapore is the single biggest location” but made an analogy between its relative location to China—“It’s like someone going from London to Rio for maintenance.” Meanwhile, Hong Kong has facilities, but has “a lack of space”—so any new developments on this front in Macau “may help.” Increasingly in the region, there are “plenty of options,” said Dixon, with developments in the Philippines and Kuala Lumpur as well.

All this plays into making business aircraft ownership a more viable proposition for Asian buyers. Dixon said the vast majority of Jetcraft’s clients are very wealthy individuals and they want long-range aircraft, due to the nature of their business needs. Interestingly, he said corporate flight departments are still a very rare phenomenon in the region, along with fleet operators—leaving a lot of opportunity for experienced international aircraft management companies.

In addition, smaller aircraft play a far lesser role than in the U.S. and Europe, as there aren’t so many airports. While the U.S. has some 5,000 that business aviation can access, Asia has around 250. The focus is very much on flying to capital cities either from other capitals in the region, or from Europe, the Middle East and the U.S.—although Australia also has a significant presence. With China, Dixon welcomes the government’s airport-building program but says airlines will still dominate.

“With my industry hat on [Dixon is vice-chairman of AsBAA], I’d rather see more mixed-use airports”—he explained, meaning airfields having a military base on one side, and civil/business aviation on the other. He admits this is controversial, but says the infrastructure is already there.

Turning to the ABACE show Dixon stressed its vital importance for the sector “and for our part of the world,” in particular for discussing pertinent issues. “Some people have become disillusioned that operating is not getting easier. AsBAA helps raise such issues and educate authorities to the value of business aviation. When you’re trying to attract investment, the people you’re trying to attract need to be able to access the main centers and the production centers. It’s part of the economy and trying to grow it.” He said such people use business aviation and expect that access to key centers, which are “not necessarily smaller cities at this point.”

Role of Finance

Dixon said “We’re normally involved in straightforward cash deals. Beyond that, some buyers finance their aircraft” but this tends to be to raise money to grow the business elsewhere—that is, buying the aircraft in the first place in cash is not necessarily a problem.

He cited “one or two niche aircraft finance operators that are more comfortable with local rules and regulations.”

Essentially, he told AIN, “people usually start with their private banks, as that’s where the relationship is, and they don’t want to start again on disclosure requirements, etc.” He noted that sometimes clients don’t realisz that their own banks—e.g. UBS or Bank of America—have aviation departments already, and often have business aircraft finance specialists based in Asia-Pacific.

Jetcraft, which has 28 international locations now, according to Dixon, is meanwhile putting together its latest market forecast to be released in time for the EBACE show in Geneva in mid-May. He noted that having so many locations facilitated successful transactions, and finding buyers and sellers in different parts of the world for clients. “Someone may put their hand up and say we need that [Gulfstream] 650, or that [Challenger] 605. If you’re a singleton, you don’t necessarily have that coverage. In general, he said, the market is getting more international. For example, “[A buyer] in Mexico used to go to North America, but I was able to sell an aircraft from Macau to Mexico. That [sort of thing] didn’t happen before.”