Market Growing Despite Tough Airspace Restrictions, Limited Infrastructure
Despite a broader slowdown in purchases of ultra-luxury vehicles, tight government restrictions on airspace, and the costly bureaucratic nightmare that is applying for flight permission, many of the world’s top business jet producers see China as a future goldmine in an otherwise limping global industry. Compared to the more than 10,000 private jets currently registered in the United States, China only has around 100 legally registered planes (although the actual number is expected to be much higher), and just as China’s newly wealthy have spent the last several years stocking up on everything from Ferraris to Ferrettis, business jet producers think this group is ready to take to the air.
Responding to this perceived future demand, jetmakers and helicopter manufacturers have been quick to tailor products to Chinese tastes. Of these, Airbus has been perhaps the most active, debuting a China-localized “Phoenix” cabin last year and customizing aircraft for Chinese buyers with everything from wood carvings to Mahjong tables. Via Channel News Asia:
David Velupillai, marketing director at Airbus Corporate Jets, said: “We can do a round table for six. Because the round table is the centre of Asian family life, but we can also convert that table into a square which is better for playing mahjong and other games. We can even do a karaoke bar.”
It costs some US$10 million for a more humble private jet to about US$68 million to buy an Airbus ACJ318. And this does not include the few million US dollars each year needed for maintenance and fuel fees.
Rupert Hoogewerf, founder of the Hurun Report, said: “They just want the best. Like if they buy a car, they are going to buy a Rolls-Royce or Bentley. You got to have one in your collection if you are over a certain status. Rolls-Royce sells a thousand units a year. I am sure it is not going to be long before we sell out at least a hundred jets a year as well.”
According to Velupillai of Airbus, his company expects to sell “about five” A320-family Airbus Corporate Jets in China over the course of 2012, while Steve Taylor of Boeing is projecting sales of “three to five” 737-based Boeing Business Jets (BBJ) in China this year. While these potential sales figures sound meager, Velupillai told the WSJ that — due to the high-margin nature of private jets — China remains “the most active market” in the world for the A320. Since 2005, Airbus has sold 20 Airbus Corporate Jets in China since 2005, mainly to private buyers. Out of 155 jets sold worldwide since 1999, Boeing has sold 10 BBJ aircraft in China to date.
Though jet makers are hoping that China will account for a larger percentage of their global sales in the years ahead, the most likely course for rapid development in the sector appears to be coming in the charter arena. Last year, Jing Daily spoke with Thomas Flohr, founder of VistaJet, who told us his company plans to roll out a larger-scale expansion effort in mainland China this year, and this past spring Berkshire Hathaway Inc.’s NetJets subsidiary announced plans to debut a new jet-leasing business with Beijing-based Hony Jinsi Investment Management Ltd. and Fung Investments.
As NetJets Chairman and CEO Jordan Hansell put it, “The Chinese aviation market has phenomenal growth potential, and we believe that introducing the NetJets service in China will enhance our brand’s global offering for customers around the globe.”