One Step Forward, Two Steps Back For China’s Private Aviation Industry

China’s Private Aviation Environment Is Far From Ready To Takeoff

China's private jet industry is a blank slate, yet growing pains are inevitable

Several articles this week about China’s aviation industry point to rapidly escalating demand on the part of the country’s wealthy business elite for private jets — a demand that has skyrocketed since the inaugural flight of China’s first personal airplane in 1997. Over the past decade and a half, the number of private business aircraft operating in mainland China has risen to an estimated 126 (though the actual total is likely higher), with the greatest increase in purchases seen between 2009 and 2011.

Such demand has encouraged CEO and Chairman of China Business Aviation Group Jason Liao to expect another 70 to 80 to join the private business fleet by the end of this year, with Liao telling China Daily that he anticipates the figure to increase 25 percent annually from this year onward. Liao is far from alone in his optimism for the Chinese market, however, as John Rosanvallon, President and CEO of Dassault Falcon recently said, “We sold our first new Falcon to China in 2006 but the market has now grown to become our largest for new aircraft orders and our most promising.”

In step, Brazil’s Embraer SA, the world’s largest maker of regional jets, expects China to buy 15 percent of its new 61- to 120-seat aircrafts by 2031 as a growing middle class bolsters travel between second-tier cities. Embraer also expects Chinese demand for business aircrafts to be worth a whopping US$24 billion by 2022, accounting for 9 percent of global deliveries by value. This past June, Embraer was cleared to begin producing its Legacy 650 executive jet in China, reducing the cost and inconvenience of selling planes requiring import licenses.

For its part, NetJets, the luxury aviation unit of Warren Buffett’s Berkshire Hathaway Inc., is also stocking up, but in a very different way. As the company announced this week, NetJets will begin selling a card that allows businesses and individuals in China access to flight time on private planes. The card, available in increments of 25 hours, gives the buyer access to large-cabin aircrafts in the U.S. and European fleets.

New planes, luxury interiors: Chinese clients are among the most demanding worldwide

While rising Chinese demand is certainly met with an eager supply of both jets and services, China’s private aviation environment is far from ready to takeoff, which leaves many observers wary of overly optimistic preparations. Indeed, the Chinese government is taking steps toward improving the industry by building business craft-specific airports around major cities including Beijing and Shanghai, cutting the time required for approval of private flights from several days to several hours, and opening all the country’s low-altitude airspace to the general aviation industry.

However, positive momentum notwithstanding, as Jing Daily has previously pointed out, “red tape and a dearth of trained pilots, maintenance crews and facilities, and suitable airports continue to smother the nascent industry.”

That is to say, although major manufacturers, among them Dassault Falcon — which launched a new maintenance center in Shanghai last week – are investing in this sector, it’ll likely be years before service facilities and standards fully meet requirements, particularly outside of Beijing or Shanghai. Moreover, while the government is expanding low-altitude airspace, high-altitude airspace remains tightly controlled by the military. This, as VistaJet founder Thomas Flohr told Jing Daily last year, means “it will take a while until the Chinese aerospace authorities will allow [private jets] to fly at the optimal level,” leaving sub-optimal room to navigate.

Categories

Industry Sectors, Investment & Real Estate, Market Trends, Policy, Transportation