Despite Potential, China's Private Aviation Industry Still "Yet To Take Off"

    Despite tight government restrictions on airspace, many of the world’s top business jet producers see China as a future goldmine and a bright spot in an otherwise limping global industry.
    Jing DailyAuthor
      Published   in Finance

    Airbus Sold 20 ACJ Aircraft In China Since 2005#

    Jing Daily

    Despite 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 and a bright spot 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.

    Despite its inherent difficulties, China’s private jet market is already developing at an impressive rate. In June of last year, the business jet charter service provider Deer Jet opened China’s largest private jet hangar in Beijing, and last spring a record number of business jet makers took part in the Hainan Rendez-Vous, looking to cultivate a new consumer base alongside yacht makers and international luxury brands. Also last spring, Airbus debuted a China-localized "Phoenix" cabin while the Hurun Report launched “Wings & Water,” the first publication dedicated solely to private jets (”wings”) and yachting (”water”) in China. And while most Chinese private jet owners prefer to remain suitably private about their lifestyle, many of the country’s high-profile businesspeople and celebrities are known to own, or regularly charter, private jets. Still, despite increasing demand and interest among China’s ultra-wealthy, the realities of the current Chinese private jet market lag far behind its potential.

    As the Wall Street Journal notes, the sales reports coming out of a business aviation show held today in Shanghai indicate that this seems unlikely to change quickly, though jet makers remain optimistic about China's long-term potential. According to David Velupillai, corporate jet marketing director at 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.

    Jing Daily

    What every private jet maker is eagerly awaiting in China is expected moves by Beijing to loosen the Chinese military's grasp on high- and low-altitude airspace. Last year, the country's aviation regulators announced plans to liberalize some restrictions within the next three years, though attendees at today's aviation conference in Shanghai pointed out that the rollout plans "leave much to be desired."

    One interesting aspect of China's nascent private aviation market is that larger business jets make up a comparatively high proportion of sales, accounting for over 50 percent of Boeing's. Said Taylor of BBJ, “The Chinese buyers have all come into the market at the high end.” This means many have skipped over smaller, single-engine planes completely, homing in on models like the US$68 million Airbus ACJ318.

    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 week 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."

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