Restricted airspace, poor airport infrastructure and a lack of FBOs has held back China’s business aviation development, but the environment is improving fast
China’s central government has set itself the goal in the current Five-Year Plan of promoting the development of the general aviation industry and reforming airspace management. And local operators say they are beginning to see the results.
Li Tan, business development manager at Hong Kong-based Sino Jet Management, says: “In 2008, when the market in the Greater China region barely existed, there were many obstacles. Things are slowly changing and CAAC [the Civil Aviation Administration of China] is making it easier for operators.”
Three or four years ago, Li says it took a long time to be granted permits – a critical obstacle to business aviation, with its need for last-minute flexibility. It was difficult to get routing information and a navigator might have to accompany the flight. Slots at small airports were not readily available. But all a non-Chinese registered aircraft now needs, to fly into an airport that is open to commercial services, is a permit to overfly and a landing slot.
In the case of a “non-open” airport, the operator needs military approval as well as a sponsorship letter from the city or provincial government, in effect inviting the visit. Aircraft on the B register don’t even need this.
Li says Sino Jet’s initial mission, when it began operations in September 2011, was to provide management services for owners who wanted to preserve their aircraft for their own personal use.
Chinese buyers are mostly first-time owners don’t want other people to “test drive” their new aircraft, Li says, but a charter market is opening up as the experience of aircraft ownership grows more familiar. Owners of multiple aircraft, especially, are seeking to reduce their fixed costs by offering charter availability, and charter rates have come down as more players enter the market.
Sino Jet approached this new business opportunity by entering into a strategic alliance with US-based TWC Aviation, which has 15 years of experience operating large-cabin aircraft worldwide.
Under the terms of the agreement, Sino Jet is marketing management, charter and brokerage services to clients who need the geographical and cultural know-how of a locally based company but the reassurance of a US operator behind it. All aircraft in the Sino Jet VIP charter fleet will be US-registered, maintained to US standards on TWC’s AOC, and flown by US-trained pilots with knowledge of the specific aircraft makes and models.
Scott Cutshall, VP marketing of TWC Aviation, says: “What’s unusual in this market is that the owners of the first two planes available for charter, a Global Express and Gulfstream 200, were actively desiring this.”
Most of the city pairs required by Chinese clients are in the four to six-hour range, and as a result “98% of the business jets you can see on the ramp at Hong Kong airport are large-cabin models,” Cutshall explains.
The Global is in demand for business flights to the Middle East and North America, though leisure trips to locations such as Hawaii will enter the mix as the charter concept becomes better established, he believes. The G200 is better equipped for intra-Asia service, and he predicts a higher proportion of leisure use.
TWC has based three Global and two Gulfstream pilots in Hong Kong, backed up by a US labour pool as required. “The initial focus is on building charter activity, but we’re in conversation with more owners and a second Gobal will join the fleet by year-end,” Cutshall says.
More than 50 business aircraft are under TWC’s management throughout the US and abroad, including Bombardier, Dassault, Cessna, Embraer, Gulfstream, Hawker Beechcraft and Boeing Business Jets.
Cutshall: 98% of the business jets you can see on the ramp at Hong Kong airport are large-cabin models
“This is the first venture of its kind for TWC,” Cutshall says. “In the mid-2000s, we had two aircraft available for charter in Japan, but we were managing and despatching them remotely. You can’t manage an operation like that from 6,000 miles away.”
Li sees two main charter scenarios emerging. Many smaller airports in less developed parts of China require a private flight because the scheduled capacity isn’t there. “If you’re travelling to Inner Mongolia, it’s not like Hong Kong to Beijing, where there is a commercial departure every hour.”
There is also good potential traffic to developing countries in south-east Asia, such as Vietnam and Cambodia, as clients come to recognise the benefits. “It’s a productivity tool and they can do business on board the aircraft in complete privacy,” she says.
While 80% of the aircraft managed by Sino Jet are based in Hong Kong, the company also works on behalf of owners based in Beijing, Hangzhou and Shenzhen, and is already doing some brokerage out of its branch office in Beijing.
“Business aviation starts in any emerging market with the more affluent early adopters,” Cutshall observes. “They require the space that a large cabin affords – and luxury amenities including in-flight service, in contrast to many US flights, where the customer may not even want attendants on board.”
The Asian service ethic is a point Chris Buchholz, CEO of Hongkong Jet, also picks up on. You notice the difference on scheduled carriers such as Cathay Pacific and Singapore Airlines, which he contrasts favourably with North American airlines.
“Everyone talks about service excellence. All the tycoons know one another. If a customer is happy, he’ll tell his friends. This makes you protective of your reputation.”
Buchholz says the competitive landscape in China has changed beyond recognition in less than 10 years. “In 2004 there were two business jets based in Hong Kong. Today there are 70, and in mainland China it’s grown from single figures to around 100,” he says.
Hongkong Jet, which received its AOC towards the end of 2011, is one of three companies in the business aviation sector owned by the HNA Group. It also owns Deer Jet in Beijing, founded in 1995, and Deer Jet Shanghai. The three businesses together operate and manage 60 aircraft.
HNA also launched the first private sector commercial airlines in mainland China and now has 16 of them, along with travel agency, freight and property interests. The group moved its international headquarters to Hong Kong last year – part of an interesting trend, Buchholz says.
“Previously, Hong Kong was a base for international companies looking to move into China. Now, it’s also for Chinese companies that want to internationalise,” he says. “They like Hong Kong because of the greater freedom here – for example, copyright protection for any research you do.”
Hongkong Jet has three ACJs, two BBJs with a third coming soon, five Gulfstreams, again with more on the way, two Global Expresses and a Challenger. The company also has its own G550, claimed to be the only aircraft in Hong Kong dedicated to charter.
It is still rare for local owners to ask about charter opportunities, Buchholz says. “The vast majority of owners in north Asia want the aircraft for themselves, for friends and colleagues. They don’t want to hire it out.” Even if owners accept the principle of defraying their costs, the fact that they are business leaders who may need their plane at short notice means they cannot easily commit it for charter.
He identifies two types of entrants into aircraft management: indigenous companies that own their own aircraft and see an opportunity to turn it into a business, but don’t know too much about aviation; and a second group comprising US and European players that, conversely, know aviation but are unfamiliar with China.
This matters, because he says “you have to know how to fly” to negotiate China’s airspace limitations and permit requirements. With fewer freedoms, crossing borders can be an issue. And operators have to know how to serve locations without FBOs.
The main demand, however, is for long-haul travel. “Clients are more and more acquiring businesses in the US and Europe, even Africa. The currency is strong and valuations are low – it’s a good time to globalise,” Buchholz says.
“For that reason, the smallest category we have in north Asia is super-midsize jets like the Challenger 605, Hawker 4000 and Falcon 2000. Clients want world-class catering and large cabins – and they get better value from our extremely high landing fees using larger aircraft.”
There is only one FBO at Hong Kong International. Buchholz would welcome competition on service quality and fuel prices, and says HNA would be happy to bid if a tender was offered to potential second providers to break the monopoly.
The FBO is also “way too small” and this constrains parking, he claims. “You can only park there 30% of the time, and otherwise you have to be towed by a vendor, who charges an arm and a leg.” This can eat into a pilot’s duty time, he says.
Hongkong Jet has a bilateral agreement with Deer Jet, allowing owners with aircraft based in Shanghai to “take advantage of the Hong Kong style of management and interface with us,” Buchholz says. “You can be Chinese registered but not have to deal with the Chinese authorities.” He describes this as a unique model that can suit customers from the US, Europe, Taiwan or elsewhere.