Talking with some of the region’s leading players, Stephanie Taylor assesses the growing demand for business and VIP aviation in Asia
Honeywell’s most recent Business Jet Aviation Forecast, released in October 2017, states: “…based on the expressed level of purchase plans, Asia Pacific would represent close to a six percent share of global new jet demand over the next five years.”
Six percent may not seem much, but Asia’s business aviation industry is still in its infancy. David Dixon, President of Jetcraft Asia and a member of the Asian Business Aviation Association (AsBAA), says today there are only around 400 private jets operating in China versus more than 10,000 in North America; California alone has in excess of 400!
The region’s infancy and, therefore, growth potential, is seeing increasing numbers of aircraft manufacturers highlight their commitment to Asia. For example, towards the end of 2017, HondaJet announced it would sell aircraft in Greater China in partnership with Honsan General Aviation. In January, the OEM opened a new FBO facility at the business jet terminal being constructed at China’s Guangzhou Baiyun International Airport.
Trends indicate HondaJet may be preparing for Asia’s shift away from larger aircraft in the coming years. Gary Dolski, CEO of Hong Kong-based operator and business jet services provider Metrojet, comments: “The Asian market is focusing on large cabin, long-range aircraft regardless of their needs.” Gulfstream’s latest figures are representative of this; at the end of January, the OEM claimed: “…there are more than 330 Gulfstream aircraft in service in the Asia-Pacific region – 280 of them large-cabin.”
However, Dolski continues: “While I believe this market will continue to grow, we will see a rationalisation and the increasing engagement of aircraft suited to a customer’s actual business travel requirements. In effect, this will mean an increase in smaller cabin, short-haul aircraft for business contained within the region.”
Jeffrey Lowe, CEO of business aviation services provider Asian Sky Group, thinks this is already happening, suggesting buyers are right-sizing their aircraft because they are looking for better value. Lowe cites this as one of the reasons the pre-owned private jet market in Asia is growing. He points out: “It used to be that the discerning Asian buyer would only consider a brand-new aircraft straight from the manufacturer.”
Textron’s focus on pre-owned aircraft at this year’s Singapore Airshow appears to support this theory. The event marked the first time Textron Aviation included a Cessna Citation Sovereign+ from its ‘Pre-owned Direct’ inventory on the static aircraft display. Before the show, the OEM also announced it would bring a “dedicated pre-owned sales focus to support local APAC operations”.
Elsewhere, ATR made the press with news that Berjaya Hotels & Resorts is acquiring two pre-owned ATR 42-500s for services to the Malaysian island of Redang, where it has two resorts.
Asian Routes
The advent of smaller aircraft will no doubt broaden the range of routes flown, which will help the industry grow further. Dixon says that so far city pairs in Asia haven’t developed in the same way as in North America and Europe: “It’s still mainly primary-to-primary routes, from capital to capital, like Hong Kong–Sydney or Singapore–Beijing, which is where the airlines fly too. We need more secondary city-to-secondary city flights to grow the business.”
Dixon reckons that competing with airlines is a particular challenge for Asian business aviation because, unlike in North America and Europe, commercial carriers in Asia actually offer a very high standard of service. He argues: “Access will drive the industry’s expansion. China now does business worldwide, particularly in places like South Africa and Latin America, both destinations where the airlines don’t really fly from Asia.”
Access goes hand-in-hand with business. Lowe declares, “It used to be mostly private buyers in the market. Now, a lot of those private first-time buyers are buying a second aircraft, but this time they are using corporate resources and the aircraft is strictly for their corporate needs.”
It goes without saying that for more routes to become viable, the industry needs access to more airports. Dixon says access for foreign aircraft at 200 airports in China is meagre when you consider that in North America, jets have 5,500 to choose from.
He feels business aviation is being squeezed out of Asia, and Lowe agrees: “Given the ever- growing needs of commercial airlines, take-off or landing slots during peak hours are unavailable. Most airports only offer a limited number of slots during the night.” Dolski adds: “Parking and the ability to hangar an aircraft in certain prime high-traffic areas is either extraordinarily expensive or there is no space available.”
Dolski divulges: “Metrojet is in the final stages of validating an affordable alternate solution to partially address the identified parking and hangar shortfall,” but with these issues in mind, chartering might seem an attractive alternative to owning and operating an aircraft.
Charter Solution
The charter sector in Asia is growing, with VistaJet reporting a 16% growth in its Asian flight hours at the end of 2017 and naming China and India as the fastest-growing countries in the region. Manila-based PhilJets, which provides helicopter and jet charter, purchasing and MRO services, saw a 100% year-on-year growth in revenue for 2017. The company said: “The total value of assets under management by PhilJets increased by almost four-fold in 2017, reaching […] the equivalent of about 77 billion US dollars.” These new assets include a Cessna Citation XLS, Bombardier Challenger 350 and Airbus Helicopters H145.
Lowe notes both the charter market and membership programmes are popular because of their lower initial and on-going costs, expanding: “As more and more people become aware of the benefits of business aviation – primarily time management – demands increase and easy accessibility becomes a desired factor.”
Dixon acknowledges people are buying shares in NetJets or FlexJet, but counters: “In my opinion, there won’t be a NetJets Asia any time soon. Why? Because the dynamic is very different. In the US you can fly for six hours between LA and New York and be in the same jurisdiction; one clearance, one permit, and it’s technically the same throughout Europe. If you do a small circuit around Hong Kong, you go through three jurisdictions – Hong Kong, Macau and China. It’s the same with Singapore – depending on runway direction you may go through Singapore, Malaysia and Indonesia all in quick succession, so things have to work in a completely different way.”
Lowe has noticed another trend: “Full service aircraft management companies with big overheads are being replaced by smaller, boutique management companies offering a menu of services from which the client can pick and choose.” It seems Metrojet is already responding to this trajectory, with Dolski revealing: “We are working on introducing new à la carte offerings to both our managed fleet and other third-party clients in the near future.”
For Dolski, one of the biggest challenges specific to Asia is the workforce. “The identification and development of local talent is key for long-term growth in the region and this covers the full spectrum of business aviation from flight crew to maintenance to general aviation management. I am a strong supporter of ‘China for China’, and there needs to be a proper evolution process that takes into consideration the current status of the workforce and where we want that workforce to be in five and ten years plus.
“We will see a lesser reliance on ‘expat’ or Western labour in many positions as local talent is identified, trained and garners the appropriate level of experience. This will, long term, help in lowering costs and merge the Eastern and Western cultures into an environment that continues to uphold all the required levels of safety and quality, with an Eastern stamp.”
Dixon and Lowe are convinced the education of the industry will lead to improvements across all areas of business aviation. “It’s about getting away from the ‘lifestyle’ perception,” maintains Dixon. “Instead, we want to highlight the value of business aviation to an economy. We have an Australian owner who says flying privately gains him an extra month’s worth of productive time at his office compared to what he would have flying with commercial airlines. Think about it – that’s the equivalent of a 13-month bonus and to a multimillion-dollar group that’s a large sum.
“The Hong Kong Government’s inbound investment department in Hong Kong is seeking to attract foreign companies to make their regional bases in the SAR [special administrative region], but limited access and lack of parking aren’t making it easy enough for people. There is a famous example where one of the richest men in the global IT industry was essentially turned away from Hong Kong because the airport constraints effectively told him to park his aircraft in Manila. That’s not a red carpet but a red flag! You can’t tell someone to park in Chicago for a meeting in New York, it takes away all the benefits I just talked about! In fairness, there has been better slot coordination of late, but there is still plenty to do. The aviation business needs a third runway in Hong Kong.”
Lowe asserts: “Solutions need to be incorporated from the beginning, when new airports or expansions to existing airports are being planned.” And change is on the horizon. In February 2017, the Civil Aviation Administration of China (CAAC) released its 13th five-year plan, with one of its targets being the vigorous promotion of business and general aviation.
The CAAC hopes to achieve this by: “Building more infrastructure, putting in place a standard system, continuously improving the operating environment and expanding service areas. There will be over 500 general airports and over 5,000 general aircraft, with the total flight hours reaching 2 million.” If this is the case, the business aviation industry in Asia won’t remain in its infancy too much longer…