China's rich help private jet market take flight

[May 25, 2011]  HONG KONG (AP) -- China's private jet market is cleared for take-off.

The country's soaring economy is creating a class of wealthy entrepreneurs who have plenty of money to spend on one of the ultimate symbols of success: the executive jet.

Airplane makers are rushing to fill that demand. They've been showing off models, some with touches aimed at Asian tastes, at air shows and luxury expos around China this spring to crowds of potential buyers.

Authorities, meanwhile, are gradually loosening restrictions on airspace and easing bureaucratic formalities that still pose hurdles for luxury fliers.

A decade ago, there were essentially no private jets in China and only a handful in Hong Kong, said Justin Lee Firestone, managing director of Firestone Management Group, a private jet consultancy.

At the end of April this year, there were 90 registered in China and 10 of those -- worth about $500 million in total -- were delivered since the start of January, he said.

"That's significant in any scenario but especially considering the global economy" is hardly robust, Firestone said. "Those numbers are explosive."

Jason Liao, who left his job as Beijing-based managing director at Bombardier last year to set up his own company helping people buy business jets, forecasts that 70 private jets will be delivered in China this year. That would be an impressive jump in sales because it would double the number in the country last year.

Liao's company, China Business Aviation Group, has already signed eight deals since it opened in September.

Airbus has sold 20 corporate jets in China so far and predicts demand for five large corporate jets a year.

"We used to say that was maybe the total market but now we think that's the Airbus part of the market," said Francois Chazelle, vice president of the European plane maker's corporate jet division.

At a Hong Kong airshow in March, Airbus unveiled its Asian cabin concept, dubbed Phoenix, which features karaoke equipment and a red color theme, an auspicious color in Chinese culture. A round table for family style dining preferred in many Asian cultures can be converted to a square to allow a post-meal game of mahjong.

"The very first aircraft we delivered to a Chinese customer had a karaoke on board," said Chazelle.

Rivals are just as upbeat. Bombardier expects China to be its third biggest market in the next decade, after North America and Europe. The Canadian company forecasts that aircraft makers will deliver 960 business jets to China by 2020, and another 1,400 by 2030.

Boeing is delivering two business jets to Chinese customers this year.

While there is much optimism among plane makers, there are still some restrictions that have hindered industry growth.

Private jets registered in China must be operated by one of five licensed companies. That's different from the U.S., where big companies that own private jets will usually have their own corporate flight departments.

One big challenge is military control of airspace, with only 30 percent open to civil aviation. In the U.S. the figure is about 70 percent.

Passenger flights in China are often held up by frequent air drills or weapons tests held at short notice. Aircraft can only fly on fixed routes between airports, which also means they cannot detour around bad weather and get grounded instead.

A shortage of trained Chinese pilots is also a problem. Some operators will either hire pricey foreigners or use pilots working for commercial airliners. That could cause safety problems if they aren't completely familiar with the controls, said Firestone.

A limited number of slots for private flights at China's airports also makes it difficult for a time-pressed executive to change schedules.

"Some clients, what they'd rather do is take commercial because then they can meet their schedule on the other side," said Jolie Howard, Hong Kong-based director of business development at TAG Aviation Asia, a private jet charter company. "That defeats the purpose of having your own private plane."

But some improvements have been made and others are in the pipeline that are expected to boost nonmilitary aviation in China and ease pressure on crowded flight paths, even if not directly aimed at private jets.

Several years ago, applications for flight permits had to be submitted at least a week in advance to civil aviation authorities. Now, approval takes one to three days, and in some cases as little as a few hours.

Under proposed new guidelines, reported by state media late last year, aircraft flying up to 4,000 meters would no longer need to wait for approval as long as they file a flight plan in advance. Aircraft flying at low altitudes -- 1,000 meters or less- will not need to file any paperwork at all.

A trial of the new guidelines began in January, when authorities allowed four helicopters to fly at low altitudes over the southern island of Hainan, a popular tourist destination. Low-altitude trials will be expanded to other areas around the country.

Despite the hurdles, industry observers believe the only way is up for sales as corporations and the rich realize private jets are more of a tool than a toy.

"Boardroom folks are saying we have a chance to use a business tool to reach clients and factories. On a single day we can go to multiple locations and have productivity gains," Firestone said.

"A few years ago they were saying: Hey, I have a private jet. I can go on vacation to Koh Samui" in Thailand.

[Associated Press; By KELVIN CHAN]

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