Aviation Giants Target Chinese Growth
Aviation companies have flocked to Shanghai this week for the Asian Business Aviation Conference & Exhibition as they look toward Chinese businesses and wealthy individuals to offset slumping demand for private jets in the west. From The Wall Street Journal:
On the surface, sales projections from archrivals Airbus and Boeing delivered at a business aviation show in Shanghai on Monday would seem to suggest that China’s business jet market has yet to really take off.
Airbus, the aircraft-making unit of European Aeronautic Defence & Space Co. NV., expects to sell “about five” of its A320-family Airbus Corporate Jets in China this year, David Velupillai, the company’s corporate jet marketing director told the Wall Street Journal. At a press briefing, Boeing Business Jet President Steve Taylor forecast sales this year of three to five of its own 737-based BBJ in China.
The numbers may not sound impressive, but given the low-volume/high-margin nature of fully customized private jets, China is “the most active market” for the aircraft, accounting for the greatest global demand, Velupillai said. Airbus has sold 20 ACJ aircraft in China since 2005, primarily to private customers.
Boeing has sold a total of 10 BBJ aircraft in China, including three last year, out of 155 sold globally since 1999.
The lineup of aviation companies looking to expand into China includes Warren Buffet’s NetJets, which on Monday announced a joint venture with Chinese private equity investors called NetJets China Business Aviation Limited. From Bloomberg:
Entering the China market will “widen our business moat” protecting NetJets from smaller rivals, such as Flight Options LLC, Buffett said in his annual letter in February to shareholders of Omaha, Nebraska-based Berkshire. “No other fractional-ownership operator has remotely the size and breadth of the NetJets operation, and none ever will.”
The China venture will be based in Zhuhai, which is an hour from Hong Kong by ferry, according to the statement. It didn’t say how many planes the operation will have or when flights start.
NetJets’ move positions the company to take advantage of what Embraer projects will be a 10-fold surge in China’s business-aviation fleet to 500 planes in the next decade. The country had about 1.11 million millionaire households in 2010, according to Boston Consulting Group.
The China Daily reports that the Chinese market for business jets did not take off until after the 2008 Beijing Olympics:
Jing Yiming, vice-president of Shanghai Airport (Group) Co Ltd, said there were 132 business jets registered in the Chinese mainland in 2011, up from 32 in 2008.
“About 3,500 flights were taken by business jets in 2011 in Shanghai, making up a third of the total for the country,” he said. “And we expect this year will see a 10 to 15 percent increase in traffic.”
Jet-charter companies in China have also expanded considerably as the country relaxes its restrictions on the use of airspace.
“In the past, you had to apply for a route one week ahead of making a flight, while nowadays it takes only one day to apply,” Jing said.