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Private Aviation Industry Sees New Horizons in China

For years, the makers of private jets have been eyeing the Chinese market, watching in anticipation as freshly minted millionaires and billionaires buy up expensive new toys, including luxury watches, wines and exotic cars. But not jets. China??s tightly controlled skies and cumbersome regulations have stifled the development of a market for private jets. Now, regulatory changes and new infrastructure are feeding hopes among jet manufacturers that the market is finally poised for takeoff.

Dassault Falcon of France recently moved its Asia sales headquarters from Kuala Lumpur to Beijing. ??Currently on a worldwide basis, the market in China is less than 1 percent of the total market,?? said John Rosanvallon, the company??s president and chief executive. ??If current trends continue, that will increase to about 10 percent within the next five years.??

Even if that is a bullish forecast, tangible changes in China are under way. Last January, for instance, China??s aviation authorities allowed a few private helicopters to start low-altitude flights over Hainan, the southeastern island that is a popular tourist destination. Even though permission was granted only on a trial basis, it has been seen as the first step in a five-year plan to open China??s low-altitude airspace. That goal was first announced by the State Council and the Central Military Commission in November as part of a plan to promote the development of the country??s general aviation sector. More low-altitude trials ?? below 1,000 meters, or 3,280 feet ?? are expected to start later this year near the cities of Changchun, Guangzhou and Shenyang.

At the same time, though the number of business jets in China remains very small, it is growing. ??Between November 2009 and February 2011, 28 private aircraft were added to Chinese registries, which represents over $1.1 billion in sales,?? Justin Lee Firestone, managing director of Firestone Management Group, a private jet consultant, said in a telephone interview. The firm??s recent report on the number of private jets registered in China noted that Gulfstream Aerospace dominated the market with a market share of 37 percent, followed by Cessna and Bombardier.

At the end of April, there were 126 registered jets in China, including Hong Kong and Macao, according to Mr. Firestone, including 10 jets that had been recently delivered worth about half a billion dollars.

David Dixon, Bombardier Business Aircraft??s vice president of sales for Asia and the Pacific, said the company was predicting 1,425 deliveries of new jets in the region from 2010 to 2019 for the entire industry, with 600 of those deliveries destined for China.

The main challenges in China, and in Asia generally, are restrictions on when and where jets can land and on a host of other regulatory questions: overflight approvals, access to airports, restricted routings and limitations on parking permits, Mr. Dixon said. ??But the level of awareness of these issues has risen considerably recently,?? Mr. Dixon said. ??The situation is evolving very much in the right direction.??

Other companies feel the same way. ??Over the long term, our goal is to have a market share in China roughly equivalent to our overall market share of the large cabin market around the world, which is about 40 percent,?? said Mr. Rosanvallon of Dassault Falcon.

China is increasingly providing infrastructure for business aviation. The first private jet facility in Beijing was opened before the Olympics, and Shanghai Hongqiao International Airport opened a dedicated private jet facility in 2010. Last December, the Shenzhen Business Aviation Center also opened, providing the first facility built for fixed-based operators in southern China. The facility features a dedicated security channel to allow business aircraft passengers and crew members to complete immigration, customs and quarantine formalities quickly. One floor offers a pilot lounge area providing flight-planning materials and a crew rest area, while another includes a business conference room and additional office space. A similar facility at Beijing International Airport mainly offers private jet charter services.

Meanwhile, the ExecuJet Aviation Group recently announced a joint venture with Tianjin Haite to start a full-service business aircraft maintenance and management company. ExecuJet Haite Aviation Services China will be based at Tianjin Binhai International Airport and will offer aircraft management and maintenance services.

Graeme Duckworth, ExecuJet??s managing director for Asia, said the General Administration of Civil Aviation of China in particular and the government in general were taking the lack of infrastructure seriously. ??Although the development has been slow to date, facilities are now being approved in fairly short time. Our joint venture received government approval within a month, which I believe is unprecedented in China, although this was with much support from the Tianjin government, who welcomes foreign investment,?? Mr. Duckworth said.

Mr. Firestone agreed: ??Anyone saying there is no infrastructure to support the growth in China is clearly in a state of denial,?? he said.

Beyond the improvement in infrastructure, Mr. Firestone also noted a reduction in the time needed to obtain permits, especially for aircraft flying into China. ??Now it can be as quick as a day to three days. Not so long ago it was a one-week minimum?? he said. ??Ever since the Summer Olympics that Beijing hosted in 2008, the Chinese government clearly has an appetite to continue supporting the remarkable growth of business jet usage from within their borders??

But he said that some ancillary services to support private jet operations had yet to emerge in China, such as dedicated private jet catering companies. ??You bring your $55 million jet and you want to hold a state dinner in your aircraft, but your flight attendant has to order your gourmet food from airline catering kitchens which specialize in feeding the masses or a local hotel,?? he said. ??That would be unheard of in Western European nations or North America, where there are two or three private jet catering companies in major cities only focused on customized private jet catering. So, someone has a great opportunity there.??

He also expects other services like pilot training to follow. ??Owners of private jets in China no longer want to lose their pilots for three weeks per year when they have to fly back to the States for annual simulator and recurrent training and then fly back to Asia,?? Mr. Firestone said. ??There is no reason why those simulators can??t be placed in Asia.??

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