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Flying dragons: Private jets are new status symbol in China
The demand for private business jets in China is sending a sonic boom through the aviation industry and reshaping China's airspace
Until as recently as 10 years ago, a personal jet was little more than a dream for even the richest mainland Chinese.
Apart from anything else, the government has only allowed individuals to own and fly private aircraft since 2003.
In less than a decade, the number of mainland-registered business jets has rocketed from zero to more than 130.
Industry experts expect the market to grow nearly 10 times over the next decade; in other words, mainland tycoons will be shelling out for roughly 100 private jets a year -- with prices starting at RMB 3 million (US$475,000) -- from now till 2022.
“It’s quick enough to fly with commercial airlines, but I want to travel even faster,” says Zhai Jiahua (翟家华), frequent flier, business jet owner and chairman of China Stem Cell, a Beijing-based stem cell lab and treatment center with around 160 staff.
The 50-something Tianjin native “invests” in private aircraft purely for business purposes -- his company deals with a large number of wealthy Chinese and high-profile politicians.
“It’s more efficient to fly with a private jet because we can talk about business onboard [without concerns],” says Zhai.
“In addition, it’s still not common for companies to own private jets in China, so to some degree it’s a way to demonstrate our business power, increase [clients’] confidence in us and boost cooperative possibilities.”
Zhai bought his first jet in 2010, a Bombardier Learjet 60, in order to transport clients for medical treatment within China.
A second aircraft, a Bombardier Global Express, was acquired soon after to satisfy the growing number of clients who wanted treatment in Europe.
During the March 2012 Asian Business Aviation Conference & Exhibition held in Shanghai, Zhai purchased his third business jet, a Bombardier Challenger 605.
I only travel with my private jet when I absolutely need to. Commercial airlines are my first choice. It’s expensive to fly my own jet.
-- Zhai Jiahua, Chinese entrepreneur and business jet owner
The jet will chauffeur his Chinese customers to Southeast Asia for medical-focused holidays, as well as transport Southeast Asian clients to China.
Even so, the aspiring tycoon left his own jets in Beijing and flew to Shanghai on a commercial flight.
“I only travel with my private jet when I absolutely need to. Commercial airlines are still my first choice,” says Zhai.
“It’s expensive to fly my own jet. The minimum cost is around US$10,000 for one flight,” he adds, noting that most of the cost are spent to rent airport tarmac space.
What do they want?
Like Zhai, most Chinese buyers purchase private jets for business purposes. And they prefer their jets big and brand new.
“Hardly any [of our clients] are flamboyant, rich second-generationers who buy jets to show off,” says Chen Fei (陈飞) of Zhuhai Business Aviation Center, China’s first private jet retailer.
The 6,000-square-meter store stocks four international jet brands with prices ranging from RMB 3-10 million (US$475,000-$1.58 million).
Chen says clients are normally very low-key and come to the center simply dressed. A large number are under 40 and come from the Pearl River Delta Region or the northeast.
Chris Buchholz, CEO of Hong Kong Jet, points out that most of his mainland clients are workaholics.
“[Some clients] need to travel to four different places within a day, and this is impossible to achieve with commercial airlines,” says Buchholz, a 39-year-old Norwegian who speaks near-native Mandarin.
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Hong Kong Jet charters, manages and flies private aircraft for clients across Asia. According to Buchholz, more than half of the company's business comes from mainlanders, who either live on the mainland or work in Hong Kong.
Competition and frustration
The Hurun Report’s latest survey revealed that China is now home to 63,500 people whose assets exceed RMB 100 million (US$15.84 million).
Around 13 percent say they intend to purchase a private jet.
The report also estimates China will be the world's largest business jet importer by 2018.
The sensational market potential has set off a “China mania” among global jet manufacturers and management firms.
Dassault Falcon, Cessna and Embraer have all expanded their China presences through partnerships with local companies. They hope to grab market share from current industry front-runners Gulfstream and Bombardier.
Warren Buffett's Berkshire Hathaway entered the Chinese business aviation market last month through a joint venture with NetJets to manage and charter aircraft.
Buchholz says China’s lack of infrastructure, especially the shortage of airports designed to accommodate private jets, is one of the major obstacles for Chinese business aviation.
“The other influential factor is airspace,” Buchholz says. “More than 70 percent of China’s airspace is controlled by the military.”
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An Internet-driven backlash against private jet owners feuled by China's widening wealth gap has also posed a setback, according to Asian Sky Group.
Many mainland buyers prefer foreign-based and registered aircraft because they're more "invisible" to the public.
Other obstacles to growth cited by industry experts include high taxes (customs duty and value added tax account for a combined 23 percent of private aircraft costs), long and complicated government approval procedures and a shortage of pilots.
Nevertheless, the Chinese government has clearly detected the opportunity in business aviation. By 2015, it plans to have greatly evolved the private aviation industry and reformed its airspace management system.
Ground has been broken on China’s first business aviation airport in Beijing's Pinggu area, and Shanghai is planning to build its second business aviation base at Pudong International Airport.
China Business Jet Shanghai Alliance (CBJSA), China's first government-initiated business aviation alliance, comprising 17 international jet manufactures, was founded last month.
"China has emerged as the world's most potentially valuable business jet market," says Kong Linshan, president of CBJSA's mother company, Minsheng Financial Leasing.
"All this is just a starting point."