China slowly removing obstacles to business jet market

Its business jet market is still in its infancy, but China is slowly breaking down barriers to become more friendly to business aircraft. As those barriers decline, Bombardier Aerospace projects demand for 600 business jets in China over the next 10 years.

"China definitely has the potential of becoming a very large market," said David Dixon, Bombardier Aerospace regional vice president for Asia Pacific sales.

The country is gradually opening its airspace to private aviation. Already flight approvals that once took seven days have been reduced to hours. And it has lowered the tax rate on new aircraft.

"The government seems to be open to new ways of welcoming private aircraft," said Brian Foley, a consultant with Brian Foley Associates.

More help is in the works.

Earlier this month, the State Council and Central Military Commission said China gradually will open up part of its low-altitude airspace for private flights in order to promote the country's general aviation sector — and use aircraft for purposes other than the military, airlines and police, China Daily reports.

Chinese policies have held the country back from developing its general aviation industry.

Despite its vast size, the number of business jets operating in China and Hong Kong is only about 125. There are approximately 11,000 business jets in operation in the U.S. today.

About 1,000 planes are used for general aviation in China, compared to about 222,000 registered in the U.S.

China's size — with its 1.3 billion people, skyrocketing wealth, and strong and growing economy — gives the country potential for the beleaguered business jet market, experts say.

Last week, business aircraft from Wichita planemakers Cessna Aircraft, Hawker Beechcraft and Bombardier were on display at Airshow China 2010, a government-endorsed show in Zhuhai, Guangdong.

Positive signs

Although progress has come slowly at times, the signs are positive.

"China has moved a long way very quickly to recognize the value of business aviation to its corporations at home and abroad and foreign corporations in China," said Bombardier's Dixon.

Chinese authorities said the airspace will be divided into three sections — areas under government control, areas under surveillance and areas where aircraft can fly freely after reporting their flight plans in advance, China Daily reports.

Last month, China opened up airspace below 13,000 feet in certain areas, making obtaining flight approvals similar to the U.S. practice of filing a flight plan and leaving, said Ed Bolen, National Business Aviation Association CEO and president.

"Does this mean we'll see a large number of business jets flying... all over China?" Bolen said. "No."

But it does mean the government is becoming more comfortable about the movement of aircraft in the country, he said. Hopefully, that will translate to better airspace access at higher altitudes, he said.

Many obstacles remain, however. The flexibility of using a business aircraft has been hampered by an inflexible system, Foley said, "at least for now."

Mainland China's airspace is controlled by the military. The country's approach to aviation has focused on the airlines, not business aviation.

The business jet market in China has traditionally been dominated by sales to the military. However, the civilian business jet market is livelier now than it was three years ago, said Trevor Esling, Cessna vice president for international sales.

"The pace is picking up," he said.

A third of the business jets in operation today has been delivered in the past three years, Foley said.

Bombardier, for example, announced this month that it has sold five super-midsize Challenger 300 business jets to Donghai Jet Co. in southern China, an order worth about $121 million.

"This order is a very important milestone in the growth of our fleet of Learjet, Challenger and Global business jets in Greater China," Bombardier Business Aircraft president Steve Ridolfi said in a statement.

Demand from high-wealth buyers has tilted more toward bigger, long-range aircraft such as the Gulfstream 450 or 550 or Bombardier's Global Express XRS.

"They've got lots of money, and they like to buy the best and something that makes a visible statement," Esling said.

The Chinese market is developing much like the Russian market did five to seven years ago — with demand for large jets followed by demand for the smaller to midsize jets, he said.

"It will come in time," Esling said.

How soon China becomes a vibrant market is debatable.

"That's the $64 million question," Esling said.

He said he thinks it could take 15 years . Others say it won't take that long — maybe five to 10 years.

"I hope I'm wrong," he said.

Multiple restrictions

China isn't an easy place to own an aircraft today.

For one, the country lacks the infrastructure to support them. Fewer than 200 airports are open to civil use, compared to more than 5,000 in the U.S., Foley said.

There are restrictions on landing and overflight approvals, restricted routings and limited parking for aircraft.

In addition, a private buyer is restricted because business jets can't be operated by individuals in China. That usually means they must be placed under a management company or operated under an officially established general aviation business, Cessna officials say.

That adds to the cost and flexibility of owning a business jet.

Still, China Daily reports that China plans to build a mechanism of regulations, services, infrastructure, pilot training facilities and flight safety monitoring facilities to aid in developing the general aviation industry.

And maintenance and fixed base operations must also expand operations to support the aircraft.

There's a growing awareness that business aviation should be a fundamental mode of transportation in China's future, NBAA's Bolen said.

"Just as it is... in Europe, in Brazil, in the United States and in other parts of the world,'' he said.