Mon, Nov 08, 2010
But Infrastructure Could Impede Rapid Growth In Business
Aviation Sales
There's a recurring buzz that China -- with its geographical
size, large population and skyrocketing wealth -- will soon unleash
an insatiable demand for new business aircraft, becoming an
enormous new market and a perfect sales environment for a
beleaguered industry. "This is true in part," says market analyst
Brian Foley, "but is not quite realistic yet."
Brian Foley
To give some perspective, roughly
18,000 business jets are registered around the world today. China
and Hong Kong are home to only 126 of them. This is fewer planes
than could be based at a single airport in other parts of the
world. And, while China's current share is very small in absolute
numbers, it is positively tiny when weighed against the size and
strength of the country's economy. So there is ample room for
future growth.
China has done a lot to make the
country more business-aviation friendly in the last couple of
years. One example is the time required to obtain flight approvals
(shortened). Another is the tax rate on new aircraft (lowered).
Most importantly, the government seems to be open to new ways of
welcoming private aircraft.
Still, important obstacles remain.
Infrastructure is the major one, with not quite 200 airports open
to civil use, compared to well over 5000 in the United States.
Airspace is restrictive and onerously controlled by the military,
with airlines receiving top priority. While business jets provide
flexibility, their use is hampered by an inherently inflexible
system -- at least for now.
Foley contends China still will be one
of the fastest-growing regions for business jets -- perhaps the
fastest -- but from a relatively small base. "What impresses me is
that aircraft delivered in the last three years now represent over
a third of the Chinese bizjet fleet," Foley says. "Furthermore,
their mix tilts toward the larger, more expensive models needed to
travel the great distances characteristic of the region. The large
Gulfstreams, for example, now account for 37% of China's fleet.
There are even a few Boeing and Airbus planes in business
configuration. And we see no slowdown in demand. We think China
will account for 3-4% of worldwide fleet uptake over the next
decade, which is roughly five times what it is today. In absolute
numbers this may still be small, but China promises to be a welcome
adjunct to manufacturers' business at a time when every additional
sale counts."
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