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."

FMI: www.brifo.com