With humongous potential, given the population size, the frenetic economic activity and the need to cover distances between business locations, Asia is transforming like no other region

Consider this—42 per cent of the world’s population lives in Brazil, Russia, India and China (BRIC) countries. Of the seven billion population, China and India account for 2.5 billion and one in three in the world market is either a Chinese or an Indian. That is a world of an opportunity as these population heavyweights are now emerging as economic giants, on their way to eclipse the United States. These figures cut across sectors.

In the realm of business aviation too, this is the emerging scenario. Honeywell Aerospace in its 2011 report estimated that Asia, Middle East and Africa regions ranked the highest in purchase expectations regardless of the economic environment. Asian purchase plan rates rose about five points over 2010 levels in the survey, and at 45 per cent, lead all world regions. Even with the prospects of slower near term economic growth worldwide, operators in these regions expect to be active buyers. Asian operators have reported strong buying intentions for 2013. Planned purchases, if realised, will result in more rapid regional growth in Asia and the Middle East and Africa, than is expected in North America, Europe or on a worldwide basis.

Whopping $230 billion worth jets by 2021

Honeywell has reported that between now and 2021 business jets totalling a whopping $230 billion ( Rs. 11,50,000 crore) would be sold across various continents. That’s about 10,000 new business jets up in the sky, primarily driven by BRIC countries and the Middle East. For the next five year period (about 5,000 business jets worldwide), the combined BRIC fleet replacement and expansion purchase plans has been projected close to 50 per cent. Medium-to-large aircraft combined account for around 35 per cent of the projected demand through 2016, up slightly from what it was a year ago. The next largest grouping is for long-range and ultra-long-range at 25 per cent. Light and light-medium aircraft make up to about 21 per cent. However, there exist bottlenecks in these regions concerning operator time restrictions, tax and regulatory compliance issues, etc. If these get sorted, the business jet market is going to further explode in the region.

With humongous potential, given the population size, the frenetic economic activity and the need to cover distances between business locations, Asia is transforming like no other region.

Chinese juggernaut

By 2014, estimates are that China will have about quarter of the world’s 800 million new air travellers. Though China reportedly has over 200 private aircraft (as against over 11,000 in the United States), this is going to change dramatically over the next five to ten years as Chinese buyers are all over. The executive jet market is expected to ride the crest of the aviation growth wave.

It was only as late as 2008, the Chinese Government started giving attention to the business jets segment. The number of personalised business jets was 32 then, which jumped to 56 in 2010 and to 115 in 2011. This is expected to keep moving north.

After USA, maximum number of billionaires in China

It is indeed amazing to know that in a communist set up, the number of billionaires is mushrooming by the day. As per Forbes, China has 115 billionaires, next only to the USA which has 413. The country is fast emerging as a major financial world power, expanding its industrial base and exploiting its natural resources, all of which have helped it to create substantial wealth.

During the Asian Aerospace event last year, the Chinese mining tycoon Lian Guangming had said Reuters, “We’re all here. Some of us are ready to buy planes; some others are still searching and researching. But I can say that the spring of private flights in China has arrived.”

With the Chinese Government relaxing norms, the business aviation segment is expected to get a boost. The Senior Vice President of Gulfstream Aerospace Roger Perry said airspace and air traffic control regulations were being eased and that is a major move forward. China is aware about the needs of corporate travellers and has started providing quick over-flight approvals, creating ground-based infrastructure, etc, which augurs well for the growth of the business aviation industry.

At the Asian Business Aviation, an integral part of Asian Aerospace 2011, the presence of almost all the business jet players reflected their strategies. “We met key people and marked greater activity over the 2009 event. It was worthwhile bringing three aircraft here,” said Ted Farid, Senior Vice President, International Sales, Hawker Beechcraft.

Though currently China’s share in the business aviation market is miniscule, this is expected to change drastically and according to Rollie Vincent, President of Rolland Vincent and Associates, a market research, analysis and consulting firm, China is expected to eventually take 20 per cent of all business jets delivered in the world, up from about seven per cent today.

As per projections by Jason Liao, Chairman and CEO of China Business Aviation Group, the market for business jets in the country would be about $11 million ( Rs. 55 crore) by 2018, thanks to the efforts of the government which has named general aviation as one of the country’s pillars of economic development in its 2011-15 plan.

In line with the projections, Aviation Industry Corporation of China (AVIC) has started exploring possibilities of co-developing a business jet made in China in collaboration with some global players. The intent is there. And for plane makers it makes absolute sense to have China as a long-term strategy.

Reports from China indicate that it is already on course to build its own business jet. According to the China Daily newspaper, Beijing General Aviation Group and Beihang University signed a contract with four goals—building research and development capabilities; industrialising general aviation engines, avionics equipment and general aircraft; synchronising technology to world levels; and forming a complete industrial chain. They will invest about $15.7 million ( Rs. 78.5 crore) in the venture. AVIC is said to be talking with Hawker Beechcraft; Cessna; Bombardier and Israel Aerospace Industries (IAI), as there is a caveat that original equipment manufacturers have to co-develop. The plan indeed is to build its own industry than just being a market.

Connecting the coasts

The kind of business jets that China will require will be dictated by the development of the Chinese expanse. If the east coast gets connected to the western border, then it would require mid-size and super mid-size aircraft. At present, only a few cities such as Beijing, Shanghai and Shenzhen have routine maintenance service, though about 20 airports are said to be operational for business jets and it is anticipated that the numbers will swell.

“Bombardier is forecasting tremendous growth for China and Asia-Pacific over the next 20 years with industry-wide business jet deliveries forecast at approximately 3,350 units for the region, including 2,360 aircraft for China alone,” said Bob Horner, Senior Vice-President, Sales, Bombardier Business Aircraft. “The vast size and strategic importance of this territory warrants special attention in order to harness the full sales potential of our Learjet, Challenger and Global aircraft. To this end, we have strengthened the sales organisation, dividing the territory into two distinct regions, China and Asia-Pacific/Australia, each represented by a Regional Vice-President and reporting directly to a Vice-President,” he added.