China's anti-corruption campaign has hurt the previously booming market for private jets, but the temporary setback may also lead to the more measured development of the sector, China Entrepreneur magazine reports.
China's private jet market has seen rapid growth since the 2008 Olympics in Beijing, and the Greater China region posted an annualized growth rate of 34% at the end of 2013 compared with the global rate of 5%, the magazine noted.
This rapid growth attracted different players to the business, including airline companies, leasing companies and other private enterprises. However, the government's crackdown on corruption has hit the private jet business, and it has become a game of endurance for companies that invested in the sector in terms of surviving in a race that initially offered profits similar to a gold rush, the report said.
"We all believe the market will rebound in the future but at the moment we need to wrap up to stay warm through the cold winter," said Jin Yao, president of Dream Jets, a company established in 2012 to operate chartered private jet services.
Xu Shaoyi, a venture capital fund investor who invested in Dream Jets, said the company had decided to focus on chartered services and consultation services for the purchase of private jets because of the heavy costs involved in buying and operating the aircraft independently. "The sector may be flourishing but it has not yet yielded returns. It is most important to avoid investing too much but rather to maintain a presence and accumulate experience," Xu said.
The government's introduction of stricter rules to curb the lavish spending of officials has led to the cancellation of existing orders of private jets by both state-owned and private companies. State-owned companies cancelled their orders in adherence to the government's rules, while private companies made the same decision since the private jets were meant to carry company executives and government officials, the magazine said.
Since the manifest of all private jet passengers must be submitted to the aviation authorities, no government official dares to take flights offered by private companies for fear of falling foul of the anti-graft drive, the magazine added.
However, Jin remains positive about the sector's future, saying that the current downturn may help eliminate the business' image of being a luxury service. "In the past, everyone bought irrationally.
Many people only chose to buy the most expensive premium models," Jin said, noting that American companies generally start by buying secondhand planes rather than new.
While the government is also attempting to resolve the issues restricting the development of the business, which include a lagging infrastructure and the applications required before each flight, Dream Jets is exploring other opportunities.
"We want to become the Uber of private jets," Jin said, noting that a seat on a chartered private jet can be cheaper than a first-class ticket on international long-haul flight on some routes.
Source: Want China Times
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