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Friday, December 27, 2013

Small jet makers see big chance as China prepares to open skies

BEIJING (Reuters) - Ferraris and Rolls-Royces have become common sights in China's cities as a new class of super-rich indulge a growing appetite for luxury, but tight regulation has meant the private jet, the ultimate status symbol of the global elite, remains rare.

Recent rules changes, however, indicate that China is preparing to open its skies to private aircraft, in a move that may herald the greatest expansion of business and private aviation in the last 30 years.

Last month, China's aviation regulator simplified flight approval procedu res for private aircraft and lowered the threshold for obtaining a private pilot license.

More importantly, the implementation of little-noticed guidelines issued by China's State Council and the Central Military Commission in 2010 will gradually lift the ceiling for low-flying aircraft by 2020.

For companies such as Cessna, Gulfstream, Dassault Aviation SA and Bombardier Inc, which have spent the last decade trying to build their China business, it may present a unique opportunity to expand in the world's fastest-growing aviation market.

"This tells everyone publicly that China now endorses the use of business aircraft and general aviation just like any other countries worldwide," Roger Sperry, Gulfstream's senior vice president of international sales, told Reuters in an interview. "I'm nothing but optimistic."

General aviation, which refers to all flights that are not operated by airlines, charter firms or the military , is already a $150 billion business in the United States.

In contrast, there are only 1,610 registered general aviation aircraft in China, the latest figures from the China General Aviation Association show.

That compares with about 228,000 in the United States, according to Craig Spence, secretary general of the International Council of Aircraft Owner and Pilot Associations.

"NO INTEREST"

Joseph Tymczyszyn, a former representative of the U.S. Federal Aviation Administration in China, said when he mentioned private aircraft to Chinese industry officials nine years ago he was told commercial aviation was the priority.

"When I talked to CAAC about general aviation in 2004, Ma Tao said, 'Don't waste your time and money, nobody is interested in that'," Tymczyszyn, a co-founder and executive director of the U.S.-China Aviation Cooperation Program, told Reuters.

Ma, then the deputy director general of the Flight Standards Department of the Civil Aviation Administration of China (CAAC), was among a group of Chinese aviation officials who often visited the United States, where their experience of general aviation began to change attitudes, Tymczyszyn recalled.

Still, in a country where the military controls 80 percent of airspace there were formidable obstacles to expanding private air travel. Approval for a three-hour trip on a private plane would take at least two weeks and was never guaranteed.

Lack of facilities where small planes can take off, land or refuel, as well as a dearth of low-altitude aviation maps, have meant hopping on a private plane to visit the other side of the country for the weekend remains a dream for even the most well-heeled.

"We had a few sales in 2006, 2007 and 2008, but very limited in numbers," recalled Jean Michel Jacob, senior vice president of international sales with France's Dassault Falcon.
Sales started to pick up in 2010 and so far the French company has sold 30 jets in China, with 20 scheduled for delivery in 2014-2015.

For U.S. rival Gulfstream, owned by General Dynamics Corp, Greater China represents about 6 percent of a worldwide delivery of 2,150 jets, compared with 65 percent to the United States.

Business jet sales in China for Canada's Bombardier have topped 100, while Textron Inc's Cessna has sold more than 70 planes.

All are gearing up for growth.

BEAUTIFUL POTENTIAL

In November 2012, Gulfstream's Beijing maintenance centre, with an 82,000 sq ft (7,600 sq m) hangar, opened for business.

Dassault Falcon, which has maintenance facilities in Hong Kong and Shanghai, is scheduled open a new one
in Beijing next year, and plans to recruit more native Chinese speakers to its sales team.

Cessna has already started delivery of its Grand Caravan EX made at its China v enture with state-owned Aviation Industry Corporation of China (AVIC). Delivery of its Citation XLS+ jets built by a separate venture with AVIC is scheduled to begin in the fourth quarter of 2014, according to William Schultz, senior vice president of Business Development at Cessna Aircraft's China operations.

Bombardier forecasts overall business jet deliveries in Greater China at 2,420 in 2013-2032, with 1,000 to be delivered in 2013-2022, rising to 1,420 during 2023-2032.

The growth, industry insiders say, would be fuelled in part by demand for smaller jets in a country where large-cabin models, such as Dassault's Falcon 7x or Gulfstream's G550 and G650, are among the best sellers.

"There is a beautiful potential in this market," Beijing-based Jacob told Reuters.

BEAT THE JAMS

Guidance issued by regulators in 2010 aims to open up airspace below 1,000 meters (3,280 ft) by 2015 and expand to airspace below 3,00 0 meters by 2020.

Pilot scheme were started in Changchun in the northeast, and Guangzhou and Hainan Island in the south, where private aircraft owners need only submit flight plans before 3 p.m. the previous day, unless they encroach on militarily sensitive areas.

The experiment was expanded to other cities in 2012 and will spread other regions gradually.
"It's pretty much like the way China transformed itself from a planned economy to a market-oriented economy in the 1980s," said Ke Yubao, executive secretary general of state-backed Aircraft Owners and
Pilots Association of China.

"It all started from the Shenzhen special economic zone and then spread to other parts of the country."

Besides investing billions in new airport construction, for both commercial and general aviation, China has also been making progress with low-altitude aviation maps, a source told Reuters.

And once general aviation sprea ds its wings, there may be fewer frustrated drivers in China increasingly congested cities, where traffic can move at snail's pace in rush hours and weekends.

"I laughed when I saw people in a Ferrari going one mile an hour in a Beijing traffic jam. If you buy a Cirrus or Cessna, you can actually go 150 miles an hour and it's more fun," said Tymczyszyn.

Source: Reuters By Fang Yan and Matthew Miller

from China Travel & Tourism News http://www.chinatraveltourismnews.com/

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