The Chinese Private Jet Industry – Set to Soar

The Chinese economy is now the world’s second largest and is likely to overtake the US in as little as 20 years. With this, personal wealth has increased dramatically yet demand for private jet travel is still waiting to take off. However the aircraft manufacturing industry is emerging and may well prove to be the catalyst for the Chinese private jet set.

Until now, China’s private jet charter market could be described as ‘embryonic’, worth less than $1bn, compared to $20bn in the US and $3bn in Europe. Reasons for the seemingly stuttering growth of the market have included a bureaucratic Civil Aviation Authority, high import duties on foreign aircraft and under-developed airport infrastructure. Things however, are changing. Some  regulations are loosening, such as the reduction of lead times needed for flight plans, and expansion of private jet airports and infrastructure is being seen around the country, particularly in key business hubs.

More high net-worth individuals has meant the growth in the number of aircraft buyers. This, in turn, will be good news for the private jet charter market as a whole, as owners turn to aircraft management companies in order to maintain the value of their investment.

Air traffic in China, which has doubled in the past decade, is again expected to double by 2020, with the number of airports set to grow from 160 to 240 according to industry forecasts. The head of China’s civil aviation administration said that the country would have up to 5,000 aircraft to transport passengers and cargo by 2015, state media reported at the end of last year.

Plans to ease controls on low-altitude flights is a move that could be a particular boost for the nation’s fledgling private aviation sector. Current regulations are strict, requiring private pilots to apply for hard-to-get approval to fly in low-altitude airspace. The official People’s Daily said the reform was expected to encourage more people to own private jets and give a boost to other civil aviation missions such as the use of disaster-relief helicopters.

In aircraft manufacturing, it was recently announced that the Commercial Aircraft Corporation of China (COMAC) has won orders from Chinese airlines for 100 of its domestically-built C919 passenger jets, challenging industry giants Airbus and Boeing. The C919 is due to make a trial flight in 2014 and should be delivered to clients in 2016. The plane is a key part of China’s plan to break the duopoly of Airbus and Boeing in the production of large commercial jets, which it currently relies on to fuel its domestic aviation market.

The growth in Chinese aircraft sales spells interesting prospects for both Chinese and Western private jet  manufacturers. Airframers are beginning to realise the huge potential of partnering with Chinese manufactures to build their aircraft under licence. Embraer have been manufacturing the larger commercial variant of the Legacy in Harbin for several years, and other manufacturers are beginning to follow suit.

A couple of months ago, Zhang Xin Guo, CEO of Aviation Industry Corporation of China (AVIC), indicated that they were looking into the feasibility of developing their own business jet model. There is further potential in the idea that AVIC could purchase an existing manufacturer or programme such as the Eclipse 500 or the PiperJet in a ‘short-cut’ that could lead to full scale Chinese production reasonably promptly.

What is certainly clear is, as the world’s fastest-growing economy a Chinese business aviation revolution looks set for take off.

Projected Growth Potential of the Chinese Private Jet Market

Region / Country Current GDP $ Trillion Number of Private Jets Number of Jets per $Trillion GDP Growth Potential by 2030
Europe 18 2500 =138 x 3.8
USA 14 7500 =535 Base
China 9 200 =22 x 24.3

Growth factor is based on USA as the base market