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In China, Opportunities Growing Fast, Challenges Diminishing Gradually

October 12, 2011

Panelists Say, When Buying a Business Aircraft, Consult the Experts

In all of Mainland China, there were only about 200 business aircraft for years, but that number has doubled in the last six months. “When numbers like that start to double, before you know it, this will be a significant region for our industry,” said Jay Mesinger of J. Mesinger Corporate Jet Sales, in an October 10 panel session at NBAA2011 on business aviation in China.

Moderated by Mesinger and Jeff Lee of American Express, the panel of 17 operators and service providers with experience in the region discussed the tremendous opportunities – and significant challenges – of business flying in the Middle Kingdom.

The opportunities in China are obvious: There’s profound unmet demand, especially for aircraft charter, and there are still few links between small and rural communities. Perhaps most significantly, the Chinese government’s next Five-Year Plan includes a focus on developing the general aviation (GA) market in China, to make GA a “pillar industry,” one that drives economic growth, by 2020. To this end, both the Civil Aviation Administration of China (CAAC) and the military have made important moves in the last year to open up more airspace for GA.

While business aviation in China is growing fast, the challenges faced by operators are so far changing only slowly.

Limited Infrastructure

While China has roughly the same land area as the continental United States, it only has 286 civil aviation airports, about 70 of which are GA-equipped (compared to over 5,000 in the U.S.). Those airports that are accessible to GA tend to be older, have minimal facilities or are under military control. With business flying still in its infancy, China also lacks an ecosystem of GA products and services, such as FBOs, maintenance facilities, flight schools and training centers.

Airspace Restrictions

In addition to limitations on the ground, there are still significant limits in the sky. The military still controls 80 percent of the airspace in China, with only high altitude corridors and areas around airports open to civil operations. This can significantly affect flight times. “For example, the distance between Beijing and Shenyang is about 200 miles, but the flight route is double that,” said panelist Paul Stinebring, former chairman of the International Business Aviation Council. “It’s due to the density of military traffic between those airports.” For much of the airspace that is accessible, operational procedures for GA just haven’t been developed.

Regulatory Hurdles

As China’s central regulator, the CAAC is relatively limited. By law, the agency is restricted to 250 headquarters staff (by comparison, the FAA has 5,000). Thus, local authorities have significant – and overlapping – jurisdiction over airspace and airports. Many government inspectors in China have never even set foot in a GA aircraft. The special administrative regions, Hong Kong and Macao, have even more layers of overlapping regulation.

High Cost

With all of these challenges, plus high user fees (including overflight fees and landing fees), the third-party cost to operate a business jet in China – not counting fuel, flightcrews or maintenance – is over $2,500 per flight hour.

Cause for Optimism

While these challenges persist, the panelists cited the latest Five-Year Plan as a cause for optimism that they would soon by directly addressed. “When you understand the way China works, it’s a top-down system,” said Asian Business Aviation Association President Jean-Noel Robert. “If the top says general aviation is a priority, I can tell you: It will be.”

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