Bargain hunting takes flight
Two years ago, buying a used private jet would have been unthinkable for many of the mainland's super-rich, who preferred to go directly to aircraft manufacturers for something straight out of the box.
But as demand for the ultimate status symbol soars, the aversion to second-hand goods has been set aside in a nation that is on course to become the world's third-largest importer of private jets within 10 years.
'When we ask our client when they would want their jet to be ready for delivery, most of them say today, if not yesterday,' says Jeffrey Lowe, general manager for Asian Sky Group, a Hong Kong-based private jet consultancy.
'Buyers start looking at pre-owned aircraft when they get tired of waiting for a new delivery.'
The wait for the most popular models such as US manufacturer Gulfstream's G550 and G450 and its Canadian rival Bombardier's Global series has lengthened to more than a year, with a four-year wait for Gulfstream's G650.
'In the first five months of this year, around half my deals on the mainland were for pre-owned jets. Last year all of the transactions were for brand new jets,' said Candy Chung, managing director of Global Aviation Asia, a Hong Kong-based private jet consultant.
Hong Kong has been at centre stage for marketing new or used private jet into mainland China. For example, Jetcraft Corporation, one of the world's top agents for used private jets, has spotted the potential of the Asian market and set up a regional office, Jetcraft Asia, in Hong Kong in May.
A pre-owned jet not only provides a quicker delivery time but is also an attractive option for buyers with a limited budget.
'Some buyers will be lured by the 'value for money' appeal of planes which are just under five years old,' said Frank Zhu, marketing director for business jets, Minsheng Financial Leasing, the largest private jet lessor on the mainland.
Such jets that are still under warranty can be bought for up to 20 per cent less than the new price, which could see US$10 million knocked off the US$50 million cost of a new G550.
But the pre-owned market is not confined to used or old jets. It includes new planes due for delivery to investors unable to settle payment or distressed buyers.
There is an ample supply of such jets for the mainland market these days because of the tough times prevailing in Europe and the United States.
But because of the difference in standards between the mainland and the US, the approval process for importing used aircraft may take up to eight months to complete, compared with one to two months within the US or in Europe.
In China, even if a private jet is strictly for the use of the owner, it is still subject to rules that apply to a chartering company. In the United States, privately used aircraft are subject to lower safety standards, which means a mainland buyer importing a plane from there might have to add more on-board safety features.
Just as car owners modify their vehicles, private jet owners may also add features to suit their style or to upgrade their investment. All modifications must be validated by the Civil Aviation Administration of China (CAAC).
Buyers have to undergo an extensive validation process if there are many modifications or the imported jet is more than 10 years old.
'If a buyer does not do enough homework, he could end up buying a plane which cannot be registered in China,' Chung said.
In that case, the plane will need to be registered in the US or elsewhere, making the aircraft subject to more restrictions and higher charges when operated on the mainland.
Second-hand sales are an integral part of the global private jet market, with about 60 per cent of these planes coming from people who are replacing existing craft, according to Canadian private jet manufacturer Bombardier's latest annual report. About 15 per cent of the private jet fleet is made up of pre-owned aircraft.
Based on its projection that China will be the world's third-largest private jet buyer in the next 10 years, Bombardier expects mainland buyers will take delivery of 1,000 in that period, followed by 1,420 in the 10 years to 2031.
This is a huge increase from the current mainland market, which in March had 109 private jets.
Minsheng has ordered more than 100 new jets, for half of which they have a buyer or lessee, while the rest are to meet anticipated demand.
'We build the inventory according to our educated guess on future demand,' marketing director Zhu said.
The largest market will continue to be in the US, which is projected to take delivery of 9,500 private jets in the next 20 years, followed by 3,920 in Europe.
About this percentage of the world's private jet fleet is made up of pre-owned aircraft