Rush into private jets is set to slow
There's a new variation on an old joke doing the rounds in aviation circles: how do you end up with a small fortune running a private jet company on the mainland? Answer: start with a big fortune.
The joke was doing the rounds at last month's Asian Business Aviation Conference and Exhibition in Shanghai, and summed up the industry's jitters at a time when the sector is starting to look very crowded.
Dozens of mainland private jet owners are rushing to set up chartering companies, seeing it as an efficient way to make sure their own aircraft are working for them even when they're not using them.
'Many business jet owners think it makes sense to set up private jet companies but don't know just how tedious and sophisticated and demanding the business can be,' said Jenny Lau, president and chief executive of SinoJet, a Hong Kong-based business jet management company funded by mainland private investors.
The surge of interest in private jet maintenance and chartering services follows an explosion in private jet purchases from 2008, since when the number of private jets have more than tripled to 109.
At present, 48 corporate jet companies are waiting for Civil Aviation Administration of China (CAAC) approval for an aircraft operator certificate. But only nine operators are actually in service, including Deer Jet, Beijing Airlines, China Eastern Airlines' corporate jet arm, Shenyang-based ZYB Lily Jet, and Shandong-based Nanshan Jet
Chengdu-based Allpoints Jet, which ordered two Gulfstream jets, a G450 and a G550 from the manufacturers at the Shanghai exhibition last month - at a total catalogue price of US$100 million - is one of the hopefuls eyeing the business. The operator is reportedly backed by Chengdu billionaire Que Wenbin.
Big White Bear Jet Co, a Beijing-based operator that owns a Gulfstream 200, a Gulfstream 450 and a Bombardier Global 5000, is also waiting for CAAC approval for an operator certificate.
Even the chief executive of Shanghai-based budget carrier Spring Airlines, Zhang Xiuzhi, said she was interested in running a private jet company. 'The mainland aviation market is polarised. Demand is very robust for the very low and for the top end of the sector,' Zhang said on the sidelines of the Shanghai exhibition. However, Zhang added that she had not yet decided whether to enter the market.
'There's private jet fever on the mainland now. Everyone wants to get into the business,' said Helena Lang Haiying, chief representative for Hawker Pacific (Asia), which operates business jet facilities in Shanghai, Sydney, Singapore and Dubai.
The appearance of so many new operators in the mainland has also led to a big rise in pilot salaries. A private jet company seeking to poach a captain - usually from the state-owned airlines - has to offer up to 1 million yuan a year. 'To hire enough pilots, we have to be very competitive with the state-owned firms,' Lang said. Cabin crew, mechanics and engineers are also in demand.
Lang, who was in charge of cabin crew at Air China, is one of many former state airline employees joining the private sector after being forced to retire at the age of 55. Their skills and experience are in demand among private operators.
'We think the development in the private jet operation sector may be too fast,' said Jin Junhao, deputy director at CAAC's general aviation division.
'Not all of the applicants are going to succeed in winning a permit at the end of the day.'
The number of private jet orders approved by China's aviation authority last year.
- By March this year, 24 had been approved