Business Aviation in China

2012 » February 2012
Business Aviation in China
Business Aviation Takes Off in China
Wednesday, February 1, 2012 - 9:00am

As Shanghai prepares to host the Asian Business Aviation Conference & Exhibition in March (see page 38), the bizav industry appears to be at a pivotal point in China. The private aviation age has dawned here, but it remains a somewhat foggy dawn with reduced visibility for anyone wanting to operate business aircraft in the country. The outlook is barely any clearer for manufacturers and service providers seeking to capitalize on rising demand.

The first generation of Chinese business jet owners still face significant bureaucratic hurdles to importing their aircraft. At the same time, limited airport infrastructure and restrictions on access to airways continue to dilute some of the flexibility that business aviation is supposed to deliver–and especially for foreigners.

But those who are pioneering the development of private aviation in the People's Republic say that the situation is slowly becoming more user-friendly. That trend is set to continue now that this form of transportation has been officially acknowledged as a priority item in China's latest five-year economic plan.

For the time being, the government continues to take a conservative approach to controlling the influx of aircraft. It's a stance that some Western experts say is merited given that the country's existing infrastructure probably couldn't cope with the deluge of jets that a completely unconstrained free market would produce.

By the end of 2011, there were still little more than 150 business jets registered in China, but manufacturers expect this number to grow exponentially over the next two decades and beyond. For the time being, though, the process of importing aircraft into the country remains cumbersome and there are tales of business jets sitting on tarmac at ports of entry waiting for release to their owners. In some cases, buyers opt to have their aircraft delivered outside China and registered there, but this means they are much more restricted in how they can operate within the country–having to endure some of the restrictions that apply to foreigners. For Chinese-registered aircraft, the situation is relatively straightforward in that any ­airplane with fewer than 29 passenger seats is ­considered to be for private domestic use and so is relatively free to make trips within the country.

One of the main sticking points for China's would-be jet set is the requirement to be able to prove that you have found an acceptable company to operate the aircraft. The authorities require that the jet be flown under a management contract and, despite the best efforts of global service providers to get established in China, there are still relatively few management companies with the necessary Chinese air operators certificate. In some respects, it's a classic Catch 22 situation: because there are not enough approved operators in China, it's hard to bring aircraft into the country, and yet because there are still relatively few aircraft, it's hard for the management companies to build their businesses–especially given the restrictions placed on international joint ventures.

Most of the operating companies are offshoots of largely state-owned Chinese airlines, which find it easiest to get the necessary approvals, and also operators based in the quasi-offshore enclaves of Hong Kong and Macau. Increasingly, faster-growing aircraft management companies are joint ventures between Chinese airlines and private companies, including Western-based groups that have more experience in business aviation. Among the main and emerging players are Metrojet, Deerjet, Asia Jet, Air China's Beijing Airlines, Hongkong Jet and Hainan Airlines subsidiary Beijing Capital Airlines.

Another constraint on the expansion of China's business aviation market is a shortage of pilots. For operational flexibility, flight crew generally need to be Chinese and the obvious place to recruit them would be from the country's fast-growing airlines, where opportunities to earn overtime pay make the switch to business aviation a hard sell and a cost inflator. In theory, Western pilots who could master the Chinese language and pass local exams could fit the bill but this is a tall order. In many cases, foreign operators also have to hire a local, Chinese-speaking navigator for up to $1,500 per day. The advantage of doing this is that it could open up access to airways and airports that are otherwise off-limits for foreigners.

Non-Chinese operators remain restricted in terms of the numbers of mainland airports they can use. For the most part, they are confined to the major airports, obviating a key advantage of business aviation, namely the ability to fly closer to the passengers' final destination by using smaller airports. With airline traffic burgeoning in China, access to the country's major airports depends on getting landing slots and these are routinely granted to scheduled operators ahead of business aircraft.

There are still fewer than 200 civil airports in China and many of these are not available to private aircraft. By comparison, a large-cabin business jet in the U.S. can access more than 5,000 airports. However, according to flight-planning specialists, Chinese officials are starting to grant permission to fly into airports that have previously been blocked for foreign operators.

"Operating into China is much easier now than it was even two or three years ago, but it is still strict compared with some countries," said Universal Weather & Aviation's Larry Williams, who helps business aircraft operators fly into and within the country.

"Now when we put in requests, the turnaround time is much faster," added his colleague Justin Murray. "Before, we needed several weeks [to get flight permits] but now we are getting them within a week and it is also a bit simpler in terms of what they are looking for in terms of paperwork. Overall, the process is becoming more predictable."

Flight-permit and air-traffic-control navigation fees are far higher than they would be for equivalent flights in North America or Europe–amounting to several thousand dollars per trip. On top of this, you should budget for some $3,000 in "government compensation fees" at every place you land, plus a $1,200 airport fee.

The starting point for any trip by a foreign aircraft operator is to have a sponsor–someone who is officially inviting you to come to China. Previously, if you wanted to do a trip that involved visits to multiple cities, you had to provide information about your sponsor for each destination, including full address details, but now a single sponsor for the entire trip will suffice. The authorities will check each aspect of the trip with sponsors to ensure that they genuinely issued the invitation, rather than it being a bogus arrangement to get around the rules. "The authorities have cracked down on 'for-hire' sponsors and this is not something that companies should be arranging for you; the sponsor needs to personally accept responsibility for having invited you," explained Williams.

Flexibility is a big reason for flying privately, but don't count on being able to fully benefit from this advantage in China. The Universal experts warned that aviation authorities are not at all keen on last-minute changes to flight plans, such as if passengers arrive late for departure or change their mind about when and where they want to fly. According to Williams, Chinese officials are getting somewhat more accommodating in these situations and he has been able to secure new permits at short notice in some circumstances. But generally, the Universal team manages client expectations around the need to plan trips as thoroughly as possible and not count on being able to make changes.

It is possible to change flight plans once in China. But this can take two or three business days, which may well be impractical if you're planning to spend only a day in each city, according to Rockwell Collins Ascend Flight Information Solutions. You can generally change a departure or arrival time by an hour or so without a new permit, but to change them by three or more hours, you'll need approval that could take another day to arrange.

Universal's experience suggests that the requirement to hire a Chinese navigator no longer always applies. "It tends to be when you are flying to more remote areas, rather than to places like Shanghai and Beijing," explained Murray. "Some airways aren't listed on charts and are known only to Chinese pilots."

Immigration is another high-priority item for the Chinese trip-planning checklist. You should apply for your business or tourist visa in good time and if you can't be without your passport while it's being processed by your nearest Chinese embassy, you should be sure to get a second passport to use for trips in the interim. Your pilots will need crew visas and if one of them gets sick or can't make the trip, you'll need to be sure that replacement crew also hold a current visa. What's more, if you're going to change out your air crew for flights within China or your return trip (as might well be necessary for a prolonged itinerary), then any pilots or flight attendants heading home early by airliner will need to leave the country on a separate business or tourist visa.

"I see the restrictions in China lessening as they see the opportunity [presented by business aviation]," concluded Williams.

"I wouldn't wing it in China–you need a support company and a good ground handler wherever you are going." Universal has offices in Beijing and Shanghai and can send its Chinese staff to back up clients anywhere in the country.
Other factors to consider are that if you are traveling to northern China in the winter there is little hangar space to protect your aircraft from the elements. It can take some time to get an aircraft deiced–indeed ground support services generally are pretty rudimentary.

Also be alert to the local holiday schedule–especially around the Chinese New Year, when this vast country pretty much grinds to a halt. Government offices can be closed for several days at a time and this can prolong the process for securing flight permits.

Despite the many operational hurdles, private aviation still beats airline service in China, according to Matt Pahl, flight operations manager with Rockwell Collins Ascend Flight Information Solutions. But in his view, the practical challenges of operating into China haven't significantly improved yet in many respects and without the support of established trip planners it would be prohibitively difficult for foreigners.

Bureaucratically, though, the situation is more straightforward, if only in that all flight requests can now be channeled through the General Administration of Civil Aviation of China (CAAC). A decade or more ago, all requests had to start with the aircraft owner's national embassy in Beijing, which would be required to submit a formal diplomatic note to the Chinese Ministry of Foreign Affairs and another to CAAC.

Rockwell Collins handles client requests through its five-strong Beijing office. While the official notice period for permits is still advertised as being 10 working days, Pahl said that his staff have a good record of getting them in as little as 24 to 48 hours.

From his perspective, one of the greatest challenges in China is that most business aviation traffic is still going through the main airports in Beijing and Shanghai and these are overly congested with airline traffic. At Beijing, for instance, between 8 a.m. and 10 p.m. foreign-registered aircraft are limited to just 15 movements per day and business jets are often effectively blocked on these grounds.

South of Beijing, Tianjin is available as an alternative airport but this is a 90- to 120-minute drive from downtown. There are few alternatives to the main airports around the country and CAAC still excludes general aviation traffic from many airports altogether.

That said, some progress has been made in terms of dedicated infrastructure. The 2008 Olympic Games spurred Chinese officials to create an enclave for business aviation at Beijing Capital Airport. In Shanghai, Hongqiao Airport is a more convenient downtown option to the far more remote Pudong International Airport. Hongqiao is also home to one of the country's few purpose-built FBOs and this is run by Australia-based group Hawker Pacific.

Hong Kong-based Evo Jet Services flagged the importance for foreign operators to avoid inadvertently falling foul of anti-corruption legislation when having agents make trip arrangements for them. U.S. and UK companies in particular are subject to strict regulations that could interpret a facilitation fee as a bribe.

Evo Jet founder Chris Cartwright also cautioned against planning flights to China over restricted airspace such as that of North Korea or Myanmar. Another consideration is that a flight involving passengers being collected along the way for flights within or out of China can be considered as cabotage operations and this can trigger additional paperwork and fees of up to $30,000.

Bizav Set to Take Off in Taiwan

by Glenn Smith

The Japanese built the airport among the rice paddies flanking the banks of the Keelung River, and when Zero fighter aircraft lifted off in the waning war years, they tilted their wings toward the shinto shrine at a nearby rocky overlook. Today, the facility retains its Japanese name–Pine Hill–but with a Chinese pronunciation, Songshan, and it sits in the heart of modern Taiwan's capital, in the shadow of Taipei 101, which briefly had the distinction of being the world's tallest building.

Later this year, Taipei Songshan Airport will become home to Taiwan's second, and perhaps busiest, business aviation center. "There won't be anything else like it anywhere in Asia or the world," said David Fei, CEO of Win Air Business Jet Company. "Even in Shanghai or Hong Kong, private jet users must drive 45 minutes from the airport to reach the city."

Fei recently invited BJT to Win Air's office on the second floor of Terminal II.

His mood was ebullient. Win Air, along with partner Sunrise Airlines, was viewed as the front runner in the competition to operate the business aviation center at Songshan. Other contenders were EVA Airways, TransAsia Airways and Far Eastern Air Transport. Fei was, no doubt, disappointed when a few days later, EVA emerged as the winner.

Yet other opportunities await. Win Air and Sunrise–rivals again now that the rationale for their alliance has vanished–are the pioneers of Taiwan's general aviation industry.

Things are just getting started in that business here. More than four years ago, on July 18, 2007, Taiwan's Civil Aeronautical Authority (CAA) amended its draconian civil aviation laws. The most significant change was the lifting of the prohibition on direct flights between Taiwan and China. Niceties like fractional ownership were left undecided.

In the wake of these changes, Win Air investor Terry Guo–chairman of Hon Hai Precision, the Taiwan company that manufactures a huge share of the world's PCs, laptops and other digital devices–claimed the honor of registering the island's first privately owned business aircraft, a Gulfstream G550, in December 2009.

Guo wasn't the first Taiwanese to own a private jet. Before him, a handful of others had purchased aircraft and registered them in Hong Kong or the U.S., but during those early days, flights between Taiwan and China were possible only via third destinations.

Now, looking forward, the Taiwan-China connection is where the action is. Already, during the first 11 months of last year, 255 flights were recorded between Taiwan and China, nearly a fifth of the period's total of 1,350. Flights in and out of Taiwan (to and from all destinations) grew 43.9 percent to 1,234 in 2010, up from 857 in 2006, the year prior to the amending of Taiwan's aviation law.

Only non-revenue-generating flights are allowed under a bilateral agreement signed by Taiwan's CAA and the General Administration of Civil Aviation of China (CAAC) in November 2008. The next round of CAA-CAAC talks are slated for this spring, and the agenda includes charter flights, which for general aviation companies Win Air and Sunrise represent the keys to the kingdom.

"There is a mutual understanding that charters will be permitted," said Sunrise Airlines vice president Gordon Tai. "All that is needed is a 'yes'. Flights will triple or quadruple overnight once there is an agreement."

Win Air's Fei agrees. "This will be a huge market overnight," he said. "Just look at the number of business people flying between Taiwan and China. Right now, unless they personally own a private jet, they still must fly airlines and endure the inconvenience."
Meanwhile, Win Air and Sunrise are in a holding pattern. The two companies own five of the six business jets registered on the island. Their business models couldn't be more different.

Sunrise is one of Taiwan's veteran aviation companies. Founded in 1992, it provides helicopter charters, heavy lifting, aerosurveys, medical evacuation and more. In 2007, Sunrise became Taiwan agent for Hawker Beechcraft, and it currently owns a Hawker 400. Sunrise also operates Taiwan's first FBO and runs the Taoyuan Business Aviation Center (TYBAC), which is housed in a former training facility at the end of runway 05Left at the Taoyuan International Airport. TYBAC opened in November 2008, and now handles 300 flights annually, the vast majority of which are to and from Taiwan and China. The occasional international celebrity such as Lady Gaga or sports stars Lebron James and Kobe Bryant have also passed through its gates.

Win Air, launched last October, is a newcomer to aviation, and offers private jet charters–to anywhere except mainland China. "China will eventually be our most important asset," said Fei. For now, Win Air ferries customers to business meetings in Tokyo and Hong Kong, and to resorts in Indonesia and Thailand. Four Gulfstream aircraft, including models G450, G550 and G650, make up Win Air's fleet, and five more are on order. Win Air also provides management and acquisition services for prospective aircraft owners.

Now Win Air and Sunrise face a new competitor–EVA. The as-yet-unnamed Songshan business aviation center will open on May 1, according to a source at the Taipei Songshan Airport. No construction is required: EVA signed a 10-year lease on land and on a facility recently vacated by China Airlines.

What happens next should be interesting. Evergreen Group chairman C. Y. Chang, who founded EVA in 1989 as a subsidiary to his shipping company, Evergreen, is known for thinking big. In October of that year, EVA placed a $3.6 billion order for 26 aircraft from Boeing and McDonnell Douglas, including Boeing 747-400 and MD-11 airliners. What EVA has planned for Taipei's first business aviation center is anyone's guess.

Shanghai convention to be catalyst for Asian bizav growth
A conversation with show organizer Roger Whyte by Matt Thurber

Roger Whyte retired in 2010 after 28 years with Cessna Aircraft, but it wasn't long before he succumbed to the urge to return to the aviation field. Now he's heading up preparations for the National Business Aviation Association's ABACE show, which will be held March 27-29 in Shanghai (see page 38). The organizers expect ABACE (Asian Business Aviation Conference & Exhibition) to attract more than 6,000 attendees and 120 to 150 exhibitors. The show was held in Shanghai in 2005 and Hong Kong in 2008, but a 2009 event was canceled due to the economic downturn.

"The consensus is that China and the neighboring countries represent potential in the next few years of tens of billions of dollars in aircraft-related supplies and services," said Whyte, who devoted lots of time to establishing relationships in the country for Cessna. "[ABACE is] where contacts will be made...That's what it's all about–seeing products, exchanging ideas and meeting people. Things happen when people get together."

What led to the resumption of ABACE?

With the growth in the region, it was time to establish a permanent base for a major business aviation show. The consensus was that it should be in mainland China. NBAA found out that the Shanghai airport authority was very interested, as they wish to have Shanghai develop as a major center of business aviation.
What is your role in the convention?

I've been traveling to China for nearly 20 years and we [Cessna] did a fair amount of business there, so I've had a fair amount of exposure. Ed [Bolen, president and CEO of the National Business Aviation Association] was looking for somebody who could take a special interest in what was going on in ABACE and asked me to do it. I'm pleased to have a part in this.

Will ABACE help expand business aviation in Asia?

The purpose of ABACE is to serve the whole Asian region and all the business aviation constituents–from customers, users and suppliers to regulators.
The Chinese government is committed to promoting business and general aviation in the country and they are liberalizing the rules for operations. There is a plan for 2011 to 2015 where they see at least a doubling of general aviation airplanes and many developments in air-traffic control, continuing to expand the number of airports and encouraging the private sector to get involved in building FBOs, fueling facilities and so on.

The idea is to get the whole community to exhibit aircraft and services, and to have meetings, seminars and educational sessions, to create a catalyst for further growth in the region.

Will sessions be offered in Chinese?

Most of the exhibitors will be Chinese, and everything will be presented in at least two languages, Chinese and English. The educational sessions will have presenters from China, Hong Kong, possibly from Korea and from Japan.

What will sessions cover?

They're interested in access to airspace, financing, safety management and cabin services. Also, regulations and how to import and license airplanes–all those kinds of things.

Are you seeing greater interest in business aircraft travel in China?

There's a lot more movement with business aircraft within the country, but the Chinese are also venturing much more abroad. They're coming to the U.S., to Europe and to Africa because China is investing very heavily in Africa. In some cases I'm hearing of Chinese airplanes going to South America.

Why do you think attitudes about general aviation have changed in China?

Partly it's [because of] pressure from people who want to fly and partly it's because [the Chinese government] sees some opportunities there and they have come to realize how important general aviation is in China.

This became apparent when they had floods a few years ago. They found they were not well equipped in terms of disaster relief and if they'd had a larger fleet of general aviation airplanes, they could have been much more effective.

They've also recently started doing traffic patrol in Shanghai using helicopters. That has never been done before.

Does China have a formal plan to expand general aviation?

They've said in the next five-year plan they want to double the number of airplanes. They have a phased plan for making [airspace] more available. I don't see any reason why it will not be implemented. They're also working on their regulatory bodies. They're very conscious of the need to develop this [regulatory framework] but also to make sure what is developed is very, very safe. It is really a sea change from what it was not that long ago. They want to promote general aviation and business aviation.

What do Westerners need to know about doing business in China?

The Chinese want to get to know people first and then start forming business relationships. It's important not to push too hard too early. The people there have their own way of doing things and work at their own pace. If you establish good relationships with people in Asia, they will remain your friends and partners for a long time.

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