Private plane business taking flight
Updated: 2010-12-14 07:35
By Wong Joon-san(HK Edition)
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A corporate jet parks at Hong Kong International Airport. The private jet boom has spread to Asia in the past five years. Mike Clarke / AFP |
Corporate jet travel is not just a status symbol, it's fast becoming a vital business tool, Wong Joon-san reports.
Corporate jet travel has been gaining momentum in Hong Kong and in the region since 2006 as huge enterprises and individuals began to recognize business aircraft not just as a mere status symbol, but rather as tool that could aid business and productivity. Greater security, privacy, convenience, comfort and the ability to travel based on an individual business professional's own schedule instead of depending on commercial airplanes are extra conveniences that make the trend attractive as well as practical.
The boom, which started in the United States in 2005, spread to Asia with the very consistent, rapid growth of the industry in the past five years. The 2008 financial crisis has not been a deterrent either. In fact, Asian business jet buyers benefited from the crisis as aircraft cancellations from clients overseas pushed forward plane deliveries to customers in the region.
In 2006, there were less than 10 business jets based in Hong Kong, and today there are more than 40 jets based in the territory - and the numbers are rising rapidly.
Hong Kong-based business aviation charter and management provider Metrojet and Geneva-headquartered Tag Aviation, a leader in private and business aviation serving the global aviation market, account for nearly two-thirds of private jet operations in Hong Kong and the Pearl River Delta region.
"We've not lost customers due to the financial crisis. There has just been a slowdown, but it quickly picked up again. Last year, we had some 40 inquiries from potential clients, and this year we have received almost 80 inquiries so far, both in the sale and management of aircraft," says Tag Aviation CEO Keith Morgan. "The growth of high net worth individuals over the past five years in the region has been remarkable. There are now 40 business jets based in Hong Kong, 120 on the mainland and 6,000 in the United States."
Metrojet currently manages a fleet of 26 business jets, including two owned by the group, deploying 11 types of aircraft, while Tag Aviation has 10 such jets based in Hong Kong and five in Singapore.
Both service providers specialize in the recruitment, management and training of pilots and flight attendants, besides dealing in the acquisition of aircraft and disposal of aircraft services.
Basically, 12-16 seater jets are more popular although there is a growing trend among clients who prefer ultra-long range and large-cabin aircraft.
Gulfstream Aerospace Corporation, a wholly owned subsidiary of General Dynamics, which designs, develops, manufactures, markets, services and supports the world's most technologically advanced business-jet aircraft, has had a long and close working relationship with Metrojet.
Gulfstream is making a major commitment in resources to the region and intends to maintain its leadership position, Roger Sperry, Gulfstream's regional senior vice president for international sales, says. Just in the past year alone, the company has doubled spare parts at bases in Beijing, Hong Kong and Singapore.
It also placed a team of technicians with Deer Jet in Beijing, the largest fleet operator of Gulfstream aircraft in the region, as well as interior maintenance specialists in Hong Kong. The company has a service presence on six continents with 44 facilities, which include those of sister company Jet Aviation. Jet Aviation has a presence in Hong Kong and Singapore.
"The number of Gulfstream aircraft operating in Asia increased significantly from 2001 to 2010 by four times," says Sperry. "Asian business aviation market has increased by 15 percent in 2009, with about 600 executive jets operating in Asia (while US has over 11,000 in operation)."
In 2001, the Asia-Pacific region had 21 aircraft, representing 2 percent of the worldwide Gulfstream fleet. In the first half of 2010, that number increased to 130 aircraft or 7 percent of the Gulfstream fleet. That's a six-fold increase in the number of aircraft sold, with customers in Hong Kong, the mainland, Japan, Taiwan, Singapore, South Korea, Australia and New Zealand.
Gulfstream has around 10,000 employees, with 44 global logistics and maintenance bases in six continents. It also has $1.2 billion in inventory based at strategic locations around the world.
Forecast International estimated that global demand of private jets will be about 5,000 in the next 10 years, and the total market value is about $191.7 billion. The brand's largest aircraft model G650, will begin its commercial operations in 2012.
Many of the planes are based at the Hong Kong Business Aviation Centre (HKBAC) at Hong Kong International Airport when not in use, but an increasing number of clientele based outside of Hong Kong are choosing to home-base their aircraft in their own respective home countries for the sake of convenience and urgent business needs.
"We do see a big growth in the jet aviation business in the past two years, and we also see a greater awareness of our facilities when meeting customers during the air shows in Hong Kong," a HKBAC official, who declined to be named, says.
"We also see a greater number of business jet customers operating from other parts of the world to Asia, including Hong Kong. And there are more operators who are using time sharing and chartering services," they say. "In addition, there are some customers who have friends who own jets, and it gives them greater opportunities to use such services."
One of the new trends in the business jet business is the increased demand for air ambulance services, which is the start of a new industry, she adds. Such a need arose during the tragic hostage incident involving Hong Kong tourists in the Philippines in August, when one of the injured had to be flown back to the territory for urgent medical treatment.
As the trend for business jet travel builds up, major players in the industry are seeing fierce competition among aircraft manufacturers from around the world trying to enter the rapidly growing Asian market. They are relying on experience, talent, dedication and professional service to ward off the threat.
"Performance is our strategy. We should do well with different products. If we deliver top quality services, we'll continue to grow, along with head count and talented people," says Morgan.
He urges the government to enhance opportunities for healthy competition to facilitate fair corporate aviation, capitalize on the industry and support growth demand for better infrastructure.
Metrojet is banking on its 30 years of experience in business aviation in the Asian region to take on its increasing pool of competitors. In addition to exploring various business aviation opportunities in China, India and Southeast Asia, the group plans to expand its facilities throughout Asia.
Metrojet CEO Bjorn Naf calls for the formation of lobbying groups to voice the benefits business aviation brings to the users as well as the economy as part of efforts to promote the business aviation industry.
Citing the United States, where business aviation contributes $150 billion annually to the US economy, he says co-operation among companies, regulators and airport authorities must be fostered to facilitate the needs of business aviation and its benefits.
"Infrastructure growth focused on a multitude of items that support the operation of a business jet must continue to develop to support the increasing number of business aircraft in the region and handling costs must come down to a reasonable level," Naf says, explaining that there must also be more airports that are open and more easily accessible to non-scheduled flights and private aircraft.
As the southern Chinese mainland is still a developing market, the consensus is that its infrastructure is not as mature as Hong Kong's. The mainland needs to open up more airports to unscheduled flights, offer easier access to its airspace and provide more ground facilities to back up business aviation operations.
Regarding the private jet industry, the Airport Authority of Hong Kong says: "No incentive is provided to business aviation. The operation of business aviation jets is subject to the same set of charging principles applicable to other aircraft (that is, based on aircraft weight and size).
"In managing the airport, the AA adheres to prudent commercial principles and ensures a level-playing field for the business partners," an AA spokesperson says.
(HK Edition 12/14/2010 page3)