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Avjet Senior VP Andrew Bradley’s Provides Analysis on Business Aviation’s Emerging Role in China

June 17, 2011

As we approach the much-anticipated Shanghai International Business Aviation Show (SIBAS), I have been reminded of the positive impact that Business Aviation offers to the world’s fastest-growing economy – particularly with China’s private sector increasingly driven by competition, innovation and productivity.

Over the past twenty-five years, since the economic reforms first took hold in 1978, China’s economic growth rate of nearly 10% a year is truly phenomenal. This period has seen the emergence of the private sector and growth in Chinese entrepreneurship.

In 2010, China moved ahead of Japan in terms of overall GDP, and was second only to the United States. China’s global trade has risen from just over US$100 billion in 1988 to US$2.6 trillion at the end of 2009—a truly impressive figure. China’s private sector is increasingly being driven by competition, innovation and productivity unrivaled elsewhere in the world.

International Focus

The majority of business jet manufacturers are based in North America (U.S. and Canada), including industry leaders Boeing, Bombardier, Cessna, Gulfstream and Hawker Beechcraft. Most of these firms gained prominence in General and Business Aviation during the 1960s and 1970s, fueled initially by the rise of corporate America, and then by a new entrepreneurial class of Americans running small- and medium-sized firms in the 1980s and 1990s. Business Aviation in the U.S. – along with its European counterpart – has now become international in scope, with China as a major market.

China’s private sector businesses and entrepreneurs, by contrast, have operated from their inception as internationally-focused. Chinese businesses are characterized by fast-growing operations worldwide with a truly global perspective, while at the same time increasing its consumer-driven economy.

Such global business development is the foundation on which business jet operation is predicated. Private aircraft ownership can deliver business and government executives to more destinations, more efficiently, and with greater security and privacy, while enabling in-flight productivity through airborne meetings, private workspaces and Internet connectivity.

A Chinese client who runs multiple businesses throughout Asia, and who also purchased a controlling stake in a UK-based business recently contacted me. I was surprised to learn from him that he often flew commercial airlines from Hong Kong to London with only occasional trips on a partner’s Gulfstream business jet when available. His need for increased productivity could clearly be addressed most effectively by business jet travel.

Untapped Market

A quick snapshot comparing private jet ownership between the U.S. and Asia shows a largely untapped market in China. The U.S. has well over 11,000 private business jets while the entire Asia Pacific region operates slightly more than 600 business jets. As recently as a year ago, China had fewer than 100 registered business jet owners.

Some key obstacles hindered Business Aviation growth in China until quite recently. Chief among these obstacles were burdensome flight restrictions in China consisting of duty fees as high as 25%; extremely long lead-times to file flight plans—in some cases weeks; limited airspace over China; and lack of adequate airport infrastructure.

However the Chinese authorities have begun to liberalize these rules, opening up Chinese airspace, and significantly shortening filing of flight plans to less than a few hours. In addition, the past twelve months have seen rapid airport construction to accommodate business jet operations.

Additional obstacles were rooted in Chinese tradition and culture. Despite the many examples of a fast-rising entrepreneurial class, many Chinese business leaders are hesitant to flaunt their hard-earned wealth. This is very different from the socially accepted wealth accumulation and quest for greater productivity that is apparent in the U.S. or Europe, where Business Aviation is recognized as an efficient business tool.

Again, though, the tide has recently begun to change in China and other Asian countries as the positive impact of private business jet usage with regard to operational efficiency and productivity has become apparent to Asian business firms and entrepreneurs.

A recent study conducted by Nexa Advisors, LLC, based in Washington, DC compared the financial performance of U.S.-based small- and medium-sized firms with and without business jet usage. The results showed a clear and definitive competitive advantage for those firms who employed the use of business jets (measured by shareholder value, enterprise value and operating profits).

The same competitive advantages are being realized now in China.

Clear Business Aviation Advantages

Getting back to my Chinese client with regard to his frequent trips from Hong Kong to London, I pointed out the clear advantages of flying a private business jet over flying via commercial airline. The most important factor was the valuable time that could be saved by flying a private business jet.
The often-repeated phrase “time is money” is never more true than when it comes to a CEO’s or entrepreneur’s efficient use of his or her time. Many of these business leaders work sixty- to eighty-hour workweeks. In the US one estimate places a CEO’s time equivalent to $2,900 per hour.

Shorter trips also show large operational gains to creating value when flying aboard a private business jet. Remote areas that are home to various production and manufacturing facilities are hours away from commercial airports. Traveling there by commercial airline creates significantly more downtime for the CEO or entrepreneur.

Aboard a private business jet, however, the same individual can visit two or more locations for business meetings in one day. Flying on commercial airlines means hours are wasted in airports, spanning multiple days for the same trip.

Furthermore, instead of being restricted to flying according to the airlines’ schedules, business jet travelers fly when they choose, being able to immediately step into a private business jet with very little advance notice, and fly to crucial business meetings, or to quickly bring vital personnel to a manufacturing site.

While China still faces many regulatory obstacles, restrictive ownership rules, and still-emerging infrastructure to support Business Aviation (FBOs, flight training schools, maintenance facilities), the future is both bright and rapidly evolving.

Many industry experts in China and Asia Pacific countries point to the rapid growth and rise of other forms of industry infrastructure in the region. I strongly believe that Chinese firms and entrepreneurs have reached an inflection point in the past twelve months with regard to the competitive advantage they stand to gain by owning and operating private business jets.

This, coupled with China’s continued success in rapid creation of industry infrastructure, points to Business Aviation’s future role in this dynamic economy’s continued growth.

Andrew Bradley is senior vice president, Global Sales & Acquisitions at Avjet Corporation – an international provider of aircraft charter and management solutions. The company is headquartered in Burbank, California, and maintains a global presence in Washington DC, Seoul, Dubai, Moscow and other locations around the globe. More information from www.avjet.com

(first published in BizJet Advisor, April 2011)

About Avjet

Avjet Corporation is an international provider of aircraft charter and management solutions. Specializing in large-cabin, VIP aircraft, the company also offers expert assistance in aircraft sales and acquisitions. Avjet’s clients maximize the many benefits of private aviation, while reducing the cost and complexity of aircraft ownership. Avjet holds the highest safety ratings by the world’s leading auditing services.

The company is headquartered in Burbank, California, and maintains a global presence in Washington D.C., Seoul, Dubai, Abu Dhabi, Moscow and other locations around the globe.

To learn more about the company, visit www.avjet.com.

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