Business aviation is in its early stages in China, but is expected to grow quickly in the coming years. There is currently a lack of infrastructure, but the government is set to tackle this problem and ease regulations.

A passenger gets into a private plane at an airport in Zhengzhou, Central China's Henan Province on September 14. Photo: IC

China's super-rich may be able to enjoy more convenient and exclusive travel in the near future, as the country's business aviation sector is expected to grow quickly in the next few years, despite moves by the government to restrain extravagance, experts said.

The country currently has around 20 domestic business aviation operators, such as Asia United Business Aviation, which is partly owned by Shenzhen Airlines, and Hainan Airlines' Deer Jet.

The sector is gradually opening up to foreign companies too. NetJets Business Aviation Ltd - a joint venture between Warren Buffett-backed NetJets Inc and Chinese firms Hony Capital and Fung Investments - received approval from the Civil Aviation Administration of China in September to provide private aircraft charter services in China.

The joint venture now has two aircraft in China and has started to accept orders, company executives told the Global Times Wednesday. Besides chartering services, NetJets is also hoping to secure a certificate in the first quarter of 2015 to manage aircraft for third parties, as a growing number of rich people in China have shown interest in having their own aircraft.

NetJets already has 50 years of experience in private business aviation. Though the Chinese market is still "tiny" compared with mature markets such as the US and Europe, it is the most promising one for NetJets, its chairman and CEO Jordan Hansell told the Global Times on Wednesday.

Government support

General aviation, which refers to all civil aviation other than for scheduled commercial airlines, is still relatively underdeveloped in China. It's an area that also includes private jets, agricultural aviation and flights used for public services.

In mature markets like the US and Europe, about 60 percent to 70 percent of general aviation is related to entertainment or business, such as flying clubs and plane chartering services, Gao Yuanyang, director of the general aviation industry research center at Beihang University, told the Global Times Thursday.

But in China, such services are still in their early stages, accounting for less than 10 percent of the sector, Gao said.

Limited infrastructure and restrictions on airspace are major factors that could hinder the development of NetJets in China, said Hansell. He noted that China has the potential to become NetJets' largest market, but a lot more infrastructure will be required, along with regulatory improvements and government support for the sector.

China now only has some 200 airports for general aviation, while the US has over 15,000, according to media reports.

China also lacks management expertise in business aviation, and there are not enough pilots and mechanics, experts said.

But the central government has been stepping up efforts to boost general aviation in China and open up the sector.

In October, Premier Li Keqiang said that local governments will have more autonomy in approving the construction of general aviation airports.

"China will see a peak of general aviation airport construction in the next decade and aviation infrastructure will be improved in five years," Gao said.

Media reports have said that the governments of Beijing, Shanghai and Guangzhou are all planning to build airports for private jets.

Also, the airspace in China is set to become less tightly regulated. According to an industry guideline in 2010, the government plans to open low-altitude airspace of under 1,000 meters throughout the country in 2015.

Although corporate jets fly at a much higher altitude, the policy has generally been seen as a boost for the industry.

Huge potential

Hansell said that rather than the chartering business, the company's main business in China will be managing aircraft for clients, as an increasing number of super-rich people now want to buy their own planes and they will need professional management services.

China now has around 400 aircraft in the business aviation sector and the country buys 80 to 100 business aircraft each year, according to a forecast made in a report by China Business Aviation Group in April.

Also, China has considerable purchasing power - over 6,000 people have assets of over $200 million, the report said.

"As well as individuals, companies will also want to buy their own jets," Gao noted.

NetJets is also considering bringing its fractional ownership model to China, in which an aircraft is owned by up to 16 individuals, according to Hansell. He noted that this model could offer more efficient use of the aircraft.

However, the company has not yet received approval to operate this business model in China, he said.

"China's general aviation is expected to see participation from more foreign investors in the future. But as domestic companies still lag far behind foreign rivals, the government will take it slow in opening the industry," Li Keshi, operating director at industry portal tyhk.com.cn, told the Global Times Wednesday.

Concerns

NetJets' entrance into China comes at a time when the country's economy is cooling, with economists predicting that GDP growth could slow to 7.3 percent this year, and to 7 percent in 2015.

The slowdown, along with the government's move to restrain extravagance, has eaten into luxury consumption in China.

Robert Molsbergen, president of NetJets' executive jet management unit, told Bloomberg in October that Chinese officials do a lot of flying in China, but now they no longer use private jets because of the government's anti-extravagance campaign.

However, Eric Wong, vice chairman of NetJets' operation in China, said that it is a misunderstanding to regard private aviation as an extravagance. In mature markets, private aviation is an important efficiency tool, he said.

"I think in the foreseeable future, there will be more use of business aviation by young entrepreneurs in particular," Wong said.

He also noted that growth of China's private sector will be a driving force for the company and more business will come from western China as many industries are moving westward.

Beihang University's Gao also noted that officials only account for a very small part of the business aviation sector in China, so the anti-extravagance campaign will have little impact on the sector.（Liang Fei）