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DEVELOPING MARKETS ASIA PACIFIC - 3Q 2010

October 2010

Category: Global Markets for Corporate Aircraft

Author: Mike Vines

Asia Pacific Round-Up
Bombardier Forecast optimistic about China and India.


Bombardier’s latest global business aircraft forecast underlines both China’s and India’s predicted dominance in business aircraft activity in the Asia Pacific region up to 2019. After many false dawns over the past decade, and barring more western economic bad news, a surge of business jet orders is on the way for this region according to the report.

In addition, more western OEMs are expanding their maintenance and spares network in the region to meet the growth in aircraft numbers. More high-end trade shows are also mushrooming right across the region demonstrating the need for business aviation as the ultimate business tool. CHINA
The ten-year forecast gives the current number of business jets registered in China, Macau and Hong Kong at just 110, but says it expects this to grow to a 700-aircraft fleet by 2019.

The reasons cited are China’s ability to maintain a “real GDP growth of 8.7%” despite major economic difficulties faced by its key trade partners in 2009. Bombardier says that according to an HSBC forecast dated April 2010, “China should continue to lead world growth in 2010 with real GDP growth in excess of 10%”. This optimistic news, it says, will improve business aircraft sales in the country which, according to the forecast, has been held back until now by “restrictive airspace access, high aircraft import taxes, a shortage of small airports and high operating costs.”

More optimistically the forecast concludes that “the strong commitment by the Chinese Government to build new infrastructure, and recent improvements to flight planning regulation, brings hope that private aviation could blossom in China over the next 10 years”.

The forecast says that an increasing number of worldwide sales will be for larger, long-range aircraft - although Cessna says it already supports 24 Citations in the People’s Republic of China (excluding Hong Kong and Macau) which is around 35% market share. Recently it has delivered a Citation Mustang and three Cessna 208 Caravans into the country.

Dassault Falcon Jet is also upbeat about its own prospects and is reported as saying recently that it expects to sell 20 aircraft per year to China over the next ten years. China’s People’s Daily On Line comments, “Dassault Aviation’s business jet unit expects the greater China region to account for one-fifth of its global deliveries in five years, up from ten percent this year. The company expects China to account for five to ten percent of its global deliveries this year”.

Backing this phenomenal growth is China’s MinSheng Financial Leasing Company, whose London-based spokesman David Tang is the chief business aviation legal advisor to MinSheng, and says the bank currently has a 16 aircraft order backlog. The first aircraft to be delivered was a Gulfstream G450 which arrived in Beijing in April for Beijing Capital Airlines (part of the Hainan Aviation Group). The first of six Gulfstream G550s ordered by MinSheng was delivered in late August, leaving another two G450s, another five G550s, a Global Express, a Dassault Falcon 7X, two Hawker 4000s and Hawker 900XP, plus a Challenger 605 still to be delivered. (A Gulfstream GV is also on order and destined for Beijing Capital according to Tang.)

“Hopefully all of the Gulfstreams should be delivered by the second quarter of 2011, but it is subject to changes,” says Tang. The Global Express mentioned will be leased to Air China and more aircraft could be ordered for Beijing Capital Airlines.

Tang adds that the MinSheng team continues to talk to all the major business jet manufacturers including Embraer and Cessna. “We haven’t ordered anything from Embraer or Cessna yet, but we are hoping that we will order from them in the near future.” MinSheng, Tang explains, still forecasts 100 business jets to be delivered within five years through its business aircraft leasing arm. “Over the next four years our expectation is to average around 25 aircraft deliveries per year.”

PHENOM CHINA TOUR
Embraer flew one of its Phenom 100 entry level business jets to China for the first time in June this year as a part of its participation in the 16th International Flight Inspection Symposium (IFIS) in Beijing. It then toured China for eight days performing demonstration flights at a number of cities.

MD 902 DELIVERED TO CHINA
In addition, MD Helicopters delivered a new MD 902 Explorer to the Huaxi Village Group, located east of Jiangyin city in Jiangsu Province, for general corporate purposes and sight seeing. Huaxi is considered the richest village in China and claims nearly two million tourists a year.

Over the past 40 years it has become an industrial and commercial powerhouse offering a wide range of opportunities to residents. All MD Helicopter products have received the necessary Type Certifications from the Civil Aviation Administration of China.

INDIA
The Bombardier business jet forecast observes, “Like China, India was less affected than the developed economies by the 2009 recession. Real GDP growth was 6.8% for India in 2009”. GDP for 2010 is expected to be around 8% matching the sub-continent’s average figures of 8.2% over the last seven years - an average most Western economies would die for.

India, in common with China, has a fleet of around 125 business jets and Bombardier’s forecast is that the sub-continent’s fleet will rise by another 325 to 440 by 2019. The forecast states that India’s “Business jet sales should progressively accelerate in the country due to economic growth and wealth creation”, adding, “Currently India’s business aviation sector is not living up to its full potential due to lack of aviation infrastructure, stringent government regulations, long procedures for aircraft imports and strict bank regulations”.

ASIA AND OCEANIA FORECAST
For Asia and Oceania the forecast reveals the business jet fleet is currently around 320 aircraft, predicting another 500 aircraft sales over the next decade with a fleet totaling 780 by 2019. Reasons given for this explosion of activity include: rapid industrialization and average growth at around 4.1% per year over the last ten years; substantial direct foreign investment into countries like Singapore, Malaysia, Thailand and Indonesia; and each of these countries also benefited from growing trade with China.

South East Asia’s real GDP is expected to grow by 5.4% in 2010 and annually by 5% over the next ten years says the forecast which is based on information from HIS Global Insight.

“Japan’s recovery appears more fragile” says the forecast, with the country’s growth predicted to be 1.8% this year and over the next ten years averaging only 1.4% per year. South Korea on the other hand has “managed to keep productivity and exports at a high level during the downturn”. The IHS figures from the forecast predict South Korea’s economic growth at 3.8% this year, and an expected average of 3.7% over the next ten years.

AUSTRALIA
Within the Oceania region, Aeromil Pacific Pty Ltd. is to expand its presence at Sydney Metro Airport Bankstown by leasing a historic hangar to house its maintenance, sales, corporate and charter operations and professional services. It is expected that the facility, located at site 521 adjacent to the Bankstown Airport Passenger Terminal, will increase Aeromil Pacific’s capability to offer considerable additional space for aircraft services and hangarage.

The company which has its head office maintenance and FBO at Sunshine Coast Airport, Mudjimba, Queensland, is expected to commence its enhanced operations at Bankstown during the last quarter of this year. Aeromil Pacific’s Managing Director Steve Padgett said, “With ever increasing costs to business aviation using Sydney International Airport, we have taken this step in order to provide much greater capacity to support our Cessna and other business aircraft customers with maintenance, hangarage, secure parking and apron availability, and FBO facilities at Sydney Metro Airport Bankstown.

“Through the use of our new facilities we intend to make it substantially easier for domestic and international business aircraft to use Bankstown as a viable and attractive alternative destination in Sydney.”

CUSTOMER AND PRODUCT SUPPORT
Gulfstream: says its Asian product support grew significantly over the past year, citing Asian business aviation market growth of around 15 percent in 2009. It claims it has a 63 percent share of the large-cabin, long-range business jet installed fleet in China, Hong Kong and Macau.

“In Asia the Gulfstream fleet has grown from 27 aircraft in 2001 to more than 110 today,” said Mark Burns, president, Gulfstream Product Support. “To support that…we’ve doubled our parts and materials inventory in Asia and added key personnel there. We are committed to our customers, and the people and parts we’ve added in Asia reflect that.” Gulfstream Product Support has more than $48 million in inventory spread across its sites in Hong Kong, Beijing and Singapore.

Embraer: from this year has taken its spares and logistic support closer to its Asian customers both in commercial and business aviation by opening a regional distribution center in Singapore. The operation is 24/7 and offers spare parts, maintenance, repair and inventory services. The extended facility accommodates added spare parts inventory for its executive jets, previously held in Paris and supports the growing number of its executive jets in the region.

Airflite Asia: has become an approved Piaggio P.180 Avanti/II service center for the Asia Pacific Region based in Singapore. The City State is also home to Piaggio Aero’s S.E. Asian sales center, Kirkwall Pte Ltd, which will provide complete maintenance, repairs and overhaul services as well as spare parts for the range of P.180 Avanti/II aircraft. The appointment adds to Piaggio Aero’s continued expansion and commitment to the South East Asia region.

Deccan Charters: The Mumbai facility of Deccan has been appointed by Sikorsky Aerospace Services as an authorized customer service center to support the Sikorsky S-76 helicopter platform, and will offer Sikorsky S-76 operators complete aftermarket support. This customer service center in Mumbai will be a key support facility for the future expansion of Sikorsky’s S-76 commercial aircraft fleet in India says Sikorsky.

Formerly Deccan Aviation, Deccan Charters is one of India’s largest general aviation services companies offering everything from corporate charters, to emergency medical services, offshore charters, heli-tourism, aircraft management and operations as well as engineering services.

CERTIFICATIONS AND APPROVALS
• Cessna Aircraft Company has gained Indian certification for its Citation Mustang entry-level business jet from India’s Director General of Civil Aviation.
• Gulfstream Aerospace has received Type Certificate Validation from the Civil Aviation Authority of New Zealand for the Gulfstream G550 and G500. The two aircraft join the large-cabin, long-range GIV, GIV-SP, G400 and G300, which New Zealand approved for registration in 2003.
• Jet Aviation Hong Kong has received heavy-maintenance approval from the Hong Kong Civil Aviation Department to work on China and Macau-registered aircraft, in addition to further maintenance approvals.

REGIONAL EVENTS
The first Asian Business Aviation Convention was held in Macau between 9-11 June, and was heralded a great success by organizer Reed Exhibitions.

The event was cleverly timed to coincide with the G2E gaming show in town at the same time. Reed said the quality of attendees - with 40% coming from mainland China, and including many high rollers drawn from the adjacent G2E gaming show - has encouraged Reed Exhibitions to make its Asian Business Aviation an annual fixture. The next event will coincide with Asian Aerospace 2011 in Hong Kong March 8-10.

A plethora of other business aviation conventions and events are to be held in Asia Pacific next year underlining the importance of the region to business aviation companies, including:

Indian Business Aviation Expo (IBAE): Hotel Shangri-La, New Delhi; 21-23 February 2011. Organized by MIU Events UK and Exhibition India Group.

The 2011 IBAE has been expanded to include a larger exhibition. Early bookings suggest that there will be a significant increase in delegate numbers. In response to comments from the 2009 show the event will encourage more participation from India’s executive branch and its policy makers.

“The OEMs will have a significant presence with Indian manufacturers and component suppliers very much in evidence,” said an MIU spokesman.

Asian Business Aviation ’11: Hong Kong; 8th-10th March 2011. Organized by Reed Exhibitions. Already this event is attracting strong attention from the industry’s leading manufacturers, with Gulfstream, Dassault and Cessna signed-up to exhibit a large number of aircraft at the show. 16 business aircraft were on display at the 2009 event from Airbus, Bombardier, Cessna, Dassault, Embraer, Gulfstream and Piaggio. New exhibition space right alongside the static aircraft display is an added attraction for exhibitors.

Shanghai International Business Aviation Show (SIBAS): Hongqiao Business Aviation Airport, Shanghai; 13th-15th April 2011. Organized by World Events Agency. A new show, SIBAS is billed to have 5,000+ professional buyers, corporate personnel and VVIPs. It will host 150+ international and local exhibitors. Pre-advertising says that its conference program will include 150 international speakers who will take part in 36 specialist sessions and workshops.

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