Las Vegas – “Money really is not a problem right now in China,” said Jason Liao Monday in excellent colloquial English.
“There’s so much money it’s just unbelievable.”
What kind of money are we talking about?
“We get calls saying ‘Hey, I want this plane, but I don’t want to wait. I’ll wire you $50 million or $60 million today, but I want the plane today, okay?’ ” said Liao, chairman and CEO of the China Business Aviation Group during a presentation at the 64th annual convention of the National Business Aviation Association.
“That’s how it’s done in China right now.”
The country, he said, is “ground zero” for business aircraft. There are currently only about 150 private jets registered in a country topping 1.3 billion inhabitants. And with an economy still humming along at a fast clip, Liao stressed that represents a huge business opportunity for business-jet makers like Montreal’s Bombardier Inc., France’s Dassault Aviation, Brazil’s Embraer and U.S. manufacturers Gulfstream Aerospace Corp., Cessna Aircraft Co. and Hawker Beechcraft.
But there’s a caveat.
“The (original equipment manufacturers) have to look at setting up production in China,” said Liao, especially for large-cabin aircraft like Bombardier’s Global line and Gulfstream’s G650.
That catch has made manufacturers pause. China, they say, is more interested in developing its own industry than being a branch plant for companies based elsewhere, and attracting them to China is a way to gather technological know-how and intellectual property, a prelude to forming their own industry.
Liao said in an interview that “it would be a good thing for companies like Bombardier to set up shop there,” extending the operations and agreements the Montreal aircraft company already has there in the commercial airplanes sector.
“China is very ambitious, you know. So we think about the long term gains, not the short-term obstacles.”
In fact, one persistent rumour at this year’s show has it that Chinese interests are poised to swallow Cessna Aircraft, a venerable U.S. company that has developed iconic piston-engine planes. The company, considered the weakest among the six main players, fell on hard times even before the 2008 crash and was forced after it to slash its workforce by more than half and suspend – and eventually kill – its Citation Columbus jet program. China has already purchased another legendary name in U.S. aviation, Cirrus Aircraft.
But Liao was effusive about the “virgin business aircraft market” China represents.
“We build 15 new airports a year, and we’ll take delivery of 75 business aircraft this year,” a 50 per cent addition in one fell swoop to China’s entire fleet to date.
Critics have said that there are hurdles to corporate and personal aviation in China, namely that the military control the airspace and getting clearance for a private flight could take days.
“There’s been a huge change,” he asserted. “Yes, it used to take a week, but now it can be done in four hours or so – sometimes even less. It’s basically on demand. We want to go where we want to go.”
In fact, that was also a problem until recently, as there were many large Chinese cities that still lacked a serviceable airport and infrastructure.
Liao said that there is even a movement afoot to build privately-owned airports.
It won’t come too soon for many of the rich business people China’s remarkable 30-year boom is still creating.
“The conversation in business circles is always the same,” said Liao. “ ‘What are you buying?’ ‘I don’t know yet, what are you getting?’ And they’re all talking about heavy (business) jets, not small ones. People used to hesitate to be the first to buy because of tax reasons. Now they’re all buying.”
He estimated that the U.S., with the largest share of business aircraft sales in the world at 40 per cent and worth about $8 billion U.S. a year, will be second to China by the year 2018.
“If they grow annually by five per cent, that takes them to $11.26 billion by then. Assuming 25 per cent annual growth in China – it’s a lot more than that – we get to $11.68 billion by 2018.”
That dynamic creates its own problems, he added.
“We’ll need about 3,600 new pilots every year, and that’s a concern.”
“But it’s pretty much a blank piece of paper right now in China. You can do whatever you want,” Liao said, referring to plane manufacturers.
“These are exciting times for business aviation in China.”
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