Market analysis: South-east Asian growth


Embraer displayed this Indonesian registered Phenom 300 at ABACE 2013 (Photo: Alud Davies)

Business jet manufacturers are looking towards south-east Asia for growth opportunities, but are they being too optimistic?
Embraer displayed this Indonesian registered Phenom 300 at ABACE 2013 (Photo: Alud Davies)

Embraer displayed this Indonesian registered Phenom 300 at ABACE 2013 (Photo: Alud Davies).

When you start talking about Asian business aviation with people outside the region you normally end up talking about Chinese business aviation. As the “C “in the BRIC country acronym and with a population of more than one billion people, the sheer size of the opportunities in China tend to overshadow the rest of the region.

But whilst China is an extremely important market it is a mistake to ignore the 10 other south-east Asian countries which make up a region far larger than north America. Covering an area of 4,500,000 km squared and with a estimated population of 610 million, south-east Asia – which consists of 11 countries – is sandwiched between India to the West, China to the North, Papua New Guinea to the East and Australia to the South.

It is, however, a region of stark contrasts, both politically and economically. From the sophisticated city state of Singapore, through to an estimated poverty rate of 19 per cent in the Philippines, south-east Asia has a wide range of incomes.

The chart above, with data courtesy of the World Bank’s data bank, presents the GDP growth rates for the largest south-east Asian economies. Estimates come from various sources, including, where possible, government’s own projections. What’s immediately striking, aside from the wild swing of Singapore’s GDP in 2010, is the projected leveling of GDPs across all countries in 2014 between 4 per cent and 6.2 per cent. Compare this to the IMF’s estimated 1 per cent pan-European GDP growth rate or the 2.8 per cent estimated for the US and it quickly becomes clear why business jet manufacturers get excited about south-east Asia.

The most consistent countries in the list are Indonesia and Vietnam, both of which, over the five year period between 2009 and 2013, attained growth rates that fluctuated between 2 per cent. Both country’s economies depend heavily on natural resources, although Indonesia exports a higher percentage of these globally.

Tourism brings money into the region, with the beautiful beach resorts in the Philippines, Thailand and Vietnam being especially popular with tourists. Indonesia’s well known resorts of Bali and Lombok, while equaling the natural beauty of any other resorts in the region, have a reputation of being more upmarket and developed than any of their neighbors, so attract heavy spending holiday makers rather than backpackers and their associated shoe-string budgets.

Business jet fleets in the south-east Asian countries remain relatively low. The chart above, with data courtesy of JETNET LLC, looks at aircraft owned by the different countries rather than those registered in the countries.

All countries show impressive fleet growth over a five year period, with Malaysia being the only country with a private jet fleet that has not doubled between 2009 and 2013. Although Malaysia’s fleet growth of 28 per cent over the five-year period is still impressive and the country enjoys a 50/50 split between large and small jets.  Noticeable by its absence in the chart is Vietnam, where no business jet has been owned or registered. The country has, however, operated business turboprops, with the current fleet including two Beechcraft King Airs.

Perhaps the most impressive growth though has been seen in Thailand, where the fleet has jumped from 12 aircraft in 2009 to 28 aircraft in 2013. Thailand is also the only country on our list that operates a Gulfstream G650, with a pre-owned aircraft joining the fleet during the summer of 2013.

Indonesia: interest in large and small aircraft

The business jet fleet has doubled in the country over the last five years, closely following the country’s jet airliner fleet development that has seen Indonesia add 120 aircraft over the same period. Total fleet numbers, however, do remain low, with the smaller aircraft being particularly well represented.

Towards the larger side, the fleet includes a 2008-build Gulfstream G550 and a 2004-build Global Express, however it’s believed that several Gulfstream G650s are due to be delivered into the country in the next few years. Embraer’s large aircraft are particularly well represented in the country, with seven Legacy 600/650s on the register and one Lineage 1000.

In 2013 three new aircraft were delivered to Indonesian owners, down from four in 2012. The large side was well catered for with single examples of the Embraer Legacy 650 and Gulfstream G450, while the smaller side saw a Cessna Citation XLS+ enter charter service with EastIndo Services.

The year 2014 is expected to be a good one for Indonesia, with accelerated infrastructure developments in a robust investment climate. GDP growth is expected to exceed that of 2013s although this is predicted to be modest.The year should see Indonesia’s fleet and deliveries rise, with Dassault noting in a press release during the Singapore Airshow that they will deliver a Falcon 2000LXS into the country by the end of the year.

Elsewhere Gulfstream is rumored to be preparing a G650 for an Indonesian customer, while at the other end of the scale, Lion Air’s charter division, Space Jet had outstanding orders with Hawker for two Hawker 900XPs that won’t now be delivered, so will look at other manufacturers for similar aircraft.

Malaysia: not to be overlooked

Although the Malaysian business jet fleet has not seen the doubling of the other countries we’re looking at, a 28 per cent growth over a five-year period can not be overlooked.

The business jet fleet is split roughly in half by large aircraft and smaller aircraft, although the smaller aircraft in the country tend to be older types, including a 1974-build Dassault Falcon 20.

Bombardier have had modest success in the country, with the larger privately owned aircraft in the country all being built by the Montreal-based airframer. The largest privately owned aircraft in the country is a 2010-build Bombardier Global 5000 and the country’s fleet also includes single examples of the Challenger 300, Challenger 605 and Global Express.

The government fleet also includes a Global Express, as well as an Airbus A319ACJ and Dassault Falcon 900. Elsewhere, the other privately-owned large business jets in the country include a locally registered 1990 build Gulfstream IV and a 2011-build Swiss registered Gulfstream G550.

As is common across the region, many of the aircraft with owners in Malaysia have their aircraft registered outside of the country, with a large proportion registered in the US (N).

New aircraft deliveries into the country have been slow, with 2013 seeing a single business jet delivered to the country.

2014 will see Malaysia slowly add to its fleet through a combination of new deliveries and pre-owned purchases. Deliveries, in particular, will be low, although these will pick up considerably in the coming five years.

Philippines: quietly growing

The business jet fleet in the Philippines is, like the country itself, contrasting to say the least. Still, the country has been quietly adding to its fleet through a series of new aircraft deliveries and purchases of pre-owned aircraft and now has the same number of business jets as Indonesia.

The average age of the fleet is concerning, with JETNET LLC quoting the average year of build as 1996. The country is home to a large fleet of older Hawker 125 aircraft that could possibly be no longer in use, however a request to the Philippine civil aviation authority for confirmation of aircraft no longer airworthy has yet to be answered.

Large aircraft are relatively well catered for in the country, with aircraft from each of the manufacturers represented. MetroJet Hong Kong operates a satellite facility in Manila and currently manages a Gulfstream G450 and G550 that operate from the country, although both remain on the US (N) aircraft register.

Deliveries into the country numbered three during 2013, again matching Indonesia. While the number isn’t high, 2013 saw the Philippines making the news for all the wrong reasons; the effects of the economic fall-out will last for several years.

2014, therefore, will be a quiet year for the country, with only modest gains in total fleet as several pre-owned aircraft join the fleet.

Singapore: a surprisingly small register

Aside from four Gulfstream G550 AEW (Airborne Early Warning) aircraft operated by the Singapore air force, there aren’t currently any business jets on the Singapore (9V-) register. But as with other south-eastern Asian countries, just because there aren’t any locally-registered country, it does not mean that there aren’t any business jets based there.

The Singaporean fleet, however, differs from its neighbors as it is a relatively young fleet. The city state also has one of the first maintenance facilities that was set up in the region.

Jet Aviation has been operating from its Seletar base since 1995 and another long term tenant, Hawker Pacific, reaffirmed its commitment to the region by opening up a new facility in 2012 that is three times the size of its original campus. Seletar Airport itself is home to a wide range of different business jets that serve Singaporean owners, with Dassault being the only manufacturer of large cabin aircraft not to be represented.

Gulfstream’s are much in evidence, as are Bombardier Global 5000s and 6000s, although these tend to be registered in either the US (N) or the Cayman Islands (VP-C).

In 2013 saw two new aircraft delivered to Singapore, with the aforementioned Bombardier Global 6000 being the largest of these. At the other end of the spectrum, a Cessna Citation XLS+ was also delivered, however this may be temporary until the aircraft can be imported into Indonesia.

This year will again see a handful of new aircraft deliveries into the city state, with the majority of these being large cabin business jets. In stark contrast to the other south-east Asian countries, the likelihood of pre-owned aircraft entering the country are fairly slim, unless of course the aircraft involved are relatively young.

Thailand: locally registered aircraft

Thailand is the second country in south-east Asia that made the headlines for all the wrong reasons in 2013 and has continued to do so into 2014, as political instability threatens to takeover the country.

The Thai business jet fleet is unique in south-east Asia as a very high percentage of aircraft are actually registered in the country.

Small and mid-size aircraft make up the majority of the fleet, with the Hawker 125 and Gulfstream G200 being particularly well represented.

Large cabin aircraft have been a fairly recent addition to the Thai fleet, with the addition in 2012 of a 2000-build Gulfstream GV. Since then, the fleet has grown to include pre-owned Global and G650, as well as a new Gulfstream G550.

Fleet growth in 2013 was largely split by pre-owned aircraft entering the country and a new aircraft delivery. The first Gulfstream G650 to be openly traded was purchased in the summer by Thai business man Vichai Srivaddhanaprabha, while the delivery was a brand new Gulfstream G550.

Predicting fleet additions during 2014 is proving difficult, with the previously mentioned political turmoil a contributing factor in the confusion. Thai GDP growth could also be described as erratic, so as soon as this, and the political environment, settle down we’ll be in a better position to look into the future.

That said, it’s hard to ignore the rise of the large cabin business jets that have entered the country over the course of the last two years. We can expect the numbers of these to rise slowly but steadily over the course of the next few years, although mostly through pre-owned acquisitions.

Vietnam: no business jets

Vietnam is the only country that we’re looking at that has never operated a business jet and the chart below has only been included for the sake of consistency. While there haven’t been any business jets based in the country, it’s worth noting that the country does currently count two Beech King Air in its business turboprop fleets.

The airline market in the country has grown rapidly in the country over the last few years, with national flag carrier Vietnam Airlines adding a large number of Airbus A321s to its fleet and several new carriers popping-up during the five year period we’re concentrating on, including VietJet who placed an order with Airbus during the Singapore Airshow that could see the fledgling carrier receive up to 100 A320 family aircraft.

While the number of airliner aircraft in a country doesn’t equate directly to the opportunities for business jet acquisitions, it does demonstrate an increased willingness of the population to travel and an increased level of disposable income for them to be able to do so.

Vietnam’s economy could be described as the youngest in south-east Asia, and therefore the least developed. Having shifted away from a centralized planned economy during the 1980s to a market economy, the country relies heavily on foreign investments to support economic growth.

As such it shouldn’t come as much of a surprise that the are no business jets in the country, although we should see a few pre-owned aircraft entering the Vietnam over the next few years.

How much growth can we expect?

It’s clear to see that south-east Asia is poised for growth, so the real question should be how much growth can we reasonably expect?

Looking at the fleet additions and totals over the last five years shows us that the going has been slow, and there’s no real reason to expect this to change greatly over the next five years. And whilst manufacturers will be looking towards the region for growth, this will come largely from pre-owned purchases rather than new aircraft deliveries. The exception to this will be Indonesia, where the quantity of billionaires means that new aircraft orders will be easier to come across – although finance remains a challenge.