Market analysis: Megacities, the super rich and private jets
In the time that it takes you to read this sentence more than 250 people will have moved to a city for the first time.There has never been a time in history when so many people live in cities. The United Nations estimates that 3.2 billion people live in cities; by 2030, it forecasts that it will be 5 billion people. That means that three out of every five people will live in cities, compared to less than 3 per cent in 1800.
The other effect of urbanisation is the growth in megacities – cities with a population of more than 10 million people. In 1950 the world had two: New York and Tokyo. Now there are 33 megacities.
But what does this mean for business aviation? One theory is that megacities could be bad for business jet sales. One of the key benefits of business aviation is the ability to fly to undeserved airports. Airlines connect megacities, because the main growth in megacities is happening in Asia. This means they are also served by good airlines (at the end end of 2013, eight of the 10 largest megacities were in Asia – including all of the top six places. China, alone, had three.)
Large city populations don’t always equate to people who are likely to fly on business jets. Of the top 10 cities, Jakarta, Delhi, Mexico City, Karachi and Manila are particularly noted for having large numbers of inhabitants living below the poverty line. But despite this, all of Asia’s megacitites – apart from Karachi – are home to large numbers of business jets.
Top 10 megacities
|10||New York City||21.6||96||212|
The ratio of small aircraft to large aircraft in these cities is quite high. This suggests that companies and individuals living in megacities use these to access lesser served cities, which are relatively close.
Aside from Jakarta, the average age of aircraft based in these cities is also quite high, whilst the number of new aircraft being delivered is quite low. While this could be seen as an issue funding new aircraft purchases, it’s also an indication of a mature market that understands the value of business aviation.
Aircraft vs. billionaires
|City||Billionaires||Aircraft||Billionaires vs. aircraft|
|New York City||96||212||2.21|
To see how the wealthy of living in the top 10 megacities behave, we’ve added the amount of business jets that are based in each city. From here we have simply divided the number of billionaires by the number of aircraft based, which gives us the number of aircraft based in the city per billionaire.
The list has been sorted from lowest to highest, as it was felt that this would give the best indication how mature the markets in those cities are.
A total of one or above suggests that there is at least one aircraft per billionaire in the city, while a score lower than one suggests that billionaires are – for the time being, at least – not using business aircraft. Perhaps unsurprisingly, the top two cities are Chinese, with Guangzhou and Shanghai both having a higher number of billionaires than the number of business jets based at the cities airports.
This supports the Chinese growth theory, and is a pattern that is repeated all across Eastern Chinese cities, where there is a disproportionate amount of people versus aircraft. But with a population of over 1.3 billion people, and a commercial airline scene that’s still experiencing phenomenal growth, China remains a key destination on everybody’s growth lists.
Seoul and Tokyo at third and fourth place may come as a surprise. Both cities have especially well developed social, economic and transport systems and are the birth place of many of the electronics we all have in our homes. Both countries are, however, by comparative standards of the other countries whose cities are on the list, relatively small with well-developed domestic airline networks. According to Amadeus, in 2012 five of the top 10 busiest air routes in the world were domestic flights in either Japan or Korea. Four of the five were between Japanese city-pairs, but the busiest route was between the Korean capital Seoul and Jeju. Jeju, a small island off the south coast of Korea – and a favourite honeymoon destination of the Koreans. Therefore, most of the traffic can be classed as leisure travel.
Indonesia’s recent appearance as an emerging economy owes much to its natural resources and a solid governmental fiscal policy that has whipped the economy back into place following the Asian crisis in the 90s. Although GDP growth rates have been slowly declining, Indonesia weathered the recent global crisis well, with GDP growth only dropping 1.4 per cent from 6 per cent in 2008 to 4.6 per cent in 2009, average growth rates for the 2010s has still been over 6 per cent. Indonesia’s topography, with an estimated 922 inhabited islands, also lends itself to the usage of smaller business jets being used to reach destinations with infrequent airline service.
Population vs. aircraft
|City||Population (mil)||Aircraft||Population vs. aircraft|
|New York City||21.6||212||101,887|
To see how developed the business aviation market is in each of the top 10 megacites, we’ve divided the number of aircraft based at the cities airports against the total population for that city.
The lower the Population v Aircraft percentage can be used as an indication of just how developed the business aviation market is in that city, and for ease of use we’ve ranked the lowest score at the bottom.
Mexico City’s owes its lowest spot to having the largest number of business jets based in any city around the world. The majority of these are based at Toluca Airport to the West of Mexico City, where the country’s annual AeroExpo is held.
But whilst the numbers of aircraft based in the city are impressive, the average age of those aircraft is quite high, with a large proportion of aircraft based in the city being older generation aircraft who will see out their remaining flying days in the country.
In contrast, New York City’s second place with 212 aircraft are spread out across a number of airports across the city, with the largest business airport severing the region, Teterboro, being in neighbouring New Jersey. But with a high population, and a high billionaire population, the average age of business jets calling New York home is quite low.
As expected, the top two Chinese megacities appear towards the bottom of the list, with Shanghai in eighth position, and Guangzhou in tenth place. Although there are aircraft based in the Chinese cities, it’s noticeable that those aircraft are all long-range, large-cabin business jets, which could be seen as an indication that the market in those cities is still in its early stages of development.
It’s fairly clear from looking at the tables that that the biggest opportunities for expansion are in Asia. Not only is there the lowest ration of business jets to billionaires, but there is also the lowest ratio of business jets to population.
While it would be easy to get carried away with focusing on these areas, it’s worth noting that a 20 per cent rise in aircraft in Jakarta sounds impressive. But the reality is that 20 per cent of 15 aircraft in Jakarta is a great deal less in aircraft numbers and dollars, than a 20 per cent rise of aircraft in New York City.