Market analysis: South-east Asian growth
NOTE: The original version of this post first appeared in April 2014. It has now been revisited and revised to include updated GDP growth figures, as well the latest fleet and delivery data from JETNET, LLC.
Business jet manufacturers are looking towards south-east Asia for growth opportunities, but are they being too optimistic?
When you start speaking about Asian business aviation with people from outside the region, you normally end up talking about China. 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 while China is an extremely important market in Asia, it’s a mistake to ignore the 11 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 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, and fortunes.
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 growth of GDPs across all countries in 2015. All countries economies are expected to expand beyond the previous years growth, aside from Malaysia, whose growth has been yo-yoing for the last few years.
With the IMF estimating a pan-European growth rate of just 1.7 percent for the whole of 2015, and the US economy expected to grow by 3.1 percent, it’s clear to see 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 2014, 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 equalling the natural beauty of any other resorts in the region, have a reputation of being more upmarket and developed than any of their neighbours, 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 based the different countries rather than those actually registered in the countries.
To get to a true figure for the number of aircraft owned by each country can be very a very tricky business. Owners have many different reasons not to register an aircraft in their own country. Some of the countries we are looking at, Singapore in particular, have no business jets registered in-country, so based aircraft has been used as the best proxy.
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 2014. 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 31 aircraft in 2015. 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. Embraer’s large aircraft are particularly well represented in the country, with seven Legacy 600/650s on the register and one Lineage 1000.
Deliveries of new aircraft into the country have also been falling, from four in 2012, to two in 2014.
Both aircraft were however towards the larger side, with Gulfstream delivering a G450, and Dassault shipping a Falcon 2000LXS into the country. Both aircraft are on the US N register.
Although Indonesia’s economy is expanding, the rate of growth has been slowing since 2011, based largely on falling exports. China, which accounts for one tenth of all Indonesia’s exports has been slowing, and this has had a negative effect on the Indonesian economy.
During 2015 the decline in economic growth is expected to stabilise, as the government focuses on infrastructure development to offset slowing exports. The country does however have one of the highest key interest rates in South East Asia, with the 7.5 percent almost matching the most recent inflation rate of 6.7 percent, all of which lowers the country’s inhabitants purchasing power.
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 2014 build Gulfstream G550 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, although the number of deliveries in 2014 tripped over 2013. While that sounds impressive, a jump from one aircraft to three aircraft still keeps Malaysian deliveries low. New aircraft that did enter the country during the year included a Bombardier Global 5000, Gulfstream G550 and a Cessna Citation CJ4.
Philippines: quietly growing
The business jet fleet in the Philippines is, like the country itself, contrasting to say the least. 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 however concerning, with JETNET LLC quoting the average age of the country’s fleet at around 20 years. 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 in 2014 fell by one aircraft from 2013, with one of these delivering on pretty much the last day of the year. Both aircraft delivered were of the same type, the Citation Sovereign+, although only one of these joined the local RP- register, with the second remaining on the US N reg.
Despite the low numbers of aircraft in the country, the Philippines has been tipped by many to be one of the largest economies in the world by 2050. Investment bank Goldman Sachs includes the country on its list of the so called Next Eleven (N-11) – Eleven global economies that are tipped as being the largest economies in the 21st century.
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 aircraft in the country, it does not mean that there aren’t any business jets based there.
The Singaporean fleet, however, differs from its neighbours 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. 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 2014 three new aircraft were delivered into the country, one more than the previous year. A Gulfstream G450 was the largest of these, with a Bombardier Challenger 605 and a Cessna Citation X+ being the other two.
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.
The first Gulfstream G650 to be openly traded was purchased in the summer of 2013 by Thai business man Vichai Srivaddhanaprabha, while the only delivery in 2014 was a brand new Gulfstream G550.
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. One of these, VietJet, placed an order with Airbus during the Singapore Airshow in 2014 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 there are no business jets in the country, although we could see a few pre-owned aircraft entering the Vietnam over the next few years.
How much growth can we expect?
It’s clear 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 while 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.
However, it remains to be said that 10 percent growth in each of the countries listed above only equates to a handful of aircraft.