The fight for China’s business jet fleet


There are two fascinating competitions going on in China at the moment. The first is, of course, the Winter Olympic curling. Chess on ice. With brooms.

And then there is the fight for the country’s business jets.

As you know, demand for pre-owned aircraft is outstripping the global supply. AMSTAT says that just 3.5% of the pre-owned fleet is available. But Greater China is one market where there are – and have been – a significant number of owners looking to sell. Because the Chinese fleet grew quickly from 2012 these are mainly young, large-cabin aircraft.

At the end of 2020 Asian Sky Group estimated that the Mainland China fleet consisted of 342 aircraft – with another 132 in Hong Kong and Taiwan. Brokers estimate that as many as 100 aircraft may have left the mainland China fleet in 2021 alone.

“It is hard to tell – as it includes aircraft on the US registry – but the few aircraft that have moved to the country have not made up for the many that have left,” says David Dixon, president of Jetcraft Asia, and author of I Sell Aircraft.

Paul Jebely, global head of asset finance at law firm Withers in Hong Kong agrees: “Undoubtedly, there are more private aircraft leaving the Chinese fleet than entering. The vast majority of our Chinese deals over the past 24 months have featured outbound aircraft. That said, especially if you include Hong Kong, then you will note that there has also been a not-insignificant number of new aircraft ordered or delivered during this period.”

As always, owners are selling for a variety of reasons. Property companies have been hit by a big fall in demand and restrictions on borrowing. Evergrande – once the country’s second largest developer – has sold multiple aircraft. Both local and international banks have also had to repossess aircraft from some customers.

Some owners also feel that owning an aircraft is risky. They are worried about President Xi Jinping’s Common Prosperity policy. The president says the policy is about narrowing a widening wealth gap, not punishing the rich. “The common prosperity we desire is not egalitarianism. We will first make the pie bigger and then divide it properly through reasonable institutional arrangements. As a rising tide lifts all boats, everyone will get a fair share from development,” said Xi at last month’s World Economic Forum.

“Common prosperity is a massive issue and we are seeing people sell aircraft because they do not want to draw attention to themselves. It is also stopping new people from buying aircraft,” says one consultant.

Xi is expected to be appointed for a third term.“It would be lazy for people in our industry to think that Xi’s common prosperity doctrine and private jets are mutually exclusive. They are not, especially when you consider that Xi has repeatedly warned against falling into ‘the welfarist trap of encouraging the lazy’,” says Jebely. “The clearly stated objective of Xi’s doctrine is actually to reduce political polarisation and rampant populism, and not to somehow reverse Deng’s ‘To get rich is glorious’ doctrine which has become totally pervasive in Chinese culture over decades. They will keep getting rich and keep buying jets, just not at this very moment in the same way they have in the recent past.”

Xi’s policies have hit some industries – particularly technology, entertainment, and hospitality – hard. Casinos – many of which had aircraft – had already been hit by the crackdown on corruption before Covid travel restrictions were introduced.

This is all creating opportunities for bold dealers “To be competitive you have to go in with funding and take calculated risks,” says Alireza Ittihadieh, President & CEO at Freestream Aircraft. Freestream has bought and sold more than 20 aircraft from Greater China in the last two years. “It is not a market for pure brokers or cowboys.”

After buying an aircraft, Freestream then takes it to a manufacturer authorised service centre for an inspection and re-registers it in the US. “We don’t start marketing the aircraft until it has had a premium survey,” he says.

Jetcraft’s Dixon agrees: “There is a huge advantage for brokers with funding in place who can prove to Chinese sellers that they can get the deal done.”

As demand for aircraft worldwide grows, the competition for aircraft in China has become even stronger. “There is a bit of a feeding frenzy,” says Dixon.

Like other markets, Chinese sellers are becoming more demanding. Some dealers are now buying without pre-buy inspections. “You won’t always get a pre-purchase inspection. It is madness to buy without the minimum of at least an engine borescope and a test flight,” says Ittihadieh. “But there are people who are buying without either – even when aircraft have not flown for years. Sometimes it will work out and sometimes it will be financial suicide.”

Dixon agrees that dealers need to be careful. “It is a tough environment and not all aircraft are hangered so mistakes can be costly,” says Dixon. “But, one positive, is that foreign buyers are now a lot less concerned about Asian based aircraft. It has taken years for this to happen and is a real benefit that the Asian business jet market can build to its advantage.”

Supply is also starting to dry up. “Many of the good aircraft have now been bought or are now under offer but there are still a few more challenging opportunities,” says Hamish Harding, chairman of Action Aviation. “But we are happy to take the risks and invest in what will be great aircraft for the next owner.”

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