China business aviation – sunset for aircraft deliveries means new opportunities for MROs

Despite The Hurun Business Jet Owners 2017 report stating there’s still demand for Jet MS_Chinese business jet marketalmost 2000 new jets to be delivered to Chinese operators, experts across the globe agree that the golden age of new bizjets in the mainland is over. Yet, when one door closes, another opens and while deliveries in China may be plummeting, demand for MRO has soared. There’s pretty simple reason why.

Together with Macau, Taiwan and Hong Kong, China is the largest business aviation market in Asia-Pacific. Home to around 480 business jets, this country has experienced a boom in deliveries of new machines over the period of 2010-2014, stabilizing the number to 7% fleet growth through 2014-2016, according to data provided by Jet Maintenance Solutions.

Meaning, the largest number of bizjets flying around China has already or is about to reach the end of its warranty period. Without a doubt, a portion of these will be sold to other operators in other regions, but it is inevitable that majority of the fleet will stay within the mainland. Furthermore, according to data from China, 2016 was the first year for a long time, when pre-owned aircraft surpassed new aircraft deliveries.

“This may well be an amazing opportunity for MROs to try and establish their presence in one of the mega economies of the world, however, there’s more to the picture than a naked eye can see,” explains Darius Saluga, CEO of Jet Maintenance Solutions. “The challenges start with the need for on-ground presence. In order to be competitive in Chinese bizav market, you must establish a JV with local legal entity, this instantly poses risk to internal environment and business processes due to cultural differences.”
As D. Saluga explains, this is just the tip of the iceberg, as regulations in the People’s Republic of China are very specific, making customs clearance, approvals from the CAAC and components shipment a pain in the neck. Every used part must receive CAAC certification, unwillingly pushing operators to enter costly OEM support programs. It is inevitable that this puts China in second place after Asia Pacific region (excl. China) in predicted total MRO spending – $6.4 billion in 2025 (over 90% growth from 2015).

However, all those bumps along the way are only minor compared to the biggest threat to the industry – airport number. According to 2016 numbers, China has fewer than 300 airports, against more than 5000 in the United States. Even by adding 20 airports a year, it would take preposterous amount of time to even reach the US number, let alone surpass it. This slows down the entire industry, affecting business aviation along the way.

“No airports means nowhere to land for private jet flyers. This results in delivery slowdown and the overall sector down slacking off. Nevertheless, there are still ways for third party MROs to get their hands on Chinese bizjets. First off, creating local representation, even the smallest one, will give you a head start. Then, if not yet created, building a network of local partners that have deep understanding of regulations and customs will open new opportunities. Last but not the least – having a trick up your sleeve, for Jet MS it’s a way to recertify spare parts in accordance to CAAC rules, will play a huge role. This allows our Chinese clients to break free from OEM support programs. China is big, but it’s only open for those that can adapt to it,” concludes Darius Saluga, CEO of Jet MS.

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Categories: Aviation, Business

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