Corruption crackdown clouds China's corporate jet market

SHANGHAI (AFP) - Makers of the world's private jets are looking to promote their aircraft as business tools in China rather than luxury toys for the super-rich, as a corruption crackdown slows sales in the country.

Chinese leader Xi Jinping launched a drive against graft after he came to power in late 2012, accompanied by policies to enforce austerity among officials - hitting sectors ranging from high-end liquor to luxury watches.

The market for private jets is a small, albeit fast-growing aviation segment in China, but the corruption campaign has taken some heat out of the market, according to industry officials.

"We're in this anti-extravagant thing so numbers are down a little bit," said Mr Briand Greer, president of Honeywell Aerospace for Asia-Pacific, which supplies the aviation industry. "To me it's like the river has slowed a little bit. Growth will be there, but it's a different period right now."

The first US Gulfstream jets only arrived in China in 2003, widely seen as the dawn of the new market. By 2013, there were an estimated 248 business jets in China - a 28 per cent jump from 2012, according to consultancy Asian Sky Group.

At China's premier airshow in Zhuhai earlier this month, major players including Gulfstream, Canada's Bombardier and Brazilian firm Embraer put their products on display.

Even the Commercial Aircraft Corp. of China, the country's major civil aircraft maker, showed a plastic model of a new business version of its ARJ21 regional jet, as it seeks to steal market share away from foreign firms.

"Business jets should not be treated as a luxury product because it's considered a business tool to improve efficiency," said Ms Christine Yan, Bombardier's China marketing manager for business aircraft and aerospace.

"As long as this benefit can be recognised... in the long run it's still a very good outlook," she told AFP on the sidelines of the airshow.

Manufacturers remain positive about the longer-term outlook for the China market, citing steady economic growth and Chinese companies heading abroad to do business.

"For a long time, it's been wealthy individuals buying a jet because they needed somewhere to put their money. It was cool to have a business jet," said Greer of Honeywell.

"There's starting to be a recognition that this is a tool that you can utilise to be more efficient," he said.

But Chinese customers for private jets are undoubtedly concentrated among the country's wealthy, with the aircraft sometimes costing tens of millions of dollars - Airbus gave a list price of US$80 million (S$104 million) when it unveiled a budget version of its ACJ319 corporate jet earlier this year.

Bombardier's popular Global 5000, which seats up to 12 people, lists for just over $50 million while the longer-range Global 6000 is US$62 million, according to the company.

In a survey this year, independent wealth publisher the Hurun Report estimated 40 percent of China's "super-rich" - defined as those with fortunes of at least US$16 million - plan to use private jets in future.

The Hurun Report's founder Rupert Hoogewerf said Chinese buyers typically pay US$20 million to US$80 million for a private jet, but some individuals are now renting for a one-off trip or time-sharing with others.

"It's the evolution of the market," he said.

On top of the corruption crackdown, there are other bottlenecks on the market.

Limits on airspace - which is largely controlled by the military in China - often lead to lengthy delays for scheduled flights, while there is a lack of airports and other infrastructure specifically to service private jets.

China has just 286 landing sites suitable for private planes, according to state media.

The government plans to "open" low-altitude airspace of under 1,000m nationwide next year, state media have reported.

But the move appears to be aimed at the broad category of general aviation - which includes gliders, light aircraft, and crop-dusters - instead of commercial flights.

Corporate jets cruise at far higher altitudes, but industry officials are encouraged by the decision.

"It's a step in the right direction," Mr Steve Cass, vice-president of corporate communications for Gulfstream, told AFP at the airshow.

"Any time you have this much growth in such a short period of time, you're bound to run into infrastructure issues."

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