China is second largest market for Global Jet Capital

Alud Davies
By Alud Davies April 24, 2018 14:47

China is second largest market for Global Jet Capital

Global Jet Capital says that China is now its second-largest market, after the US.

Speaking during the Asian Business Aviation Conference & Exhibition, Vivek Kaushal, the firm’s chief risk officer, said that China has overtaken Europe as the second most important region, with activity increasing over the course of the past 12 months.

For Global Jet Capital, which specialises in financing large-cabin aircraft, the Chinese market is ideal, as it is known as a large-cabin, long-range market.

Although Mr Kaushal does not see this changing significantly in the near term, he does see this eventually changing as Chinese buyers look not only for value in their aircraft purchases but also at more-mission-specific aircraft.

For many years there was a sense of one-upmanship in Chinese business-aircraft purchases, with Ultra High Net Worth Individuals trying to go one up on their peers. So, for example, if they saw that a friend had bought a G450, they would buy a G550. If they saw somebody had bought a G550, they would buy a G650. Pretty much all of the aircraft coming in were new.

But a recent shift in attitudes has seen Chinese buyers not only accepting pre-owned aircraft but also beginning to look at smaller aircraft too.

Mr Kaushal sees two types of Chinese buyers. The first is a group whose members’ business interests are truly global and who need to globe-hop all of the time. For this group, a long-range, large-cabin business jet makes sense, as its true capability is used often.

But for the second group, whose members’ business interests are largely regional, Mr Kaushal says that a large-cabin business jet is largely an oversell. This group of owners fly mainly regional missions, with just the occasional long-range flight.

This second group is beginning to become more educated on business aviation, and its members are starting to realise that for 90% of their usual flights a large cabin business jet is not needed.

This is partly due to the costs involved. Aside from the initial purchase cost, the monthly and flight costs of a larger aircraft are more expensive. As the Chinese market has begun to mature, more owners and potential owners are beginning to understand that they could purchase an aircraft based on their usual mission profile, and use commercial first-class flights for long-range travel.

The shift towards smaller aircraft won’t be happening overnight, but Mr Kaushal says that we will see what he calls a ‘reality check’ happening over the course of the next few years.

“Aircraft size still matters, we’ll see more in the next few years with a reality check. For China, there is a certain type of aircraft that you need, and a certain type of aircraft that can meet that range. From what we have been looking at, there is a certain amount of oversell on the capability of the aircraft for the region. As the market matures and people start looking more closely at operating costs and what they really need, I think we will see more purpose-built aircraft specific for that region.”

For Asia, not just China, an aircraft with a maximum range of 4,000nm seems to be the sweet spot. Even one of the region’s longest city pairings — Tokyo to Jakarta — fits within this range in normal operating conditions.
That puts the Challenger 650 and Falcon 2000LXS as perfect fits for Asia, although aircraft with less range but still with large cabins could fly most missions.

Aircraft of this size were sadly missing from the ABACE static display, though Bombardier did display a Challenger 650, and Cessna showed a smaller Citation Latitude.

Alud Davies
By Alud Davies April 24, 2018 14:47

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