Hong Kong running out of space for business jets

Liz Moscrop rounds up what’s happening with Hong Kong business jet operators as the private aviation market continues to expand in Greater China.

It would no longer be fair to call Hong Kong an emerging market for business aviation. It has well and truly emerged. Most of the resident billionaires own private jets. There is no room at local operators to park their managed planes, and companies are fighting for staff and facilities.

It is hard to know exactly how many aircraft are based in Hong Kong, but the number continues to rise. In a recent report, local broker and consultancy Asian Sky Group (ASG) estimates that the Greater China business jet fleet consisted of 336 aircraft at the end of 2012, with 57% based in China and 33% or 111 business jets based in Hong Kong.

Gulfstream and Bombardier dominate the Greater China fleet, with 219 aircraft between them. The report also suggests that the fleet consists of predominately large cabin, super large, and ultra-long range business jets, plus corporate airliners. These four categories account for 70% of the fleet, and are split evenly between the China and Hong Kong markets.

According to ASG, there were 111 business jets based in Hong Kong fleet at the end of 2012. The report suggested that 57% of the fleet was made-up of ultra-long range and super large types and claimed that Gulfstream was leading the market with the G550 and G450.

Four operators manage majority

The biggest operator in Hong Kong is Metrojet, followed by TAG, Jet Aviation Hongkong Jet and Hongkong Jet. These four manage 81% of the Hong Kong fleet, and each management company on average operates 10 different business jet types in their fleet.

However, it looks like the landscape may have changed somewhat. The report claims that Metrojet manages 28 aircraft in Hong Kong. Its fleet is dominated by Gulfstream aircrafts, which account for 20 aircraft out of the 28 (71% of its fleet). A job site update in April indicates the company also has aircraft based in Beijing.

With 25 aircraft on its books, Jet Aviation Hong Kong is due to take delivery of the first Gulfstream G650 to land in Greater China in the next couple of weeks. Most of its aircraft are based in Hong Kong but some are also in Singapore.

“We are growing dynamically here, and will be taking delivery of 20 more Gulfstreams this year,” said Iris Riesen, managing director of aircraft management services at Jet Aviation Hong Kong. She added that there was more growth coming from the Mainland.

“We can help people at short notice, and get an aircraft registered within three months. We’re seeing a definite shift to Mainland China, though,” says Riesen. “Some individuals there prefer to keep their aircraft on an international register for ease of operations outside China.”

TAG Aviation manages 36 aircraft, 27 of which are Bombardier models. It is the largest operator of Global 5000 types in Asia. It also has an Airbus ACJ318 on its books. Hong Kong Jet, meanwhile, manages 25 aircraft, including several corporate airliners, making it one of the largest operators of these types in Asia.

Asia Jet about to add five Gulfstreams

Card member and aviation services group Asia Jet is also growing fast. According to chief executive Mike Walsh, the company is adding an extra five Gulfstream aircraft to its fleet in the next month. The firm recently tied up with US-based Jed Edge (in fact has a 12% equity share in the company), which automatically added 16 aircraft to its AOC. The fleet now stands at 21.

Walsh is bullish about the future. “We finished ahead of budget by 25% this year and are starting to see rewards. The customer trusts us because we are FAA registered, and ISBAO and platinum listed,” he said. He added that retail clients accounted for 80% of the company’s card membership business, and that aircraft sales and other consultancy were also proving profitable.

Despite the influx of aircraft, challenges abound in developing the market. Walsh pointed to the local ‘grey’ or illegal charter market as being a problem. He said: “Some owners have no concept about the risk they’re putting passengers at when operating illegally.”

China opens up

Although planned airspace relaxation has not jet happened in China, Jet Aviation’s Riesen says that flying to China is becoming easier. Riesen said that although Chinese military airports are closed for traffic to outsiders, there are still 48 accessible airports, and hiring a mandatory navigator is not too much of an issue.

Chinese firm Sino Jet Management offers business aviation services ranging from acquiring an aircraft, hiring flight crews to scheduling tailor-made travel arrangements. It helps find financing and also offers VIP charter, as well as flight dispatch and concierge services. CEO Jenny Lau is cautiously optimistic about the company’s prospects in Hong Kong. “We have seen a slowdown compared to 2011, but that is because of the economic environment,” said Jenny Lau, CEO of Sino Jet Management. “The bigger story is what’s happening in Mainland China.”

Chinese investors and subsidiary firms are looking to place aircraft on both Chinese and US registries. Lau added: “There are only so many pilots or mechanics on the B-register. This can pose a problem in the crew is on sick leave or holiday. There is simply not enough manpower. It takes four months to retrain an N-type-rated pilot and convert his or her licence to a B-ticket. It is still doable, but there is a high demand for local pilots and consequently a supply shortage.” Currently Sino is a Chinese-owned company operating aircraft under part 91 regulations in China.

Lau said: “We’d prefer to have a Part 135, and are expecting to get our Chinese AOC in the next few months. We have ten aircraft at the moment, with two in Shenzhen.” Sino Jet is perhaps best known for managing the first Embraer Legacy 650 in Greater China, which belongs to film star Jackie Chan. Lau said this has produced lots of enquiries. However, she said: “Jackie’s busy schedule means it is not often available.”

Sino Jet is keen to develop its Mainland China and concierge market and offer and other services, such as yacht and helicopter charter, as well as high-end hotel stays. It may not operate under its own name in the Mainland, as Sino is generally reserved for state owned enterprises. The firm is waiting for a decision on that.

Biq squeeze in Hong Kong

The biggest problem in Hong Kong is lack of space to park aircraft. “Getting take-off and landing slots is not a problem. The difficulty is with finding space for maintenance,” said Nigel Parker, managing director of maintenance services at Jet Aviation.

Operators in Hong Kong have only six hours parking approval. Any longer is a big challenge, especially for home-based aircraft. Sources say it can take up to seven days to get engine run slots.

Another issue is that Chep Lap Kok is big, so business jets are dotted all around the field. All the operators are struggling to get maintenance space. There is only certain work that can be performed on the tarmac. Parker added: “We’re not supposed to do maintenance on remote bays.”

Lau added that Hong Kong has acid rain, which is detrimental to paint schemes. “There is no hangar space and we can’t use a Ground Power Unit,” she says. “This means it is difficult work on aircraft. We have to do lots of extra work to keep corrosion to a minimum level. It is difficult to maintain jets.” She said that the firm would consider placing aircraft out of Hong Kong, “providing there was enough manpower there.” Indeed, she is so concerned about the maintenance problem that Sino is considering starting its own maintenance offering.

The fact there is only one FBO is also an issue. Plans for a third runway were stopped; consequently proposals for a second fixed base operation were also put in the freezer. This is also an issue for operators, since there is a monopoly on fuel at the Hong Kong Business Aviation Centre, which comes in at some $1.20 per gallon more than neighbouring airports.

Another problem is the common difficulty of finding pilots. “It is challenging to explain to an owner why the employer’s market rates for good candidates are so high,” said Parker.

The market in Hong Kong is flourishing, despite the jostle for space. Other players with offices in Hong Kong include Lilyjet and Gama Aviation, while Macau Jet, Donghai Jet, China Southern and China Eastern are all making inroads in the neighbouring Greater China market.