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Understanding market logic from a different perspective

As the Business Aviation community breaks new ground in emerging global markets- bridging cultural differences due to language challenges and business methodology can add enormously to the complexity of the process for those of us who consider ourselves pioneers.

It will be important not to treat the challenges like that of the old American cowboy movies- in which the good guys walk into a new town- and announce their arrival by telling everyone there how they think things should be done.

There is no doubt that these new markets understand the value proposition for business aircraft - although the transaction process may take on a new look due to cultural twists. Leaving language differences aside for a moment- let’s explore some of the rich nuances we may be facing as we enter into these more culturally diverse markets mining for business.

When doing business in China- there are a few specific differences to keep in mind that shape the business aircraft market in this region. Not unlike other emerging markets- the age of the aircraft considered for purchase is a huge factor. Driven in part by the idea that new opportunities for wealth are related with new equipment- along with a lack of experience in decision-making when it comes to Business Aviation- and the fact Chinese businessmen do not have the same years of operational experience with business aircraft as others have had throughout the US and much of Europe- the result in this market is a general lack of confidence in the older- higher (usage)-time aircraft.

From a very practical position- new buyers from this region do not see the maintenance infrastructure in place that can provide service on what they feel may be a more problematic sector of the market. So their emphasis is on new or like-new equipment. Only on the rarest occasion will a buyer in these markets consider an older aircraft for purchase.

Also- since most are first-time buyers in this region- they are not buying from an inventory of aircraft that are located in their country or area. In addition- they have not been able to acquire a comfort level when it comes to assessing an aircraft’s maintenance history or reliability. These buyers have a much greater comfort level when buying a new aircraft directly from the manufacturer. In the interim as they wait for their new deliveries- they acquire like-new- very low usage-time aircraft.

This worldwide demand for new or like-new aircraft has put a huge strain on inventory levels and has contributed in great part to the low supply- higher priced inventory of recent years.

I am sure as these buyers gain more experience operating the aircraft they acquire- and manufacturers and Maintenance- Repair and Overhaul facilities increase within their borders- there will be a change in the buyers’ perception regarding the acceptability of the older aircraft market. In fact- as these initial buyers begin to trade aircraft they will stay within their region and a true resale market will emerge.

Exclusivity


Another very interesting cultural difference is the idea of exclusivity for the buying partner. Not unlike in the US some 30 years ago- buyers in the China/Asia market do not recognize the benefits of hiring a broker or consultant to assist in the acquisition process.

Frequently a buyer will think that when they are not buying a new aircraft from the factory- informal word-of-mouth communications about their interest in acquiring a business aircraft will attract the deal they desire. The logic is that not being aligned with one broker gives them a better chance of casting a wider net. It took many years for US buyers to change this mind set- so naturally the same may hold true for the Chinese/Asian buyer.

While the value of using only one broker or consultant may seem like a biased position- having the right expert as your buying partner provides a more effective decision-making process and actually results in better answers to a buyer’s needs.

Having one broker instead of several different people putting the word out also helps to avoid creating a false sense of demand in the market. Choosing the right buying-partner- and then arming him with the exclusive right to search- negotiate and recommend purchase does not limit the buyer’s choice of aircraft. In fact it will almost always allow the buyer access to all the available aircraft and secure a better purchase price.

The exclusive approach will also eliminate back-to-back transactions or fees that are sometimes not disclosed to the buyer ahead of time. Even when considering a direct purchase from the manufacturer- having a trusted partner at the buyer’s side will help to access all the information available and assist in choosing the right manufacturer from which to buy.

If you are a new aircraft buyer- I encourage you to trust this process to yield a successful outcome.


Increased Familiarity


As the China/Asian markets mature and infrastructure increases- the business of Business Aviation in these areas will become more familiar to all of us as new entrants broaden global conditions and diversify transactions. Patience and tolerance to cultural nuances when doing business in new areas of the world is what is required to achieve success in our expanding global market for business aircraft.

As I mentioned at the beginning of this article- those seasoned in Business Aviation cannot burst in- announce their arrival and start mandating how things should be done: Time is required to develop trustworthy relationships.

Also- for those looking to enter these new markets- they must remember that being invited into someone else’s world is a privilege—not an entitlement. It is a huge opportunity for the Business Aviation community to develop relationships that assist China reap the benefits of transportation via business aircraft- and that opportunity should be approached respectfully.

Read more about: Business Aviation in China

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