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Asia Pacific Update:

Greater need for long-range Corporate aircraft within region.

Since the financial uncertainty in Dubai it has become clearer that Asia Pacific- and China in particular- is the region now most likely to keep business aircraft sales ticking over: Asia Pacific- although relatively small by western standards- has become more important to the OEMs in a time when sales in the U.S and Europe still languish.

One problem- necessitated by the region’s geography- however- is that China’s corporate jet orders seem to show greater need for long-range corporate aircraft rather than light jets. Underlining the point is the emerging news that China’s MinSheng Financial Leasing Co Ltd (MSFL) is to become a world player in business aircraft leasing. Only a few months ago this then un-named Chinese buyer signed for a Gulfstream G450 which has since been delivered to Beijing.

In the last few months MSFL has placed orders for another five Gulfstream G550s- a Hawker 4000- a Challenger 605- and a Global Express XRS - and yet another four jets were expected to be added by the end of 2009- according to a representative of the bank.

Last quarter in our review of the region- David Tang- a London-based lawyer and aviation consultant to MSFL who helped put these deals together- told World Aircraft Sales Magazine that the enthusiasm and demand from Chinese Corporations to lease business jets was truly amazing. Earlier- Tang said that MSFL would have ten business jets on its books within two years- but this has now been updated by MSFL- and it plans to acquire a minimum of 60-70 aircraft within five years.

He recently said of MSFL’s other four possible 2009 orders that it could include the bank’s first Gulfstream G200- and further revealed that MSFL is in discussion with Hawker Beechcraft and Dassault which is offering the Falcon 7X as its long-range contender. The bank is also believed to be interested in purchasing Airbus A318 Elites.

The first Global 5000 (B-LRW) delivered to mainland China- to the Reignwood International Group last July- could be the first of another couple of similar sized aircraft signings according to insiders. The company is a major shareholder in the prestigious Pine Valley Golf Resort and Country Club in Beijing. The resort boasts gardens not unlike those of France’s Palace of Versailles- its hotel is modeled on the U.S. White House- and the golf course was designed by Jack Nicklaus. Apart from its Reignwood corporate duties the Global 5000 is used to fly VVIPs in to the resort- and is believed to be a major reason for expanding the business aviation fleet.

Meanwhile- Trevor Esling- Cessna’s vp- International Sales- is still a little cautious over a of sudden burst of business aircraft sales in China. “The Chinese scene has always been a bit of an enigma-” he said. “The last time I checked- there were about 59 jets registered with probably a few more delivered since then. We have 23 or 24 Citations in service there and it’s taken us 20 years to build up to that number.

“The Chinese have spoken about freeing up some airspace to 10-000 ft for general aviation and allowing a little more flexibility there. They are also to trial some increased approval rates for Hong Kong- Macau and mainland China registered aircraft. So maybe there is a small light at the end of the tunnel. The majority of our China market share is for mid-size aircraft with the Sovereign and the Citation XLS+ most popular.”

Giving an overview of the light and medium jet aircraft sector- Esling says that Asia Pacific has been one of the bright spots for his company and notes the difference in attitude compared with the U.S. and Europe currently.

“We’re selling into a much more optimistic market as Asia Pacific economies are all doing relatively well and we continue to sell new Citations there-” he remarked. “We are seeing sales in Malaysia- Indonesia- Philippines- Australia and China. In total we’ve got around 170 Citations in the region which includes India.”

Alan Smith CEO of Sydney-based Hawker Pacific which has had a presence in China since 1984 observes; “The Chinese Government has listed a swathe of measures that will help corporate aviation- including lower regulatory fees for corporate and private aircraft and ownership which should further stimulate the market. China’s military is handing over more airspace to civilian control which will also help matters.”

Smith says his OEM contacts are all seeing a flurry of Chinese interest in heavy metal; “If you talk to Dassault Falcon- Bombardier and Gulfstream that seems to be the sort of aircraft that people are going for in China.”

Asked about the MinSheng forecast of 50- 70 long range corporate aircraft in five years- he said; “Obviously we are closer to Dassault and Hawker Beechcraft as we are distributors for them - but the indications are that it [China] has the real potential to live up to those expectations assuming its economy keeps driving the way it is.

“I think it’s very exciting and the start of something big.” Smith added that the first Falcon 7X had been delivered to China as had the first Hawker 4000s to China and India.

From statistics supplied by Cessna’s Trevor Esling- the total deliveries over the last five years of light and medium business jets to Asia Pacific accounts for 153 aircraft. This is the grand total from Bombardier- Cessna- Gulfstream and Hawker Beechcraft competing in this specific segment and includes China and India.

Deliveries for 2009 show some stark figures in this segment though; for instance India came out top with one light and four medium jets delivered; South Korea with three light jets; and Australia- the Philippines and Indonesia with one aircraft in each category. According to the statistics no deliveries were made to the People’s Republic of China- Japan or Malaysia in these two aircraft categories for 2009.

Given the vast distances in the region it’s probably not too surprising that the entry level and medium categories have suffered most in the downturn although 2008’s figures were much better- with India coming out top with 11 aircraft- Australia with nine and the People’s Republic of China with seven for their combined light and medium jet deliveries.

SHANGHAI FBO/MRO
Hawker Pacific has had a presence in mainland China since 1984 and its long relationship definitely paid off when it won the competition in early 2007 to be the joint venture partner with Shanghai Airport Authority in operating an FBO and MRO hangar at Hongquiao Airport- Shanghai. The FBO is now very close to going operational says Hawker Pacific’s Alan Smith.

“The VIP passenger lounges are already complete. It’s a world class facility - the Shanghai Airport Authority has met every deadline and everything is finished to the highest quality-” Smith reveals. The FBO official opening ceremony will be in early March but the facility will be fully operational before then. The MRO hangar facility will follow later in the year.

“The critical part is for the FBO to be fully ready for the Shanghai World Expo and an expected influx of corporate aircraft. Pre-booking for corporate aircraft is already up to 60 aircraft-” said Smith- “with around 200 expected over the duration of the event. This gets the joint venture off to a flying start.”

Shanghai’s World Expo starts its six month run on May 1st and will be the largest ever World Expo- this time with the theme ‘Better City- Better Life’.

The 3.5 square mile World Expo site (the largest ever) is expected to generate 70 million attendees with five million visitors expected from outside China. Until the MRO comes on line- Smith says the company will operate teams of mobile repair engineers for Dassault- Hawker Beechcraft and other business aircraft OEMs as it did for the Beijing Olympics.

INDIA
Dassault’s Falcon 7X gained certification from India’s Director General of Civil Aviation in November 2009- in advance of the first of six aircraft ordered for the subcontinent. The first aircraft is due for delivery to Religare Aviation Ltd (part of the Religare Voyages Group- a business aircraft charter company based in New Delhi) this month- where it joins a fleet of six business aircraft including a Falcon 2000. According to Dassault another Falcon 7X has been ordered by Ratan N. Tata- Chairman of India’s huge industrial group.

Dassault says that more than a dozen Falcon corporate jets are currently on order from Indian customers. The company has a permanent liaison office in New Delhi and has invested heavily in a new spares center and customer service operation in Mumbai.

“India has been one of our strongest markets over several years- so Falcon 7X type certification is of real significance-” said John Rosanvallon- President and CEO of Dassault Falcon. “As the country’s economy continues to strengthen there will be an increasing need to connect India efficiently with other major centers of trade around the world. For example- the Falcon 7X provides direct- nonstop access from Chennai- India- to London City Airport in the center of London.”

Also in India- Alan Smith (Hawker Pacific) says that his company is one of several groups of companies responding to a Request For Proposal (RFP) for the exclusive rights to operate Delhi International Airport’s FBO and MRO.

“We’ve been examining that [RFP] with some partners and only time will tell – I don’t want to presume or assume anything- we are one of a number with an international partner- and it does call for an international partner. The RFP lists handling 10-000 movements per year at the airport.

“Corporate aviation is a big thing over there and you’d be staggered by the number of aircraft parked on the ramp- which varies from heavy metal to humble King Airs. There is a lot of domestic trade.” There are around 30 Delhi-based business aircraft already- which serve India’s political capital- he said.

India’s 28 state governors and their departments have been major business aviation users for decades- whereas the private sector is still in its relative infancy. The strong government sector is a major area for future sales- say insiders- as many are investigating moving from twin turboprops to jets.

Cessna’s Trevor Esling says- “Of all the markets in the region- India has probably been the quietest this year for light and medium business jets.” But by 2025 he expects the sub-continent to be in the world top ten countries purchasing business aircraft. In the light and medium jet category only five aircraft were delivered and were split between Cessna- Hawker Beechcraft and Gulfstream.

To underline the importance of India’s potential- MIU Events is holding its first Indian Business Aviation Expo - IBAE 2010 - from 24th-25th February in New Delhi. The subjects under review should answer many of the questions asked by potential business aircraft owners and operators. More information from www.miuevents.com/ibae-10

AUSTRALIA & PACIFIC RIM
Hawker Pacific’s Alan Smith says his order book for special missions aircraft both quasi-military and flying ambulance aircraft for the region has been extremely good over the past 12 months.

“We gained the Malaysian Police order for five Beech King Air 350s and the fourth and fifth aircraft have just been accepted in the U.S.” A more recent contract was signed with the Australian Government to supply another five King Air 350s for a new interim light transport squadron- while an MRO contract will cover 16 of the type for the military.

“There has also been a lot of aeromedical fleet renewals and we have orders for seven King Air B200s and are expecting another order within the next month or two for another five which will be a mix of B200s and ’350s-” adds Smith.

With its H.Q at Bankstown Airport- Sydney- Hawker Pacific is the largest independent company of its type in Asia Pacific and a market leader in integrated civil and military aerospace sales and product support. It operates six FBOs in the region- three in Australia- one in Singapore- and has joint ventures at Skypark FBO Kuala Lumpur- and in Shanghai. The company is a distributor for Hawker Beechcraft- Dassault Falcon- Bell Helicopter and Diamond Aircraft.

The Diamond Aircraft Industries Distributorship only started in January 2009 and by anyone’s standards has had a pretty good year with New Zealand’s Massey University School of Aviation ordering 14 aircraft; two Diamond DA42 twins and 12 single-engined DA40s worth around $5 million.

“The University of New South Wales has ordered another seven Diamond aircraft and we have another number of major institutional-type projects coming to fruition at the moment-” said Smith. The company is also picking up MRO work retrofitting the DA42’s original Thielert Centurion diesel engines to AvGas fueled Textron Lycoming IO-360 (180hp) powerplants. Seven aircraft are undergoing retrofit for the Adelaide Flight Training Center at the moment. “I’d say the outlook for Asia Pacific is quite heartening especially when we bring India and China into the equation-” said Smith.

SKYPARK FBO MALAYSIA
Skypark FBO Malaysia is a joint venture between Hawker Pacific and ExecuJet of Switzerland (first announced at EBACE2008) which operates with a common management team from both companies.

Smith says business has been a little slow to meet the anticipated volumes but there are a variety of reasons for this; not least the worldwide recession. The FBO is in an almost stand-alone building at the completely revamped Terminal 3 at Sultan Abdul Azziz Shah Airport- Subang- Kuala Lumpur.

“It’s an outstanding facility and we are seeing an influx of new Malaysian registered aircraft-” said Smith. “Dassault has had some sales success and we are managing a brand new Falcon 2000EX here as well. We made a number of Hawker Beechcraft turboprop and jet sales also – it’s becoming quite a solid market. The global financial situation has certainly impacted on our original business plan but we are seeing a steady growth of volume and it is encouraging.”

Although the FBO is a joint effort- on the MRO side Hawker Pacific maintains Dassault and Hawker Beechcraft aircraft while ExecuJet specialize in Bombardier business jets.

ExecuJet which has FBOs at Sydney- Melbourne- Brisbane and Singapore has now signed a lease for space in a new hangar facility at Skypark which will house ExecuJet’s Bombardier warranty repair facility and act as an interim solution until a specifically designed building is completed in 2011.


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