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Business Jet Management in China

Professional aircraft management is mandatory today for business jets based in China. The use of an aircraft management company not only simplifies and expedites placing a new aircraft into service for the owner- but it also can provide significant operating cost savings.

Gil Wolin   |   1st September 2011
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Gil Wolin Gil Wolin

Gil Wolin draws upon almost 40 years’ aviation management experience as an industry consultant....
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What advantages does aircraft management offer the owner?

Professional aircraft management is mandatory today for business jets based in China. The use of an aircraft management company not only simplifies and expedites placing a new aircraft into service for the owner- but it also can provide significant operating cost savings.

Business Aviation has taken a firm hold in China with more than 120 corporate jets now based in the country. Its infrastructure is growing too- with nearly 30 airports open to corporate jets- and “open skies” anticipated by 2015. Yet that is only the beginning of the story – Bombardier forecasts that 600 new corporate aircraft will be delivered into China over the next decade.

China’s emergence as an international economic powerhouse in mining- energy- telecommunications and other industries mandates that its corporate leaders and high net worth individuals have Business Aviation at their disposal- to travel to distant markets including Mongolia- Australia and the Americas.

The fledgling nature of China’s Business Aviation industry does not yet support the independent private flight department. It is still building a pool of aviation professionals (managers- flight crews- maintenance technicians- and schedulers) to serve the rising number of business jet owners and users.

That- coupled with Civil Aviation Administration of China (CAAC) regulations requiring a valid Aircraft Operating Certificate (AOC) for aircraft based on the mainland- makes professional aircraft management mandatory today for business jets based in China.

Using an aircraft management company simplifies and expedites placing a new aircraft into service for the owner- while also providing significant operating cost savings. The owner becomes part of a larger purchasing group for fuel- maintenance and pilot training. He or she also gains a skilled- experienced scheduling and administrative support staff available 24 hours a day- seven days a week - a team that will insure the owner’s compliance not only with Chinese aviation regulations- but international ones as well.

Safety also is enhanced with professional management. The management team will explain to owners the newly-required compliance to the International Business Aviation Council’s ‘International Standards for Business Aircraft Operations’ (IS-BAO) certification. Today most EU countries have implemented this requirement as well as the Over-The-Air-Rekeying (OTAR) offshore countries- and eventually it will be required worldwide. Key Aircraft Management Companies.

Fortunately- there are several excellent and internationally recognized aircraft management companies operating in China today. The two oldest - both owned locally - were founded in 1995: these are Metrojet- based in Hong Kong (a division of the Kadoorie Group) and Deer Jet- based in Beijing (a division of Hainan Airways Group). Later- Zurich-headquartered Jet Aviation established a regional operation in Hong Kong- and more recently was joined there by Geneva-based TAG Aviation.

Basing in Hong Kong provides a bit more registration flexibility. Ten years ago the Hong Kong Civil Aircraft Department (CAD) made no distinction between private and AOC commercial operations. Today it does- and allows non-Hong Kong registered aircraft to be based at- and operate out of Hong Kong. This gives owners the option to register in the US or Cayman/Bermuda Islands if they prefer.

As the latest entry to this market- TAG Aviation chose to partner with China First Mandarin Business Aviation- to facilitate communications- adapt to Chinese business culture- and to help better understand Chinese law and compliance issues.

While using a China-based aircraft management company simplifies the entry-into-service process for the new owner- the process still requires approximately twenty steps to complete- depending on how the aircraft is financed and imported- and where it is to be based.

Involving the management company (and their expertise) early in the acquisition process yields several critical benefits for owners and the Original Equipment Manufacturers (OEMs) alike.

The owner gains the aviation professionals’ assistance with key decisions regarding aircraft specification and the completion process (critical for the long range/large cabin aircraft that currently dominate the Chinese market)- as well as help to establish the communications- understanding and trust required for smooth operations going forward. The OEMs- meanwhile- dramatically improve the odds that customers will be completely satisfied with their new aircraft.

‘The Happiness Barrier’

The consensus among management companies is that it takes about eight months for a first-time buyer in China to cross what might be termed 'The Happiness Barrier' (in other words- to fully understand all the issues and expenses related to business jet ownership and operation).

New owners often are startled when they are first confronted with the number of financial- personnel and technical decisions required to place their aircraft in service. The earlier in the acquisition process that owners involve the management company - and are informed of the steps and attendant costs required to place the aircraft in service - the sooner they cross that Happiness Barrier.

Once trust- and a clear line of communication are established with the owner- the management company can continue to educate and keep the client abreast of what is needed to operate the aircraft reliably and safely.

Most management companies require owners to provide an operating deposit – an advance against estimated operating expenses – equal to two months’ billings. The deposit enables the management company to begin paying all aircraft-related expenses immediately – including crew salaries- training and hangar rent. The owner then replenishes the deposit monthly when presented with the previous month’s accrued expenses. Any unused deposit is refunded when the owner sells the aircraft or leaves the management company.

Home Base Selection: One of the first steps is selecting the base. If the owner plans to base the aircraft on mainland China – for example- at Beijing- Shanghai or Shenzhen – the CAAC requires a contract with a management company before signing the aircraft purchase or lease agreement. (That is not required for Hong Kong-based aircraft.)

Personnel Selection: Next- the management company must help the owner select dedicated pilots- engineers (aircraft maintenance technician)- and flight attendants - and arrange for training and type-rating (in order to qualify a pilot to fly a certain aircraft model) if required.

Proper crew selection is important for a variety of reasons. At this time the CAAC requires that the Pilot-In-Command of aircraft landing in mainland China be a Chinese national. And while management companies can provide a pool of pilots from which an owner might draw upon any particular flight- most China-based owners prefer the personal service and relationships that dedicated flight crews provide.

Early crew selection enables the crew and engineer to assist overseeing the aircraft’s customized completion. It also familiarizes them with specifics about their owner’s aircraft- facilitating routine maintenance (accomplished with the assistance of other management company engineers)- as well as supervising major maintenance performed at certified repair stations.

Operating Cost Control: Management companies can further assist owners to control operating costs by generating revenue through making the aircraft available for charter when the owner is not flying it. While this is a popular option elsewhere in the world- at this time few Chinese owners are willing to share their airplane with others.

International business jet operations can be a complex and expensive matter for any owner- more so for the first-time buyer. Working with a skilled and experienced aircraft management company helps ensure owner safety- regulatory compliance- reliability and availability- as well as better control of operating costs.

The growing success of management companies in China is testimony to those abilities- as well as to the companies themselves.

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