By David Pierson, Los Angeles Times -
BEIJING — In the latest sign of China’s rising importance in the global aviation industry, Cessna Aircraft Co. said it would develop a plan to build business jets with the state-owned Aviation Industry Corp. of China.
The announcement paves the way for Cessna of Wichita, Kan., to become the first U.S. aircraft maker to manufacture business jets in China, the fastest-growing market for the multimillion-dollar planes.
“We believe China represents a significant opportunity for growth,” said Scott Donnelly, chief executive of Cessna’s parent company, U.S. conglomerate Textron Inc., at a signing ceremony Friday at the Great Hall of the People in Beijing.
Plans for the joint venture, which includes a partnership with the city of Chengdu in western Sichuan province, call for setting up a manufacturing base to build existing Cessna aircraft models. In the next phase, the company would help develop China’s first business jet to be sold abroad.
It’s “intended to be a global product and one we would take around the world,” Donnelly said.
The collaboration highlights the rapid emergence of China’s business aviation sector, which has seen its fleet nearly triple in the last four years because of rising wealth and government support.
Expansion has been so aggressive, industry officials fret about finding enough qualified pilots in the coming years.
Cessna’s plans could give the company an edge in a highly competitive market that favors larger, more expensive jets such as those built by Savannah, Ga.-based Gulfstream Aerospace Corp. and Canada’s Bombardier Inc.
Others looking to crack China’s market include France’s Dassault Falcon, which has assembly operations in Little Rock, Ark., and Brazil’s Embraer, which unveiled a jet emblazoned with movie star Jackie Chan’s name at the Singapore Airshow last month.
The number of business jets in China is expected to grow to 2,360 in the next 20 years from just under 170 today, according to Bombardier.
The growth arrives at a time when sales remain sluggish in mature markets such as the U.S. and Europe.
More than a quarter of Gulfstream’s backlog today is in Asia, most of it for China. As recently as 2000, the company didn’t have a single jet in China. Today it has 40 and another 40 in Hong Kong.
The company said the surge in international orders is one reason why it added 1,000 jobs in the U.S. last year.
“Things started slowly but it’s really taken off in the last five years,” said Jeff Miller, vice president of communications for Gulfstream.
China’s business jet industry has grown in concert with the country’s increasingly sophisticated business community, which must access markets in Africa and South America as well as reach corporate offices in Hong Kong, where many companies are publicly listed.
And like exotic cars, yachts and luxury real estate, China’s super rich have set their sights on private jets as the next must-have accessory.
“There’s a lot more money out there to buy these kinds of toys,” said Rupert Hoogewerf, the Shanghai publisher of the Hurun list of the richest Chinese. “There’s also a huge element of face involved. I met someone the other day who wants to buy two jets: one for his own use and the other for clients.”
Chinese buyers have shown little interest in entry-level planes. Instead, they start at the so-called super mid-size jets that generally start around $20 million.
Hongkong Jet, a charter and management service for business jets in the former British territory, has among its fleet the long-range Gulfstream G550. The $50 million aircraft seats up to 18 passengers and can fly nonstop from Beijing to Los Angeles in about the same time it takes a commercial airliner to complete the journey.
Keeping the mostly mainland Chinese customers happy means outfitting planes with Wi-Fi and offering dining service. If the plane lands at a small airport with inferior catering facilities, attendants are dispatched to the nearest five-star hotel to bring back anything from caviar to wonton noodles.
“Our reputation is on the line, even when it comes to catering,” said Chris Buchholz, CEO of Hongkong Jet, which expects to grow its fleet tenfold to about 100 aircraft in the next five years.
Beyond private wealth, experts say, sustaining growth in the business jet industry here will depend on how much the Chinese government is willing to loosen control of its skies.
The country has only recently begun freeing up flight corridors at lower altitudes for civil aviation. The country’s airspace remains largely under the grip of the People’s Liberation Army.
Permission to fly still requires approval that can take up to a day or longer. Fees are also especially high compared with those in the U.S. Landing and taking off from Beijing can cost $10,000 just to use the airport’s facilities.
Company officials are optimistic that conditions will get easier because of government support.
Aerospace is deemed a sector of strategic importance. China plans to add 78 new airports in the next decade.
The country is also building its first large airliner, the C919, to compete with Boeing and Airbus. Outfitted with technology from GE Aviation and Honeywell International Inc., the Chinese craft is expected to begin service in 2016.