(Updates with statement from Cessna in seventh paragraph. Click SHOW <GO> for more Singapore Airshow news.)
Feb. 15 (Bloomberg) -- Embraer SA is using the star power of Hong Kong-born actor Jackie Chan at the Singapore Airshow as competition intensifies in China’s business-jet market.
Chan’s Embraer Legacy 650 jet, with his name and the Chinese character for “dragon” on its tail, is on display at this week’s event as the Brazilian manufacturer competes with General Dynamics Corp.’s Gulfstream and Bombardier Inc. in capturing Chinese sales projected to grow 15 percent a year.
China’s business-jet fleet may increase to 2,470 planes by 2030 from 150 in 2010, according to Montreal-based Bombardier, as the nation liberalizes airspace regulations and rising wealth spurs demand. The world’s fastest-expanding major economy had about 1.11 million millionaire households in 2010, according to Boston Consulting Group.
“China’s business aviation has witnessed explosive growth since 2009 as the super-rich look beyond cars and yachts to jets, and as financial institutions flock to the market,” said Jenny Lau, Chief Executive Officer at Hong Kong-based Sino Jet Management Ltd., which will manage Chan’s plane. “In the next three to five years, the Chinese market will be the main story, with all the big planemakers focusing on it.”
Minsheng Financial Leasing Co., the leasing arm of Hong Kong-listed China Minsheng Banking Corp., ordered three Lineage 1000 ultra-large executive jets, Embraer said in a statement at the air show yesterday. The plane maker also won orders for 12 E195 commercial jets from Brazil’s Azul Linhas Aereas Brasileiras, it said.
Bombardier sees “great potential” in China, where it has a market share of 30 percent in registered and certified business jets, Christophe Degoumois, vice president for business aircraft sales, said in an interview at the show. Chinese classical pianist Lang Lang flies a Bombardier jet to performances, Degoumois said.
Textron Inc.’s Cessna Aircraft Co., the world’s biggest builder of business jets by deliveries, expanded its China sales staff in the past year and expects to complete a service facility with sister company Bell Helicopter in Singapore in the second quarter, it said in a statement at the air show.
By 2025, China is “expected to become one of the top 10 countries for business-jet ownership,” Cessna Vice President Trevor Esling said in the statement. The Asia-Pacific region accounts for 10 percent of Cessna’s business-jet sales, he said.
“Rising national prosperity and Chinese airspace liberalization make it likely that the business aviation market will mature at quite a rapid pace,” Esling said.
Savannah, Georgia-based Gulfstream said yesterday it will open a training facility in Hong Kong equipped with a flight simulator for operators of its G450 and G550 jets. The center, operated in a partnership with FlightSafety International Inc., will cater to pilots and technicians in Asia, who previously had to travel to the U.S. for training.
“This is the first simulator dedicated solely for business-jet operators in Asia,” Larry Flynn, president of Gulfstream, said in the statement.
About 80 Gulfstream aircraft are located in Hong Kong and mainland China, with a total of 175 in the Asia-Pacific region, according to the statement. Gulfstream controls 48 percent of the regional market for large-cabin business jets, it said.
Market ‘Very Big’
Ernie Edwards, president of Embraer’s executive jet division, said China’s market for business jets may grow to as many as 635 planes by 2021. Embraer is aiming for a market share of 15 to 20 percent in the country, said Edwards, who estimated it currently has 10 to 12 percent.
“Over the next 10 years, we expect almost $17.5 billion of executive jets being delivered into China,” Edwards said yesterday at the air show. “The market is very big.”
Minsheng’s Lineage 1000 jets will be delivered starting this year, Embraer said in yesterday’s statement. Embraer previously received orders for 13 of its Legacy 650 planes from Minsheng Financial, it said in a Feb. 3 statement.
Minsheng Leasing also ordered 50 Gulfstream aircraft, worth $2.6 billion at list prices, in July, the largest business-jet deal signed by a Chinese plane lessor.
Embraer hopes to win final government approval in the first half of this year to convert a factory in Harbin, China, that will build Legacy 650 planes, Edwards said. Production of the plane would begin “shortly after that” at the plant, which previously made regional commercial jets, he said.
The company plans to make as many as 20 Legacy planes a year in Harbin, it said in April.
The Chinese market is still dwarfed by the U.S. and Canada, which had a combined fleet of 9,700 business jets in 2010, according to Bombardier.
“High aircraft import taxes, a shortage of airport infrastructure for business aviation and high user fees are among the factors” explaining the lower number in China, Bombardier said in its 2011 market forecast.
The country, whose airspace is mostly controlled by the People’s Liberation Army, is liberalizing its low-altitude airspace to boost development of general aviation, according to a 2010 report by the state-run Xinhua News Agency. The government plans to set up a market-oriented system for access by 2015, according the report, which cited a joint notice by the State Council and the military.
The number of civilian airports in China is expected to grow to 244 by 2020 from 156 in 2009, according to Bombardier’s forecast report.
“There’s a recognition that the country needs to develop and grow,” Embraer’s Edwards said. “There are still restrictions in China that one doesn’t experience in other parts of the world.”
The government typically requires a two-day notice for private-jet flights from Hong Kong to mainland China, said Chris Buchholz, Chief Executive Officer of Hongkong Jet, a subsidiary of China’s HNA Group.
“They’ve made access to China a lot easier in recent years,” Buchholz said in an interview.
Demand, which was initially focused on Beijing and Shanghai, is growing in other cities, and mainland China will be a bigger market in the long term than Hong Kong, Buchholz said.
Kung Fu Panda
Chan, the Hong Kong-born star of movies including “Rush Hour” and “Kung Fu Panda,” was named a “brand ambassador” for Embraer last year. He received his Legacy 650, the first delivered to a Chinese customer, this month and will promote Embraer’s line of executive jets in China as well as globally, the company said in a Feb. 3 statement.
Embraer teamed up with Chan after Bombardier named “Pulp Fiction” star John Travolta, a licensed jet pilot, as brand spokesman for its Learjet, Challenger and Global jets.
Chan’s Legacy 650 has a 3,900-mile range, enough to fly nonstop from Beijing to Dubai or Hong Kong to Adelaide, Australia, according to the manufacturer. It can carry as many as 13 passengers in its three-zone cabin on shorter trips.
“He’s never owned his own private aircraft before,” Embraer’s Edwards said of Chan in a Bloomberg Television interview yesterday. “He’s very, very popular throughout the world, but most significantly he’s popular here in China and Southeast Asia, Asia in general.”
--With assistance from Rishaad Salamat in London, Terje Langeland in Tokyo and Susanna Ray in Seattle. Editors: Terje Langeland, Robert Fenner
To contact the reporters on this story: Jasmine Wang in Hong Kong at firstname.lastname@example.org; Joyce Koh in Singapore at email@example.com
To contact the editor responsible for this story: Neil Denslow at firstname.lastname@example.org