The high cost of flying a business jet in China

Although charter services may see a temporary rate drop because of overcapacity, it is hardly cheap to own a private jet in this part of the world.

The close to 300 business jets in service on the mainland cost an average US$30 million each to buy and about 30 million yuan (HK$37.5 million) a year to use, said industry veteran Jason Liao, the chairman and chief executive of jet broker CBAJets.

“Of the 30 million yuan, 10 million yuan is financing cost if we assume a 5 per cent interest rate. The bulk of the rest is fixed costs, like fees for management, parking and maintenance no matter whether you fly or not,” Liao said. “Then operational costs, including fuel, grow with the more hours you fly.”

Flying an Embraer Legacy 650 – a model owned by Jackie Chan – costs 23,000 yuan an hour, according to CBAJets.

Business aircraft are handled by fixed-base operators (FBO) and, on the mainland, they can only be found at some airports.

Unlike in mature markets, where a hub airport for business aviation would have many FBOs competing to provide parking, refuelling and line maintenance services, there is no Chinese airport with more than one FBO.

Depending on the aircraft type, one landing in Beijing could cost more than 100,000 yuan, Liao said, adding “that is probably the most expensive in the world”.

A licensed aircraft management company, required for all private jets, takes care of all operational matters such as clearing flying permits as well as employing the aircrew. Some management firms are also licensed to operate charter services.

Deer Jet’s new bundled membership card product starts from 10 flying hours for 788,888 yuan regardless of the route – down from a previous hourly price that exceeded 90,000 yuan an hour, according to the company.

“The notice required before flying has come down significantly to one day or less now,” Liao said, with a whole market of service providers flourishing in between aircraft operators and airport handlers to facilitate the process.

UAS International Trip, which specialises in flight facilitation, said it could easily arrange a private jet flight on the mainland within 24 hours.

The ease and cost involved in getting flying permits on the mainland ultimately depend on where the aircraft is registered: local, or foreign (Hong Kong included).

Jolie Howard, a vice-president at CIT Business Aircraft Finance, said there was trade-off between cost and ease of operation as handling fees, crewing and maintenance availability, and taxes were vastly different. Handling costs for a foreign aircraft averaged US$10,000 each time compared with only US$3,000 for a local one, and there was also a “compensation fee” of US$3,000 per entry.

However, registering a plane on the mainland meant paying a hefty value-added tax and import duty that combined came to at least 22.5 per cent.

According to Asian Sky Group, 10 per cent of mainland-based business jets and 37 per cent of the Hong Kong-based fleet are registered in the US.

Hongkong Jet is the first and only foreign holder of a Bermuda air operator’s certificate, a new choice being pursued by several other operators. “I think we should be creative,” said chief executive Jon Martin. “Getting the Bermuda AOC has given us a real cost-saving edge in having much faster aircraft registration.” Sijia Jiang

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