Business Jets Versus UHNWIs and Billionaires

As the world’s gross domestic product (GDP) rebounded by 5.7%, Asia-Pacific’s economies managed to grow by 5.8% and accounted for 32% of total global GDP in 2021.

The Asia-Pacific business jet fleet grew by 1.4% in 2020; but declined by 1.1% in 2021. The challenges arising from COVID-19 may be a leading factor in this, as countries tighten movement restrictions, and companies downsize.

A large portion of business jets fall into the category of charter, private or corporate use, where the Ultra High Net Worth Individuals (UHNWIs) with a net worth of US$30 million or above are the dominant users. This segment values privacy and security as well as efficiency. Business jets allow users to avoid the tedious process of booking, checking in and waiting for a commercial flight, thus bringing the comfort and flexibility that users value.

While UHNWIs may be opting for charter jet services, billionaires are more likely to be private jet owners. From the statistics provided by Wealth-X, the average age of jet owners is 63.6, and has an average net worth of US$1.66 billion. Although not all billionaires who fit the profile own jets, and not all jet owners are billionaires, billionaires do dominate the private jet market.

According to Knight Frank’s Wealth Report 2022, the Asia-Pacific region was home to 32% of the total UHNWI population in 2021. From the 2021 Forbes list, about 76% of billionaires in the AsiaPacific region reside in Greater China or India.

The fleet size to billionaire ratio in Australasia is relatively high compared to other areas. The Australasia population is significantly lower than in other subregions, and so is the number of billionaires. It is worth noting that Australia has the second biggest fleet in Asia-Pacific, which means that there are around eight jets per one million people in Australia. New Zealand also has a large fleet size to population ratio of about five jets per one million people. Japan only has 0.5 business jets per million people. Most other countries and regions range from 0.4 to 0.3 business jets per one million people, whereas India only has 0.1 jets per one million people, even though it has a very high population.

GREATER CHINA

The pandemic has changed how people live and work. The demand for online shopping, home office software and online communication tools is higher than ever. According to the 35th annual Forbes list of the world’s billionaires, six of the top ten billionaires are engaged in the technology sector. This was not only seen in western countries, but also in China. Taking Shenzhen as an example, it is known as the technology hub of China as tech titans BATX (Baidu, Alibaba, Tencent and Xiaomi) all have departments or headquarters based in the city. In 2021, 99% of billionaires residing in Shenzhen had created their fortune rather than inherited it

In an article written by John Hyatt of Forbes, five of the top ten cities with the most billionaires were in greater China, namely Beijing, Hong Kong SAR, Shenzhen, Shanghai and Hangzhou. The UHNWI population in Greater China participated in a wide range of industries, enhancing both financial and real economies.

Over the years, the number of UHNWIs has increased continuously, while the fleet size fluctuated within a 10% YoY band. Like its ranking in the UHNWI population, Greater China ranked first in business jet fleet size in 2021, with mainland China having the biggest fleet in the subregion. Looking at the UHNWI per jet rate in mainland China, among approximately 207 UHNWI, one might be an owner of a business jet. Using the same methodology, one of every 50 UHNWIs in Hong Kong SAR and one of every 71 UHNWIs in Taiwan would have a business jet.

Mainland China accounted for 626 of the billionaires in Greater China, and it operates the largest fleet in the Asia-Pacific region. With a large population like India, mainland China also has a high fleet size per population ratio. There are 0.54 business jets per billionaire in mainland China and 0.6 business jets per billionaire in Taiwan. Hong Kong SAR, however, has a fleet to billionaire ratio of 1.42, which results in a higher rate than mainland China and Taiwan. Macao SAR only has one billionaire and has ten based business jets. This results in a significantly high ratio of ten jets per billionaire. Moreover, since Macao SAR is sparsely populated, it has 14 business jets per one million people.

China’s zero policy towards the pandemic tightened travel restrictions and reinforced quarantine requirements in places with high or mid risk of exposure to COVID-19. The lockdown suspended businesses that did not provide essential services, and those that could not work from home. The decline in the 2021 fleet number is likely to be temporary, as the Chinese market still has potential in different areas; moreover, the projected population of UHNWIs in 2025 could exceed 100,000 in mainland China. The jet per billionaire ratio might shed some light on the potential market expansion in mainland China and Taiwan; however, additional efforts need to be made for potential users to realize their need for business jets.

AUSTRALASIA

Australia dominates the economic and business activities in the Australasia subregion; however, GDP has declined since 2013. Exports decreased 1.6% YoY in 2021 on top of the 9.8% decrease seen in 2020 from the previous year.

Despite the economic downturn, Australia is home to 44 billionaires. With abundant natural resources, the mining industry has created 16 billionaires in Australia. Since New Zealand is sparsely populated, only two billionaires reside in the country. Thus, the jet per billionaire ratio is the highest in the Asia-Pacific region.

The Australasia fleet size experienced similar growth as the growth in the UHNWI population. The 7.4% increase in 2020 fleet size might arise from the positive economic and development outlook that all consumers have more confidence in the market. In 2021, although the growth rates for the UHNWI population and fleet size were positive, they had decreased from the previous year. The ratio between business jets and billionaires in Australasia does not necessarily represent an oversaturated jet market. It might indicate that UHNWI and billionaires residing in these countries are willing to spend on those services.

SOUTHEAST ASIA

Southeast Asia is famous for its scenic attractions which has generated fortunes for people living in the subregion. COVID-19 has disrupted the tourism industry, with governments closing borders to stop the spread of the virus. Pandemic-related restrictions suspended factories during each wave.

Singapore has the smallest population in Southeast Asia yet accounted for nearly 30% of billionaires residing in the subregion. Since the number of billionaires in Singapore was twice as many when compared to Malaysia, the Philippines and Indonesia, Singapore has a lower number in terms of fleet size versus the number of billionaires. Thailand and Vietnam have a smaller fleet compared to other Southeast Asia countries, thus resulting in a low jet per billionaire ratio.

Although the number of UHNWIs is low compared to other subregions of APAC, the fleet size is relatively large. Considering the economic conditions and UHNWI population, it is reasonable to assume that Southeast Asia is a popular destination for business jet owners or users.

INDIA

Ever since 2002, India has experienced steady GDP growth over the years but saw a decline for the first time in 2020. Dr. Rumki Majumdar of Deloitte believes this applies to all emerging economies, as they are more sensitive to external factors. During the pandemic, the need for healthcare services and pharmaceutical products increased significantly. As a result, 16 of the wealthiest 100 people in India are in the pharmaceutical industry

The jet to billionaire ratio is exactly one, as there are 140 business jets in India with 140 billionaires. This means if every Indian billionaire is a jet owner, they will have exactly one aircraft. The number may not be a perfect reflection of the real world, yet it indicates consumer willingness toward the business jet market.

Over the year, India’s fleet stayed steady, whilst the number of UHNWIs almost doubled. It indicates that previous UHNWIs did not change their minds when it came to operating a business jet, and neither did any newly created billionaires. In April 2021, people who could purchase a business jet or afford charter services had flown to other places due to the concern about the inability to access healthcare services in India. This indicates that the Indian UNHWI population is willing to spend money in the jet market when they realize its unique value.

JAPAN

Japan was one of the earliest Asian countries to industrialize, which set the foundation of the country’s development. Its capital city Tokyo was home to the greatest number of headquarters of Fortune 500 companies in the late 1980s. Today, Japan continues to be the world’s third-largest economy. Based on the Forbes Ranking, the wealthiest individuals in Japan come from the retail and manufacturing sectors.

There are 49 billionaires in Japan, which makes Japan the country with the third highest number of billionaires, whilst having the fourth largest business jet fleet. The number of business jets per billionaire in Japan is lower than the average among Asia-Pacific countries.

The number of UHNWIs has experienced minor growth, whilst the fleet size has a bigger fluctuation. Japan’s fleet is more sensitive to changes as the installed based is relatively low. COVID-19 greatly impacted the traditional manufacturing and retailing industries, which forced consumers to change their consumption patterns, which in turn caused a slight dip in the country’s fleet size in 2020.

A report published by the OECD (Organization for Economic Co-operation and Development) projected that the economy of Japan would continue to grow once its pandemic-related policies were eased or removed. “As the economy re-opened, service consumption, such as for hotels, restaurants and entertainment, got a big boost,” said Wakaba Kobayashi of the Daiwa Institute of Research. As businesses resume and border restrictions are removed, Japan still has the potential to expand its fleet. However, uncertainties brought by declining growth in its manufacturing market and issues arising from a low-birth rate may weaken fleet development in the future.

SOUTH KOREA

South Korea was one of the Four Asian Tigers. This term described the economies that underwent rapid economic growth between the 1970s and 1990s. Today, South Korea is one of the dominant players in the technology industry, with 60% of South Korea’s 20 wealthiest people engaging in technology-related industries such as electronics or telecommunications, online gaming or services and biotechnology. In stark contrast to the wealth rankings in other countries, three of the top ten wealthiest people in South Korea are from the same family.

The South Korean fleet is relatively small compared to other countries, yet there are 43 billionaires residing in South Korea. This causes the country to have the lowest jet per billionaire ratio of 0.74, meaning theoretically there would only be 74 business jets when there are 100 billionaires.

The year-over-year fleet growth in South Korea was like Japan’s as the former has an even smaller fleet. The Chaebol structure in South Korea produced an uncommon distribution between wealth and business jets compared to other subregions.