Charter Report Market Intelligence

Factors Impacting Business Jet Charter in the Asia-Pacific Region – Charter Report 2016

by Global Sky Team

Factors Impacting Business Jet Charter in the Asia-Pacific Region – Charter Report 2016

With expanding trade and developing markets, the Asia- Pacific region has seen an increasing demand for business travel including demand for efficient business jet charter. As a relatively new market, business jet owners in the region are now increasingly aiming to mitigate the running costs of operating their aircraft and thus are considering the benefits of chartering. An emergence of mobile apps, media, and websites has made business jet charter easier and more accessible than ever. As the demand and availability of jet charter increases, a number of challenging factors have begun to influence the market.

Aircraft Utilization & Operation Structure

A typical optimized charter utilization for a business aircraft is 40 to 50 hours per month. Meeting these target hours can help rationalize the large investment put into such business jet. In order to keep an aircraft flying at the targeted utilization hours, an operator requires a supportive operation team including maintenance program providers. Maintenance planning and support are an important part of operating a business jet. While this might be easier for larger operators, small operators often face a significant investment for handling complex charter activities in addition to owner flight requirements.

There is increasingly more proactive work required to mitigate issues that will affect charter trips. The refined operational support can often require in-house regional expertise as well as global third party support to supplement the operator’s own team when conducting global operations.

Timing

As with many industries, jet charter demand fluctuates according to the season. Historically within this region, the time around Chinese New Year and Western holidays including Christmas, New Years and Easter are busy. Periods around the World Economic Forums, G8, G20, and regional ASEAN meetings also create a higher demand for charter, as well as major sporting events including the Super Bowl, World Cup and Olympics. Summer months are usually relatively slow, as the need for charter shifts to Europe and the US.

The time surrounding a natural disaster will also increase demand in the cargo charter industry, along with wide body passenger aircraft, and helicopters. Tsunamis in Southeast Asia and the recent earthquake in Nepal demonstrated that the first few days of a disaster are crucial, requiring initial search and rescue and moving experts and equipment into disaster areas. These disasters also showed the need for a coordinated effort by Asian governments to engage the private sector for such eventualities as part of an emergency response plan (ERP).

Restrictions

Infrastructure status, airspace limitations, and regulations throughout Asia are often the paramount challenges when operating a charter throughout the region. These can also make aircraft utilization targets difficult to attain. Landing and takeoff slots in major Asian cities are becoming increasingly more regulated, requiring operators to be aware of all conditions and requirements far in advance.

For example, foreign-registered aircraft in China are not easily allowed to operate to regional airports and are confined to those under 2438 m (8000 ft) in altitude. In Taiwan, the same passengers must be onboard on all segments of the trip. In Indonesia, all local flights on a foreign-registered non-scheduled aircraft (private or charter) are completely prohibited, bringing to new heights the operational limitations linked to ‘cabotage’ principles.

Known for their free-market, efficient-regulation and respect of liberties, the cities of Hong Kong, Macau and Singapore are the most charter-friendly locations in the Asia-Pacific region. Although a chronic shortage of parking space and takeoff slots cause difficulties to operators in Hong Kong, being a central location in Asia Pacific, it is still the most convenient, efficient and preferred destination for charter clients.

While governments in this region come to understand the efficiency and productivity that stems from business aviation, the industry can hope for more relaxed restrictions and more flexible business travel in the future.

Charter Users

There are a number of typical business jet charter clients throughout the region, with casino operators being arguably the largest. Such companies have historically acquired their own aircraft to maximize their chances of attracting highly-roller clientele. The rationalization of costs in the casino segment has arguably played a large role in the recent resurgence of block charter demand (buying blocks of hours at a time) in and out of Singapore, as well as Macau. The Philippines is also beginning to see a need for supplemental block charter.

Fortune 500 and multinational companies are also increasingly becoming regular users of business jet charter services, being typical from the entertainment or real estate industries, government agencies and commodity firms, among others. As the demand from Fortune 500 companies in this region is strengthening, such companies commonly want to ensure operators have all the necessary international-level qualifications. This would include international charter certifications: IBAC’s IS-BAO stage I, II, or III, Wyvern Wingman, ARGUS Gold or Platinum, or the Flight Safety Foundation’s (FSF) BARS audit. Business jet operators will not have all certifications, but most will have two or three to reassure clients about their efficient and safe flight operations.

Charter Products

As the demand for business jet charter increases throughout the Asia-Pacific region, the services continues to evolve, creating numerous options for users. The most popular option for chartering a jet is on-demand, which allows use when needed with no commitment and a pay-as-you-go structure. To secure preferred rates and availability, block hour programs are becoming increasingly popular, offering a guaranteed discounted rates and priority treatment – or blocks – to be used within a period of time. A number of companies are also offering charter card programs, which requires an initial fee but provides a guaranteed hourly rate. The card program also works on an on-demand basis. As many programs vary in their advantages and conditions, it is best to research which solution is best suited to one’s requirements. A description of most prevalent Asia-Pacific membership programs and mobile applications active is presented further in this report.

Aviation Professionals

While demand for business aviation services rises, there is a growing concern regarding the shortage of aviation professionals in the region. According to the International Civil Aviation Organization (ICAO), “the Asia-Pacific region will need 216,000 new pilots in the next 20 years, more than in any other part of the world, accounting for 40 percent of the global demand.” The shortage of aviation professionals also applies to the business aviation industry, and does not stop with pilots.

Mechanics and engineers, who tend to flock toward the train and automobile industry, ask for higher salaries in order to join the business aviation industry. The difficulty of employing these types of professionals also creates a burden for companies employing them. The initial investment required to train certified flight crews, mechanics, and dispatchers is not only high, but also does not guarantee that such resources will gather the necessary standards and experience to provide a sustainable base to the local industry.

Business Aviation Industry

Although challenges within the charter industry will continue to arise, Asia – with its large population and wealth – is in a good position to quickly tackle flexibility issues to empower efficient business travel throughout this rapid-growth region. Organizations including ASEAN and APEC working with the International Civil Aviation Organization (ICAO), the International Business Aviation Council (IBAC) and the Asian Business Aviation Association (AsBAA) continuously raise the importance of improving transportation regulations in an effort to implement efficient solutions.

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