China is buying into business-aircraft production, but buyers are favoring imports
and business jets should soon begin rolling out of Chinese factories, but how many of them will Chinese buyers want? While China's business aviation market has grown powerfully since 2008, its preference for large aircraft—larger than Cessna's—shows no signs of changing. Recent sales trends seem stronger for Embraer, which until last year had almost none of its aircraft in China.
And in business aviation, for once, buyer preference is an almost completely dominant factor in Chinese aircraft demand. China's industry and its Western partners are almost always assured of local orders for commercial airliners assembled or partly built in China; helicopter manufacturing, too, can enjoy the support of government buyers. But neither the government nor its companies are buying many business jets, and the state is not directing the choices of private buyers, just as it would not tell them which luxury cars to choose. And they are mainly choosing Gulfstreams.
Cessna has been working with Avic on projects to build at least three of its aircraft types in China: the mid-size Citation Sovereign with Avic's fighter subsidiary AAT in Chengdu; and the super-light Citation XLS+ in Zhuhai and Caravan utility turboprop in Shijiazhuang, both in factories of Caiga, Avic's general-aviation business. The Citation Latitude, not due to fly until 2014, has been a later prospect for production in Chengdu.
The first Chinese Caravan was due to be completed by the third quarter, but by July, this had slipped to year-end. At that time, XLS+ deliveries from the Zhuhai plant were due to begin in 2014, having slipped from this year. For the Sovereign, Cessna was still in talks with AAT and the Chengdu city government in April (AW&ST April 22, p. 24). Production volume targets have not been disclosed.
Aircraft of XLS+ and Sovereign size are not the focus of demand in China, however, and there are few signs of that changing. “Over the last 3-4 years, [mainland China] market shares of Gulfstream andhave not changed significantly year to year,” says Hong Kong business aviation consultancy Asia Sky Group, reviewing figures up to 2012. “What is happening, given the current market trends, is [ ] Falcon and Embraer are taking market share from Cessna and Hawker [Beechcraft].”
Embraer is setting up an assembly line for business jets in partnership with Avic at Harbin. A factory that formerly assembled ERJ 145 regional jets has been reequipped at apparently little expense for the closely related Legacy 650 super mid-size jet. The latter is closer to current Chinese tastes for large aircraft. The first 650 from Harbin is due for delivery by year-end, as planned, says Embraer.
The Brazilian manufacturer had a negligible business aviation presence in the Chinese market until last year. By the end of 2012, the business-jet fleet in China, including Hong Kong, had eight Embraer aircraft, up from just one a year earlier, and compared with a Cessna fleet unchanged at 33 aircraft. Notably, five of the Embraers that arrived last year were Legacy 650s and one was an almost-identical Legacy 600. Moreover, Embraer booked orders for 28 aircraft in 2012, suggesting its fleet share will rise.
In deliveries, as always, the real action last year was at the heavy-metal end of the market, with fleets growing by 36 aircraft for Gulfstream, 25 for Bombardier and nine for Dassault.and corporate airliners dominated the other 26 net additions.
China's links with Western general- and business-aviation manufacturers trace back to the 1970s, when Beijing purchased French helicopters for its military. This led to local manufacture of the Aerospatiale SA321 Super Frelon as the Changhe Z-8 and the AS365 Dauphin as the Harbin Z-9. Civil versions of these—the 14.5-ton AC313 and 4.5-ton AC312, respectively—now form the core of Avicopter's commercial lineup. This early link lead to China taking a 24% share in developing's 1.5-ton EC120, built by Harbin since 2004 as the HC-120.
In 2005, agreement was reached to co-develop theand Avicopter AC532 (Z-15) medium helicopters, with Harbin supplying airframes for the 8.3-ton EC175. Other civil helicopter deals followed, including in 2005 establishing a joint venture with Changhe to assemble the 3.2-ton AW109 as the CA109. In 2007, signed a deal with Changhe to supply S-76C airframes, which has now transitioned to the supply of S-76D airframes beginning in 2016. In each case, the motivation was access to China's market and low labor costs.
Helicopters also led to China's first acquisitions. In 2007, industrialist Cheng Shenzong struck a deal to build the Brantly B2B light helicopter in Qingdao, and later develop the obsolete design into China's largest unmanned helicopter, the V750, built in Weifang and first flown in 2011. In 2012, in another U.S. acquisition, Enstrom Helicopters was purchased by Chongqing Helicopter Investment.
What has become a major push by Chinese industry into the general-aviation (GA) market began when, in 2007, Cessna announced that, to reduce costs, its Skycatcher light-sport aircraft would be produced by Avic company Shenyang Aircraft. The decision sparked controversy, which did not subside when, in 2010, Caiga agreed to buy bankrupt U.S kitplane maker Epic Aircraft. The bankruptcy judge blocked plans to relocate production to China.
Ulimately, Epic was sold to a Russian company, but Caiga acquired Epic's designs for a family of single-turboprop, single- and twinjet aircraft, which now form the basis for its Primus and Starlight product lines. China's first indigenously developed business aircraft, the all-composite Primus 150, is powered by an 850-shp.H85 turboprop. First flight is planned for this month; certification is eyed for 2015.
China's buying spree did not end there. At the end of 2010, Avic company Technify Motor acquired U.S. piston aero-engine manufacturer Continental Motors from Teledyne. This July, Technify acquired insolvent German aero-diesel manufacturer Thielert Engines, merging it with Continental and positioning itself to supply both the traditional gasoline-fueled GA market and growing international demand for light aircraft burning easier-to-find jet fuel.
In its biggest deal yet, in 2011, Caiga acquired U.S. light aircraft manufacturer Cirrus. The Chinese owners have invested a lot, setting up assembly of SR20/22 piston singles in Zhuhai and, in the U.S., accelerating development of the Vision SF50 single-turbofan personal jet, which is expected to be certified in 2015. Cirrus is to produce airframes for Icon Aircraft's A5 light-sport amphibian and, in June, Icon announced a “privately held strategic investor in China . . . well established in the Chinese general aviation market” had taken a stake in the company.
Chinese industrialist Cheng, meanwhile, did not stop at Brantly, and in 2009 acquired Superior Air, a then-bankrupt U.S. manufacturer of aftermarket parts for Continental and Lycoming piston engines. His company, Beijing Superior Aviation Technology, then initiated China's boldest move yet, teaming with the Beijing municipal government in a bid to buy U.S. business and GA aircraft manufacturerout of bankruptcy. Hawker Beechcraft called off the negotiations in October 2012.
Although China's biggest move to date to secure a share of the global business-aircraft market ended in failure, Western manufacturers have continued to pursue deals to build their products there. The latest is Switzerland's, which is to assemble its PC-6 utility and PC-12 business turboprops in Chongqing. But Cessna and Embraer are the first to persuade China to manufacture business jets, a sector of the market that is expected to grow most dramatically.
The volume of business flying in mainland China, measured by hours in the air, rose 61% in 2010-12, according to Civil Aviation Administration of China () figures which, by covering two years of operations, flatten out bumps to give a better indication of the trend. The number of movements rose 59%.
The CAAC seems fully supportive of business aviation. Shi Boli, director general of the regulator's transportation section, told an industry meeting earlier this year that, while the potential for further growth was obvious, “we very clearly recognize that the industry is restricted by limited resources. Infrastructure is unsuitable, support services are lagging, specialist personnel are in short supply and so on.”
After consultations with industry, the CAAC says it has come up with an 18-point plan to improve things. Many of the points have been only vaguely described—for example, “strengthening regulation and control, including the system for allowing entry into the market.” But others are a little more concrete, such as “perfecting the national airport plan,” presumably in favor of business aviation, “and pushing forward infrastructure construction.”
Airports at Beijing, Shanghai, Shenyang and Shenzhen have or are building business-aviation terminals. Zhuhai has taken first steps for a fixed-base operation (FBO) trial. Some airports have set up special arrival and departure channels for business-aviation passengers, and some, while having no dedicated terminal, are at least preparing facilities to support business aircraft.
Tap the icon in the digital edition of AW&ST to read our skeptical assessment of the Chinese business aviation market in 2007, or go to AviationWeek.com/chinabizav
|AgustaWestland – Joint venture established with Changhe Aircraft Industry in 2005 to assemble AW109 light-twin helicopter in Jingdezhen (as CA109).|
|Brantly – Acquired by Qingdao Haili Helicopters in 2007; B2B light-piston helicopter production moved to Qingdao; unmanned version developed.|
|Caiga – Designs acquired in 2010 from bankrupt U.S. kitplane-maker Epic Air by Avic’s China Aviation Industry General Aircraft (Caiga) form the basis of Primus turboprop and Starlight turbofan business aircraft.|
|Cessna – Skycatcher light-sport aircraft is built by AAT in Shenyang; Caravan is to be assembled in Shijiazhuang under joint venture with Caiga; negotiating with Caiga to assemble Citation XLS+ business jet in Zhuhai, and with ATT to assemble Citation Sovereign in Chengdu.|
|Cirrus – U.S. light-aircraft manufacturer was acquired by Caiga in 2011; Caiga South China Aircraft Industry assembles Cirrus SR20/22 in Zhuhai.|
|Continental/Theilert – Continental Motors was acquired from Teledyne by Avic (Technify Motors) in 2010; Theilert Aircraft Engines was acquired by Avic in July 2013 and merged with Continental.|
|Diamond – Shandong Bin Ao Aircraft Industries assembles DA40 TDI light-twin for China and selected Asian countries.|
|Embraer – Harbin Embraer Aircraft Industry, a joint venture with Avic, has begun assembly of Legacy 650 business jets in Harbin; first delivery end of 2013.|
|Enstrom – U.S. light-helicopter manufacturer was acquired by Chongqing Helicopter Investment in December 2012.|
|Eurocopter – Co-development of the Eurocopter EC175 and Avicopter AC532 medium-twin helicopters was launched in 2005. Harbin Aircraft Industry supplies airframes for the EC175 and builds light EC120 as HC-120.|
|Flight Design – German light aircraft (CTLS and C4) to be produced in China beginning in 2015 under a deal with Taiwan’s Aero Jones.|
|Icon – U.S. light-sport seaplane manufacturer’s June 2013 equity financing round was led by a Chinese strategic private investor; airframes are to be supplied by Caiga-owned Cirrus.|
|Pilatus – Agreement signed with Beijing Tian Xing Yu Science in July 2013 to assemble PC-6 utility and PC-12 business turboprops in Chongqing.|
|Sikorsky – Changhe Aircraft supplied S-76C helicopter airframes under agreement signed in 2007; new deal signed in September 2013 to supply S-76D airframes.|
|Superior Air Parts – U.S. piston-aeroengine aftermarket parts manufacturer was sold to Superior Aviation Beijing in 2008, and combined with Brantly in 2011.|
|Yuneec – Jiangsu-based Yuneec International manufacturers of the e430 electric-powered light-sport aircraft marketed by U.S.-based subsidiary GreenWing International.|