The private jet has become a business tool for the few who can afford it

IT's a luxury seen by some but to those who rely on the services of corporate jets, it's a time and even a cost saver.

One Malaysian corporate boss recently visited five cities in China over a span of less than 24 hours. He remarked that this would not have been possible if he did not have the services of a private jet.

“We saved time. We were airborne within 40 minutes from reaching the airport. We couldn't have done this if we flew commercial,” says the chief executive who requested anonymity.

His story is echoed by other too. Another renowned Malaysian corporate chief needed to close a deal in Macau. He chartered a corporate jet to meet his business associate. Minutes after being greeted by his Macau business partner, the deal was signed. He felt that his gleaming chrome jet helped seal the deal.

For a business person, time is of the essence. Saving a day could be the difference between winning or losing a deal.

“When you have a jet, it puts you on a different echelon. It becomes a business tool. You sign the deal faster. Don't think about the US$50,000 that you are paying for using the jet. You are using the jet to secure a US$50mil (RM155mil) deal. What is the US$50,000 compared with the US$50mil deal?” says DNest Aviation Services Sdn Bhd founder and chief executive officer Capt Earnest K.

In today's world, reaching a destination with the fastest possible time is paramount for any business owner. That is where corporate jets and business carriers fill an increasingly important need.

And not suprisingly, a new trend is emerging among corporate leaders in Malaysia, and this is to have their own personal corporate jets or turboprop aircraft.

Investing in a personal aircraft is no longer seen as a luxury. Forget the champagne or caviar served onboard. There is none. The aircraft is purely a time machine and a politically correct asset to own for growth purposes.

Capt Earnest K says that Malaysia probably has the most corporate jets compared with its Asean neighbours.

He sees the trend of chartering and having aircraft management business growing, as more business owners require the flexibility and urgency of responding to business opportunities.

“Malaysia probably has some 30 private aircraft, and all are used for business purposes. Most are jets. Less than five are turboprop carriers,” says Earnest.

DNest presently maintains different makes of aircraft namely, the Hawker 800XP, Citation Bravo, Lear 45, Gulfstream IV, Falcon 900B, Bell 407, Dauphin 365N Piper Seneca IV/V and Skyvan.

It is an open secret that Malaysia business owners who own corporate jets include the likes of Genting Bhd chairman and chief executive Tan Sri Lim Kok Thay, SapuraKencana Petroleum Bhd president and group CEO Datuk Seri Shahril Shamsuddin, SapuraKencana Petroleum Bhd executive chairman Datuk Mokhzani Mahathir, Tan Sri Lee Kim Yew, founder of the Country Heights group of companies and KL Kepong Bhd chief executive officer Tan Sri Lee Oi Hian.

Beechcraft International Services Co president and CEO Shawn Vick feels the aircraft charter market is starting to grow in Asia Pacific.

He sees the private aircraft transportation business beginning to develop as well as becoming a growth route in the Asia-Pacific sector as more operators secure the air operator's certificate.

He adds that Malaysia was an important growth market in the last decade, driven mainly by Malaysian businessmen who had international global supply chains and needed to respond urgently to situations and customer demands.

Since 2002, Beechcraft Corp points out that Malaysia is the fourth largest buyer of business carriers and corporate jets in the Asia Pacific region after Singapore, Hong Kong and China. The number of business aircraft in Malaysia has grown by 79% to 61 from 34 in 2002.

This is on the back of an average increase of 65% for Asia-Pacific as a whole. It points out that 3.9% of all business aircraft in Asia-Pacific are in Malaysia.

“Business owners recognise the value of a private aircraft as a tool for growth. With a private aircraft, there is no need to be on anyone's schedule. This also gives flexibility to a business owner who needs to make multiple stops in a day. Having a private aircraft gives privacy and convenience,” says Vick.

Cost isn't that high

Vick says that it was another misconception that flying privately was more costly. Citing an example of the usage of the Beechcraft King Air 350i turboprop, the average hourly cost was US$1,100 per hour.

If that were to be multiplied by the eight passengers fitted into the plane, that would work out to US$137.50 per hour, which was very cost effective, notwithstanding that one had flexibility to make as many stops during that trip.

Capt Earnest admits that owning a jet does not come cheap. However the cost goes down as the flight time increases and with more passengers in the aircraft. For short haul flights, the cost may not be so efficient.

For instance, the cost per person flying on a four hour return flight via business class would be approximately RM4,000 per person. If five people were on that flight, it would come up to RM20,000. Meanwhile, a 3 hour return flight on a corporate jet would easily come up to US$40,000.

“People who use jets are not thinking of these sort of costs. They are closing big deals and time is money,” says Earnest. He points out that there are currently two types of business owners in Malaysia who use private jets. The first are owners who are extremely wealthy and can afford to buy a private jet, without having to worry if the jet remains grounded for weeks.

The second are those who need a business jet, but cannot justify the cost of owning one.

“For this segment of business owners, they do not mind paying a little bit more for the chartering service, so that they may have the flexibility to use the aircraft as and when they please,” he says.

Earnest says that the growth of the charter business would also be fuelled by business owners themselves who would also lease out their private jets for chartering purposes in order to lower the holding cost of the jet.

Earnest says a trend which has started to emerge, although yet to take off in a big way, is the fractional ownership' of a corporate jet.

Under this structure, say for examples four people jointly own an equity stake in a jet, while the maintenance portion is managed by a company. Through this structure, the holding cost of the jet is severely brought down.

Earnest says that right now, corporate jets need to get international clearance before making its flights. He felt that this is not necessary especially within Asean.

“For instance, if a jet needs to fly to Indonesia, it cannot fly immediately unlike in Europe where it can do so within the next half an hour. Here, we need to apply for international clearance and wait for the permit which may take 2 to 3 days. In Europe, if you need to fly from UK to Brussels, you can do it within 30 minutes. Within the Asean region, we should be allowed to fly based on our flight plan without having to apply for international clearance,” says Earnest.

Statistics wise, Vick says that the number of business aircraft delivered to Malaysia between 1992 to 2001 was 19.

For the period 2002 to 2011, it rose to 27, which is a 42% increase.

“Only 6 of the 61 business aircraft in Malaysia are currently up for sale. This indicates the market is a growth one, and one for sellers,” he says.

Beechcraft Corp says the number of business aircraft in Asia Pacific grew from 65% from 947 in 2002 to 1,566 in 2012.

Singapore saw the largest increase at 131%, with its fleet growing from 16 aircraft in 2002 to 37 in 2012.

This was followed by Hong Kong 104% and China at 103%.

In terms of how the Asia Pacific business aviation market breaks down, around 58% of the region's business fleet are jets and 42% are turboprops.

Data shows turboprop popularity is growing. The number delivered to Asia-Pacific during 2008 to 2012 was 27% higher than during the period 2003 to 2007.

Beechcraft Corp has 64% of the business turboprop market in Asia-Pacific.

“Turboprops cost substantially less than a jet of the equivalent size and are more economical to operate.

“These factors that have helped lead to an increase in demand for King Airs,” says Ted Farid, Beechcraft's vice president of sales for the Asia Pacific region in a statement. Beechcraft's King Air line of twin-engine turboprops began production in 1964 and is the best-selling business aircraft family in the world. This market leadership is underlined by the fact that between 2002 to 2011 around 69% of all business turboprops delivered to Asia Pacific were King Airs.

Of the current business turboprop fleet across the region, King Airs hold a dominant 64% market share.