General aviation set for Chinese growth

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While most of the attention has been on China's business aviation industry amid the country's rapid economic development, the ongoing economic crisis and domestic demand means that its general aviation sector arguably has greater potential.

There are numerous regulatory hurdles. China is reviewing many of the rules as part of a broader review of the aerospace industry, and taking the industry's views on board as it does. But this process will take time, especially given the military's close links to the aerospace industry.

There is a shortage of infrastructure away from the coastal economic centres. The government is investing more in airports and related infrastructure as part of a stimulus package in this economic crisis, and in an attempt to improve accessibility in the country. However, it will be years before the effects are visible.

General aviation contributed only 0.001% to the gross domestic product and employed 7,000 people in 2007. China has around 900 privately registered aircraft and 74 operators - about a tenth of the number in Australia, which has only 2% of China's population. There are few small airports, and most of these are either unable to handle general aviation aircraft or they are not allowed to.

diamond aircraft
 © Diamond Aircraft

Yet, in many ways, China is much like the USA several decades ago. It has a large population spread across a wide geographical region. A proliferation of airlines has led to growing demand for pilots, and therefore flying schools. Interest in light sport aviation is just taking off. The use of helicopters in the civil sector is starting to grow, especially in the search and rescue segment.

In the USA, the General Aviation Manufacturers Association says that there are 231,000 general aviation aircraft in the country, and that the sector employed more than 1.3 million people and contributed over $150 billion, around 1%, of the US GDP.

There are nearly 4,000 paved general aviation airports in the USA, compared with 500 for scheduled airlines.

Much of this is due to lobby groups such as GAMA and the National Business Aviation Association, which regularly engage the authorities on issues that affect their constituency. While there have been attempts to form similar organisations in China, these have been largely ineffective. So it is up to the industry to push the benefits.

"General aviation improves China's transportation system, supplementing infrequent airline services in smaller markets and providing services to communities without airline services," says Kevin Wu, vice-president of Textron China.

"It also enhances economic development in regions where the road system is undeveloped or congested with traffic, or where mountains or waterways impede ground travel, situations where transportation by smaller airplanes and helicopters provides the most benefit over current transportation methods."

Textron subsidiary Cessna, which manufactures a range of general aviation aircraft, sees continued growth in the governmental and quasi-governmental segment. Airline training continues to be a strong segment, with customers looking at aircraft ranging from piston products for ab initio training up to jets for advanced training, it adds.

Several airframers have taken steps to manufacture their aircraft in the country and meet this demand. Diamond Aircraft took the first step in 2006, when it signed a deal to manufacture the single-engined DA40 in China in a joint venture with three other partners at Shandong province. When operational, the 30,000m2 (323,000ft2) facility will be able to manufacture 1,000 aircraft annually.

German and Canadian engineers will help their Chinese colleagues to ensure the aircraft are produced to European Aviation Safety Agency standards, and these will be targeted at selected Asian markets and particularly in China - seen as one of the biggest globally.

"Officially, there are about 450 GA [fixed wing] aircraft registered in China. Out of all these aircraft, around 152 are Diamond's DA40 and DA42 aircraft. By the end of 2009 the number of Diamond aircraft operated by Diamond customers will be more than 200," says Michael Feinig, general manager of Diamond Aircraft.

In 2007, Cessna announced its intention to build on its 20-year involvement in China by manufacturing 162 Skycatcher light sport aircraft in the country with Shenyang Aerospace. It expects to produce up to 700 aircraft a year at full-rate production.

"We are excited about [the Skycatcher] and the applications it will have for basic flight training in China," says Cessna. "We have had an office in China for some time and that presence would only grow with our business."

Also in 2007, Liberty Aerospace signed a deal with China's Anyang Angel Aero Science and Technology Development to manufacture the two-seater XL2 in the country. The joint venture is expected to produce up to 800 aircraft for the Chinese flying school market.

"These aircraft will be manufactured using the competitive local labour rates and negate the need for expensive shipping costs from the USA to China," Liberty chief operating officer Paul Bartlett said at the time.

The civil and para-public helicopter segments are driven by the search and rescue, oil and gas and emergency medical services markets. There are an estimated 124 civil helicopters in China, compared with more than 10,000 in the USA.

One big factor that helps the cause of the helicopter market is the devastating earthquake that hit Sichuan province in May 2008. The earthquake toppled many buildings, blocked roads, destroyed railways and damaged bridges. Helicopters, however, were successfully deployed to rescue people who were trapped in mountainous regions and deep valleys and otherwise unreachable.

EUROCOPTER PRESENCE

Eurocopter is a major beneficiary. It has had a presence in China for several decades, licence-producing the AS365/Z9 and jointly manufacturing the EC120. Its newest project is a 50-50 joint venture with Avicopter to develop and manufacture the EC175/Z15. It is increasing its presence in MRO segment and has identified partners for a planned pilot training school and simulator centre.

"We hope to take advantage of growing needs for helicopters in China, mainly for search and rescue, oil and gas as well as police and emergency medical service missions. We aim to maintain a long-lasting tradition of co-operation and partnerships," says Eurocopter.

China's AVIC (see box) is also keen to make a bigger push in the general aviation segment, and has been augmenting its helicopter production capability and building a factory to produce fixed-wing aircraft in Zhuhai. This will complement plants in Guizhou, Hanzhong, Jinmen and Shijiazhuang.

It has not revealed the type of aircraft it plans to manufacture, but it has been trying to buy a Western general aviation firm to acquire the technology. In 2008, it thought of bidding for Dutch firm Stork NV's aerospace division that was later sold to UK-based private equity group Candover Investments.

General aviation faces numerous challenges, the biggest of which are restrictions on the use of China's airspace. The military has divided it into four segments, controls it tightly, and flight planning application processes are lengthy and time consuming as a result.

eurocopter
 © Eurocopter
The Eurocopter EC175 has been developed jointly with China's Avicopter

"It is no secret that airspace restrictions on China will have to be relaxed before the general aviation segment will flourish," says Todd Duhnke, director for international Citation sales at Cessna. "We have been working with regulatory groups led by the CAAC [Civil Aviation Administration of China] and the FAAbut we still have some work to do to see more open skies."

China is considering relaxing the rules on low-altitude flying as part of its 11th five-year plan [2006-10]. In August, the CAAC approved a pilot scheme that begins in 2010 for China's first general aviation industrial park in Xian. This allows operators to use low-altitude airspace below 9,800ft (3,000m) for flights between the airport and tourist spots. This could be the model for the future.

Infrastructure is the other big issue, in particular the lack of development of smaller airports and related services. Given that the private sector is not allowed to develop airports and this relies solely on the government, this could take time to resolve.

There is also no clear separation between general aviation and scheduled commercial civil aviation, especially when it comes to safety regulations and aircraft import duties. While there is a growing amount of commercial aviation MRO facilities, general aviation aircraft must still mostly fly overseas for their maintenance and checks.

Textron, the parent of Cessna and helicopter manufacturer Bell, argues that China should take several steps to help general aviation, believing that it should open the airspace and co-ordinate civilian and military use to "optimise aviation capacity and national security", reduce fees and duties, and create more GA airports with fuel and service facilities, lights and instrument approaches, and at lower cost than commercial airports.

Additional test areas such as the one in Xian could also be set up to evaluate new policies and infrastructure, and demonstrate the utility of an expanded general aviation market to local governments and non-aviation businesses.

If a favourable operating and regulatory environment, and if improved infrastructure and related services are in place, Textron estimates that China's GA market could grow at an annual rate of 20% from 2010 to 2015. This would generate 7 billion yuan ($1 billion) of annual output, 43,000 jobs and a range of indirect benefits.

China, however, is still a far way off from achieving those goals. "China is not yet prepared for GA as we understand it. The bureaucracy is still the biggest obstacle," says Diamond's Feinig. "But we know, in China things change rapidly if there is a political will. This political will is declared by the Chinese government."

CHINA MULLS SEAGULLS AND DRAGONS

AVIC is aiming to develop aircraft from its new headquarters in Zhuhai

AVIC General Aircraft is selling a 30% stake in its business to companies linked to the Guangdong and Zhuhai governments and is moving its headquarters from Beijing to Zhuhai, which is a coastal city in southern China's fast-growing Pearl River Delta region.

The headquarters will be in Zhuhai's city centre but it is unlikely to relocate any earlier than 2011 because construction of the new building headquarters has yet to start.

But AVIC General Aircraft has started to build an aircraft assembly plant at Zhuhai airport that is due to be completed in November 2010 and it plans to have at the airport a customer support centre.

grob 
 © Grob

It has yet to decide which type of fixed-wing aircraft will be assembled in Zhuhai, but there are several possibilities.

AVIC General Aircraft is developing a small amphibious aircraft, called the Seagull, which is powered by a single propeller engine and is pitched at recreational users.

It has also held talks with PLZ Mielec about manufacturing the Polish company's M18B Dromader utility aircraft

The Agriculture Bureau of China's Heilongjiang province ordered 15 M18Bs in 2007.

While these initiatives may come to fruition in the coming years, a longer-term ambition of AVIC General Aircraft is to build a large amphibious aircraft that executives say will be as big as a Boeing 737.

This aircraft, tentatively named the Dragon 600, will be powered by four turboprop engines and undertake firefighting and rescue missions.

AVIC General Aircraft is also looking at buying a general aviation aircraft manufacturer from the USA or Europe to fast-track its push into Western markets.

China has two aircraft with US Federal Aviation Administration certification, the 19-seat Harbin Y12 turboprop and the Hongdu N5 crop-duster, but neither have been sold successfully in the USA.

Owning a Western manufacturer would give AVIC General Aircraft a brand recognised in Western markets, an international product support network and personnel experienced in achieving Western certification.

Administrators of defunct German general aviation manufacturer Grob Aerospace disclosed in December 2008 that AVIC was interested in acquiring the company before it was sold to a German company.

US industry sources, meanwhile, say AVIC General Aircraft has looked at Piper Aircraft and Spectrum Aeronautical.

Spectrum is a new California-based company that is working to build business jets and get its first aircraft certificated, while Piper is a well-established business and general aviation aircraft maker.

Singapore-based investment firm Imprimis bought 100% of Piper in early May and the aircraft maker has said under its new ownership it is looking to grow in Asia.