Operators and manufacturers are eagerly awaiting the opening-up of China's general aviation market, which is expected to see huge growth in years to come
Chinese general aviation companies and their potential foreign partners are preparing for a boom in sales from the keenly anticipated opening-up of China's heavily regulated GA market.
The Civil Aviation Administration of China (CAAC) took an important first step last year by introducing less-stringent regulations governing GA. The CAAC promises further reforms and says it is working with GA businesses at home and abroad to foster growth.
But change cannot come fast enough for local operators and manufacturers in China and abroad. There are only 557 GA aircraft in China spread across 46 operators, according to CAAC tallies from 2003. But in reality, at least 20% of these aircraft are not operating and utilisation levels remain low, with large batches of indigenous aircraft, such as the Hongdu Y-5, spending most of their time sitting on the tarmac at government-controlled flying clubs across the country.
"Without a reasonable general aviation environment, GA enterprises will find the going extremely tough, if not impossible," says Francis Chao, managing director of US-Chinese consulting firm Uniworld.
Chao says the number of GA aircraft has gone down over the past 20 years, making general aviation China's only declining industry. A study completed this year by the China Civil Aircraft Development Corporation (CCAC) forecasts a market of 7,000 GA aircraft in 15 years' time and ultimately a market of up to 10,000 aircraft.
CCAC vice-director of marketing Su Lijun says the industry will grow, but there are policy regulations that first need to be addressed. "We understand general aviation in China is really in the infant stage," he adds.
While the number of aircraft has been on a downward spiral in recent years, the number of GA flight hours is on the upswing because aircraft utilisation rates have been improving (see chart). Agriculture operations account for most GA operations in China, with local flying clubs performing most of these missions using indigenous aircraft. Pilot training is also slowly starting to take off. There are now about 5,000 pilots in China, with a further 400 to 500 a year being trained. If barriers are lifted, the country's tiny GA industry - fuelled by demand from fast-growing airlines for new pilots and from increasingly wealthy corporations for VIP charters - should start catching up with the rest of the world.
"We do have some progress," says CAAC general aviation division director Meng Ping. Regulations introduced in May 2003 represented "major change", says Meng, giving flight schools and other operators more flexibility. For local flying, flight plans can now be submitted the previous afternoon and are generally approved within a few hours.
Military approval
But cross-country flights are more difficult because they also require military approval and applications have to be submitted at least two days in advance. Arrangements for international flights originating outside China are even more cumbersome. Approval for such flights typically takes 14 days, except for Hong Kong, where operators can often secure approval in two to three days.
Meng says the CAAC is setting up an agenda for additional changes and is studying how it can help GA expand in China. The government wants to help local GA companies upgrade their operations and develop the market to meet future needs. It also wants to facilitate the involvement of potential foreign investors.
"It will be more complete and more simple for local and international operators," Meng told this year's Uniworld-organised China General Aviation Forum. "We'd like to work together to make the regulation and law more suitable for general aviation business."
The Chinese government formed an expert committee in 2000 to discuss the opening of the GA market, involving several high-ranking officials including Meng. Committee member Cao Jing Nan says it is working with the government and operators to make sure proper regulations are introduced and enforced. The committee has also asked air traffic control authorities to develop a strategic policy for GA.
"General aviation in China can act like commercial aviation in China to contribute its value to the fast-growing economy," says Cao.
But regulatory changes alone will not be enough to unlock the huge potential of the Chinese market. Other barriers to GA growth - including high user fees, limited airport access, inadequate supply of fuel and lack of aviation charts - also must be overcome.
To address the charts problem, the CAAC last year enlisted the help of the US Federal Aviation Administration to begin creating the visual flight rules (VFR) charts that are required for GA to spread across China. The joint charting programme began in December 2003 and is expected to result in the drafting of 30 to 40 sectional charts by the end of 2008. The first chart, covering north-east China, is now being prepared.
"North-east China needs more economic development and GA should help the economy develop there," says the FAA's chief representative in Beijing, Joe Tymczyszyn. He points out the CAAC is paying the FAA "to make this VFR charting work" and this demonstrates the Chinese government's commitment to developing general aviation.
Tymczyszyn says the FAA is also meeting this year to discuss flight standards and is helping the CAAC to develop regulatory oversight of general aviation. The idea is for the CAAC to learn from the FAA's system of field offices, inspectors, aircraft certification and pilot licensing. In February FAA administrator Marion Blakey visited Beijing and identified eight areas of future co-operation - including flight standards, air traffic control, aircraft certification and airports - that will help the CAAC create a system similar to the FAA and the International Civil Aviation Organisation.
In April a group of CAAC officials visited Washington DC to examine some of the GA services provided by the FAA. As well as visiting several FAA offices, they toured a number of GA airports and met leaders of the Aircraft Owners and Pilots Association, General Aviation Manufacturers Association and National Business Aviation Association.
"For general aviation to get started, they need more than just charts," Tymczyszyn told the forum. "But the people at CAAC didn't know what else was needed. I am very enthusiastic about general aviation growing in China."
Development of GA airports will require a major effort because there are a mere 40 GA-only facilities in China. Operators at these airports have unrestricted access to only a small chunk of airspace, typically about 10km (5nm) in diameter, and need special permission to fly outside this zone. Access to the airspace needed to fly to another GA airport is difficult, and sometimes impossible, to secure. For example, in Beijing and Shanghai there are small GA airports with sightseeing and flying club operations, but typically they are surrounded by prohibited chunks of airspace, which makes it impossible to leave the area.
Unrestricted flying
Operators say China's air force is looking at opening up the airspace to permit unrestricted GA flying in most airspace up to 6,000ft (1,830m). The military now controls all China's airspace and historically has been reluctant to cede control. The lack of low-altitude radar outside major population areas means it cannot always keep track of GA aircraft. Automatic dependent surveillance - broadcast (ADS-B) is being marketed as a potential low-cost solution to provide radar-like coverage in rural areas. The military must also decide on GPS navigation availability for civilian operators and generally needs to approve all proposed reforms to the current system to enable the CAAC to make GA procedures simpler.
"The Chinese military needs to make some decisions," says Tymczyszyn.
Wang Xia of the China GA Research Centre says: "Airspace restrictions really slow general aviation growth down. We have a chicken-and-egg issue with airspace. There is no airspace, so general aviation is not ready to open."
The China GA Research Centre - a subsidiary of the China Civil Aviation Academy - also forecasts a market of 10,000 general aviation aircraft by 2020, but Wang warns: "The policy and regulations are not yet ready for GA to move forward."
Operators also complain that the low availability of 100-octane low-lead (100LL) avgas is hampering potential growth, especially in rural areas, where the complete lack of fuel supply means GA aircraft cannot access large areas of the country. Manufacturers say this is restricting sales of piston-powered aircraft because prospective buyers would be able to operate such aircraft only in major cities.
Fuel production
Chinese oil companies say they are prepared to support the development of GA and hope eventually to produce fuel for piston aircraft, although there is not enough demand for them to justify such production. There is only one refinery in China producing jet fuel and 100 low-lead has to be imported.
"This is a chicken-and-egg question," says China Aviation Oil Supply deputy director Zhang Lianxi. "We don't have general aviation in China, so we don't have supply. General aviation in China is not there yet, but it's not something we can't overcome."
Government officials say China is concerned that fuel issues could restrict GA growth and is working on possible solutions to supply 100LL avgas at a reasonable cost.
High user fees are also hampering growth, particularly in private flying. There is now one pricing system for all airport users because GA aircraft are grouped with commercial aircraft. But officials say airport fees for GA aircraft should soon be reduced, particularly at smaller facilities, because management of most airports is being transferred to local government. As this happens, local airports will no longer have to retain the old national pricing strategy and are expected to offer discounts to GA operators to attract business.
The price of avgas, where available, is also high but is expected to come down as China reviews its aviation fuel pricing system. The price of aviation fuel has not been adjusted in China for 10 years.
The high cost of flying in China is also driven by a 23% tax on imported aircraft. Western GA manufacturers are lobbying for this tax to be reduced, they hope to 7%.
Indigenous manufacturers have a huge advantage under the current tax system because most of the 23% tax applies only if the aircraft is imported. But Western manufacturers aim to circumvent the tax by partnering with Chinese manufacturers for the local assembly of their aircraft. China Aviation Industries II (AVIC II), whose factories have traditionally been China's largest producer of GA aircraft, has expressed interest in such partnerships. Several AVIC II companies have linked up with Western companies in recent years for the local assembly of helicopters and want to expand their fixed-wing business as the general aviation market opens up.
China Aviation Industries I (AVIC I) is also interested in expanding into the GA market for the first time. AVIC I's Shenyang factory aims to produce several types of GA aircraft with between two and 10 seats.
The company says it is in talks with foreign manufacturers to set up joint-venture production in China, but is also considering indigenous development, possibly with foreign investment.
"Most companies only want to sell aircraft in China, but if you don't manufacture in China, it's difficult to sell in China," says Shenyang assistant director general for commercial aircraft management, Lin Guoxian.
AVIC I's Zhonghangfei Technology Development Centre is also in talks with Western manufacturers to establish small aircraft assembly lines in Pianjin, a city in north-east China that aims to develop a GA manufacturing centre. Independent aerospace firms in Nanjing and Shijiazhuang are already test-flying new single-engined aircraft.
"In the future, the market is very big so I don't mind any other company developing general aviation aircraft," says Lin.
Major expansion
AVIC II subsidiary CCAC concludes in its study that growth will be slow over the next five years and will be mainly limited to traditional operators. But CCAC's Su says the industry will "really take off" between 2010 and 2015 and will reach 7,000 aircraft in 2015.
She says major expansion will be driven by growth in public security, industrial aviation, sports aviation, tours/sightseeing, business aviation and recreational flying. Most of these sectors are tiny in China - for example, only about a dozen business jets are operating. In the USA alone there are more than 14,000 business jets and over 625,000 licensed pilots.
"The overall utilisation of our airspace and infrastructure is still very low," says Air China business jet general manager Zhang Hongying.
Air China is one of four airlines that operate business jets in China and so far all have been unprofitable. NetJets also looked at launching a fractional business jet ownership programme in China in 2000, but its Chinese agent, Avion Pacific, says the move has been on hold since 2001 because the market is not yet ready.
In an attempt to push along the business jet market, which in turn could generate growth in other GA sectors, the small Chinese business-jet community has created the China Business Aviation Association (CBAA), which believes that by promoting business aviation in China, it can tackle some of the many impediments to growth, including problems encountered by foreign operators in securing visas for their flight crews.
"The government is opening up," says former Hong Kong Business Aviation Centre chief executive John Li. "More and more flight schools are opening up. Civilians are learning how to fly. I think the country needs time to grow."
Xia adds: "In China, we say aviation should take off with two wings - commercial aviation and general aviation. But we only see commercial aviation. We don't see the other wing do anything."
BRENDAN SOBIE / BEIJING
Source: Flight International