The Bombardier and Challenger jet resale availability is showing greater signs of softening than the Gulfstream models.

The early-model Challengers from the first CL 600 up through the Cl 604 have all got plenty of inventory available.
The CL 600 has probably got the best value in the ‘around $1MM or less category, primarily because at least it has stage 3 engines….albeit, rather inefficient ones.
The best deal amongst the longer-range aircraft in this Challenger family must be the 604. There are around fifty to choose from at resale with all but the 2005 or 2006 models priced below $10MM. The later model 604’s will no doubt price pretty close to the $10MM mark to make a deal happen.

The top Challenger model, the CL 605 has seen inventory climb recently with almost 20% of the 230 CL 605’s available. The late models are still pricing in the very low $20MM’s. Aviatrade was recently in discussions with a UAE owner who wants $25MM for a 2012 model CL 605….at a time when the new 605’s are selling for around that price.
The biggest issue with all the Challenger models (except the 850) is the cabin length. This does not provide for much privacy.
Having mentioned the CL 850, I’m sure that Bombardier is very thankful for the China market because without that market, this model would probably have become extinct. The China propensity for ‘face’ and liking for ‘big and shiny’ (range appears to be a much lesser consideration) has really goosed CL 850 sales. Unfortunately , prices appear to plummet when these CL 850’s are offered for resale. Aviatrade knows of a beautifully –outfitted, low time, 2006 model CL 850 that can be acquired for a lot less than $13MM.

The super-mid-size CL 300 has enjoyed good sales (400 in the fleet) and this is proving to also be a popular model in China (this may have something to do with discounts ?). Prices are anywhere from mid-teen $MM’s down to just over $10MM for models between 2003-2011.

Bombardier offers its Global 5000 (later models with the additional fuel tank plumbed back into the fuel system) and the Global Express XRS….now being joined by the latest Global 6000.

The Global 5000 has almost 15% of the fleet available, which puts it well into a buyer’s market. The range with full passengers is its main drawback, but there is a lot of cabin space.
The earlier Global Expresses are obviously being pressured by the Global Express XRS sales and therefore these Global Expresses also represent very good ultra-long-range value priced around $20MM-$23MM range. Buyers must, as always, be prepared to thoroughly examine this vintage of aircraft (no matter from which OEM).
The Global Express XRS’s seem to be feeling the strain with almost 15% of fleet availability. There should not be any need to pay very much over wholesale value in order to buy a very nice example of the XRS.

This article was written for our China audience, however, some of the guidance is relevant to any buyer and we hope the reader finds the comments informative and constructive….

HOW TO BUY A PRIVATE JET…. (in other words, how 99.99% of the world conducts private jet transactions)

The Familiar Approach to Jet Acquisitions

China aircraft buyers are generally only familiar with the OEM (Gulfstream, Bombardier, Falconjet) buying experience. This typically consists of contacting an OEM recommended by a friend, choosing an aircraft, selecting options for any given aircraft model, agreeing the price with the OEM and confirming a delivery date before signing the OEM contract.

The OEM ‘buying experience’ in China is therefore fairly straightforward (if somewhat more expensive than in other parts of the world). Neither Gulfstream nor Bombardier nor Falconjet are known for their ‘charity’.

Similarly, the OEM buying experience is not particularly time-sensitive. Buyers can conduct an aircraft acquisition at their leisure ….and the OEM’s are patient sellers. Therefore the OEM aircraft sale is very much a ‘pre-packaged’ approach.

The Alternative Approach

When dealing in the pre-owned aircraft marketplace (no matter what the vintage of the desired aircraft), there are significant advantages in terms of cost and access to aircraft (generally, these aircraft are cheaper and there is no delivery delay). Cosmetic changes to the aircraft interior/exterior can be accomplished prior to delivery (but only after the aircraft sale is completed). Reduced cost is by far the biggest advantage of pre-owned acquisitions. Buyers can benefit from significant discounts between (say) a 2011 model when compared to a 2013 model, especially if the sale of an aircraft is the result of a sellers’ distressed circumstances,(more on this subject in future articles).

However, because no two owners, nor their respective aircraft, are particularly alike, it follows that no two pre-owned aircraft sale transactions are identical. Variations in ownership and the particular aircraft under ownership can make for some interesting, but by no means insurmountable, situations during the pre-owned aircraft acquisition process. These situations will arise regardless of how ‘new’ the aircraft under consideration.

Primary reasons for the variables in universal aircraft acquisition transactions are;

•  Intrinsic technical and cosmetic aspects of each aircraft
• Buyer/Seller aircraft transaction expectations
• Prevailing Market Conditions
• Global location issues
• Cultural differences

Aviatrade Asia has been conducting globally-oriented aircraft acquisitions of all aircraft types/vintages since 1988 and we can offer guidance with regard to a proven process that can be followed for almost any aircraft acquisition.

In fact, prior to initiating any acquisition, Aviatrade Asia supplies the buyer (client) with a comprehensive flow chart outlining the various steps and anticipated time required to complete these steps. It is very important that the buyer’s expectations are managed on a realistic basis and that the process to accomplish all steps is completely understood by both seller and buyer.

This “how to buy” article precludes any discussion of finance and ownership structure and assumes that a particular aircraft make and model has been identified. The narrow scope of the article also precludes any detailed discussion of the logistics involved.

The elements of a successful acquisition can be roughly summarized as follows;

• Shortlist of suitable aircraft
• Comparative analysis of the aircraft
• Preliminary physical inspection
• Selection of acquisition aircraft.
• Submission of LOI (Letter of Intent to purchase)
• Negotiation/Acceptance of LOI.
• Negotiation and signing of Purchase Agreement (PA)
• Prepurchase inspection
• Export/import.
• Management company selection

        (….preparations and negotiations for the last two items will begin almost simultaneously with the start of the acquisition)

The Shortlist Preparation

Having identified a particular aircraft make and model, the buyer will require the services of numerous experts from the outset of the investigative process. This expertise is coordinated by the buyer’s advisor and for the sole benefit of the buyer, (much like the role of an orchestra conductor during a symphony performance).

Provided that sufficient aircraft are available for consideration, an advisor (consultant) will recommend a shortlist of perhaps three aircraft for consideration. These aircraft are compared side-by-side for all aspects of their technical points, ownership history (there is usually only one owner for late-model aircraft), maintenance history, cosmetics and interior options such as entertainment and communications systems. This summary is discussed with the buyer (client) and the aircraft are rated in order of preference.

Comparative Analysis of the Shortlist

Obviously, it would be ideal to make the selection directly from the shortlist and proceed to the acquisition. However, geographical location of the short-listed aircraft will influence this analysis and selection due to various factors, not least of which will be the buyer’s willingness to travel significant distances to view an aircraft. Of course, we would anticipate that the buyer would eventually travel to view the selected acquisition aircraft. There is an alternate procedure that can be negotiated between seller and buyer involving prepayment of a flight to the buyer’s location.

Preliminary Physical Inspection

Instead of the buyer traveling to see the short-listed aircraft, appropriate due diligence for each aircraft on the buyer’s shortlist can be accomplished by an experienced inspector together with the buyer’s advisor. This is an important step in the process, regardless of how many aircraft are under consideration. Although digital records and internet access can offer a preliminary indication of aircraft condition and acceptability, the initial physical inspection and onsite records review will provide a much clearer picture of the suitability of each aircraft on the shortlist. Much like buying an expensive home, there is no substitute for the ‘up-close and personal’ investigation.

This preliminary assessment is intended to be somewhat ‘forensic’ in nature and will usually reveal potential reasons for aircraft rejection… such as undisclosed damage or adverse systems trend-monitoring (these issues can be evident even in ‘almost new’ aircraft). It is better to discover these problems ‘early’, as opposed to further along in the acquisition process.

Submission of Letter of Intent

Per the initial sub-title to this article; 99.99% of jets are bought and sold outside of China. Therefore it is extremely important that China buyers retain an experienced international aviation attorney. This aviation attorney can explain all aspects of the acquisition process (from a legal perspective) to the buyer’s attorney. The aviation attorney will guide the buyer through the various aircraft-related legal documents such as LOI, escrow, title/lien search, Purchase Agreement, ownership structure, closing documents, etc. Our US aviation attorney has worked for such Aviatrade Asia clients in China as Phoenix Satellite Television.

The first of these documents is the LOI. This document is submitted to the seller after consultation with the advisor and a review of the preliminary physical inspection. This is an important document because it outlines the fundamental terms of the transaction from the buyer’s perspective. These terms will include such items as purchase price, deposit conditions, timeline for acquisition, etc., (more on this aspect a little further on).

Incidentally, Aviatrade Asia has interacted with a number of law firms in Hong Kong and China who claimed to have had experience with private jet transactions. Unfortunately, it appears that these law firms have only engaged with OEM-standard contracts and commercial aircraft leasing transactions….such aircraft contracting experience, whilst similar in nature, is not really appropriate for the complexity of private aircraft transactions outside of the OEM environment.

Purchase Agreement (PA)

When the buyer and advisor are satisfied with the signed LOI and the particulars of the aircraft under consideration, the buyer/seller engage (via their respective legal counsel) in a negotiation of a comprehensive Purchase Agreement. The initial draft of this document should be prepared by the buyer’s counsel….a buyer should never accept a seller’s offer to provide a draft LOI or Purchase Agreement.

This PA will address many issues that will constitute a ‘road map’ for the entire journey through the acquisition process. Furthermore, the details of the PA will address all of the aviation-specific legal protocols that are probably quite unfamiliar to China buyers…..once again, please remember our ‘99.99%’ observation.

Prepurchase Inspection

This comprehensive inspection of the selected aircraft is performed at an OEM factory-authorized facility. This inspection is paid for by the buyer (the prepurchase inspection final report is confidential to the buyer) and the report results are made available to the seller solely with respect to any rectification required. Any such rectification, as confirmed and required by the inspection facility, is the responsibility of the seller (this requirement is standard and is addressed in the PA).

There are a number of ‘tactical’ and ‘strategic’ components to this inspection…(much the same as in a game of majong). Aviatrade Asia can offer expert insight into these nuances that will ensure a distinct advantage for the buyer.

Export/Import

As previously mentioned, the export and import process will be initiated almost simultaneously with the signing of the PA. The main reason is that certain technical requirements must be matched to the proposed country of registration (note, this country will not necessarily be the same country designated as ‘home base’).

For most aircraft and especially ‘almost-new’ aircraft, this process is a formality that entails mostly documentation and verification of existing aircraft components and systems.

It should also be noted that the export and import are usually paid for by respective seller and buyer. This, of course, can be negotiated during the LOI and/or PA negotiations…(hence the importance of the preliminary evaluation information that is provided by the inspector and advisor prior to the actual PA signing).

The timing of the export/import process is especially important to buyers who intend to immediately import their aircraft onto CAAC (B) registration. Aviatrade Asia can provide a turnkey solution to buyers who will undoubtedly face import delays for the foreseeable future. Many China buyers are now opting for ‘offshore’ registration, at least in the near term. However, this offshore approach brings its own operating restrictions and must be carefully evaluated.

Management Company Selection

Once again, the initial evaluation of this component of the overall acquisition process will begin at about the same time as the acquisition itself.

The options in China for aircraft management are somewhat limited at present and based upon Aviatrade Asia’s thirty years of operating experience outside of China, ‘bigger is not always better’. Nevertheless, the limited availability of certified management companies in China still leaves room for competitive bidding. The good news is that numerous AOC’s are in the CAAC pipeline (this subject is beyond the scope of this article). If an ‘offshore registry’ is considered, then the management options are much broader.

Acquisition Timeframe

It is extremely important that China buyers appreciate that our ‘99.99%’ observation governs all aspects of acquisition. With this in mind, there are certain expectations on the part of any seller. These expectations include the anticipated ‘cadence’ of a transaction.

For example, Aviatrade Asia recently lost two good opportunities to acquire late-model Falcon 7X’s for a China buyer, simply because our client observed the Chinese New Year holiday to its fullest and was unpleasantly surprised, upon re-contacting us, to learn that both 7X’s had been put under LOI between the 8^th and 18^th of February. Apparently, both sellers did not want to risk losing a deal whilst waiting for a promised visit from a China buyer.

Similarly, sellers will have expectations regarding timeframe of a deal after the LOI is signed. All of these timing goals/progress deadlines are spelled out in the LOI and PA. However, we have had experience with China buyers who, despite having signed (and therefore assumedly understood) a PA, have subsequently ignored required timing conditions. This situation does not by itself jeopardize an acquisition, nevertheless, it does not contribute to a harmonious relationship and can cause unnecessary complications in the acquisition process.

With the above in mind, we advise buyers that the usual/expected timeframe to complete an acquisition, from the point at which an LOI is signed, is around eight weeks. This timeline can easily be distorted/extended as a result of international timezones and global religious/ cultural observances. None of these interruptions need derail an acquisition provided that the parties understand that the key to all of these timing issues is ‘communication and coordination’ between the parties.

Summary

As this article stated in the title; 99.99% of private jet transactions currently occur outside of China. It therefore follows that 99.99% of the expertise required to successfully complete an aircraft acquisition also resides outside of China. There is no substitute for experience and a seasoned international advisor will provide the necessary guidance and advice that will ensure a seamless and successful acquisition process…..100% of the time !

“Obama threatens to eliminate tax breaks on business jets” (if re-elected !)

President Obama’s statement during the first presidential debate has stirred the usual hornets nest amongst our bizav industry observers.

Obama was, of course, referring to the accelerated depreciation available to buyers of new jets. Whilst the defenders of the bizjet faith do make the well-articulated points that manufacturing jobs are safeguarded and local economies are boosted when buyers take advantage of this short-term tax break, it remains a truly uphill task to persuade the non-bizjet traveling masses that these tax breaks are anything more than a sweet discount for the buyer of a fifty three million dollar (give or take a few options like Direct TV) Gulfsteam G550.

Many of our industry writers and policy advocates hew to the party line that business jet travel saves time and creates stronger growth at participating companies. This is undoubtedly true of those companies that ricochet around North America in their Cessna Citations, and Hawker 850’s..and also true of the regionally flown King Air and other turbo-props. However, the higher up the size and price-tag scale you go, the less compelling the argument. There appears to be somewhat less justification for flying a Bombardier Global 6000 between New York and Palm Beach….especially with only two passengers in the back and nothing more than a golf-outing with a fellow CEO or three to show for the round-trip fuel burn.

Unfortunately for our ‘advocates’, there is a significant sector of  bizjet owners/users who’s self-indulgence and oneupmanship detract from the corporate message.

Whenever corporate missteps bring into question the leadership of those at the helm of the listed companies, there follow (almost without fail) questions about executive (personal) use of the private jets……and invariably we are informed that appropriate reimbursement has been provided to the company. This defensive position is nearly always contradicted by the internal company records that are disgorged after numerous independent requests for ‘supporting documentation’. This does not exactly conjure confidence on the part of company shareholders or other interested parties.

Of course there will be howls of disagreement with the comments written above, but we believe that the bizjet world cannot properly justify these forty/fifty (and shortly) sixty million dollar flying emblems of corporate grandeur.

Perhaps if the use of the company G550 or Falcon 7X were not quite so restricted in terms of “who can fly and who can’t”, then the trickle down effect would greatly assist in the public appreciation of these impressive jets. We are well-aware that some US companies use ‘corporate shuttles’ between various locations….but I highly doubt that there’s a G550 or Global Express XRS plying the White Plains NY to Charlotte NC route with eighteen passengers on board, twice a day.

Aviatrade make a living advising buyers and completing acquisitions on behalf of these very users……however, we believe that the advocacy ‘theme tune’ in the US must change. We need more companies (CEO’s/CFO’s) to step up and be proactive, supportive and transparent about their business jet ownership  and not hide them off-balance sheet via some of the more familiar schemes….either that or vote Mitt Romney into the White House and hope for a turnaround that will take the unwelcome spotlight off our economy-sensitive industry. After all, when times are good and all pockets are full, no-one cares about a little golf game in Palm Beach. 

…this information saved a recent GIV buyer an awful lot of time and trouble:

…..1. A GIV buyer should ensure that thorough records research is performed prior to making an offer (Letter of Intent or LOI). An experienced Gulfstream-certified inspector should perform this work.

2. This records research forms the basis for the LOI (and subsequent Purchase Agreement) and includes technical language that assures the buyer of a thorough inspection by a recognized Gulfstream facility.

3. It is not sufficient or advisable to rely solely on the pre-purchase inspection that is performed at a Gulfstream-authorized facility as part of the acquisition process.

4. This ‘pre-purchase inspection’, now called an Aircraft Records and Condition Survey (ARCS) by Gulfstream Aerospace is not thorough enough for these older Gulfstreams. A customized inspection should be approved by the buyer and agreed to by the seller.

5. The reason that Gulfstream has reduced the scope of the ARCS is because the manufacturer wanted to reduce its involvement and potential liability.

6. This, in turn, places the burden of discovery on the buyer who must be comprehensively briefed prior to committing to an LOI.

Buyers in the market for new private jet aircraft and hoping for immediate delivery are out of luck. Most manufacturers (OEM’s) and especially those who produce the ‘high-end’ of the market aircraft such as Gulfstream, Bombardier and Falcon will be informed by the salesmen that the wait time will be in excess of twelve months and sometimes more than twenty-four months. These backlogs were even in evidence during the 2008 financial meltdown, albeit with a shorter wait time.

Those new-jet buyers that don’t want to wait their turn at the aircraft manufacturers’ delivery door can instead explore the new-aircraft “position” market. The first piece of valuable information that we can offer is that the manufacturer will never offer a position opening (if an OEM becomes aware of a canceled order) to a buyer who walks in ‘off-the-street’. Gulfstream, for example, will simply approach another position-owner elsewhere in the delivery schedule and offer a “move-up”. Hence, there is often a shuffling of positions within the OEM that never becomes public knowledge.

POSITION  BUYING OPPORTUNITY

On the other hand, there are position owners who are not willing, or at least are reluctant, to negotiate with the OEM when a position becomes surplus to requirements. The reasons can be related to deposit/progress payment issues or market conditions that may indicate a possible profit (premium) from a position sale.

In either instance, the position-holder will search out possible buyers using either a readily available peer-to-peer network or they will turn to companies like Aviatrade to quietly source a buyer. These off-market opportunities are generally kept confidential and are transacted expeditiously so as to avoid exposure and attendant unwanted attention. The OEM’s frown upon this position-sale practice because of course it dilutes the OEM pool of captive and potential buyers and there will often be veiled references to ‘consequences’ for the position holder, if a sale is ‘outed’ before completion.

There are some owners who simply prefer to cast a wider net and approve some sort of listing or advertising for their position sale, however, this approach almost certainly risks involving a ‘daisy-chain’ of brokers who will all want a ‘piece of the commission pie’……with associated and unnecessary costs to a buyer and/or seller.

POSITION PRICING

As may be evident, any premium that may result from a position sale by giving a buyer a jump on OEM deliveries will depend upon a number of factors.

• The immediate desirability of a particular model (think Gulfstream G550 or Global XRS/6000)
• The current OEM-stated “next available delivery” slot.
• The length of the wait time before the position delivery.
• The particular contracted options package.

POSITION SALE TIMING

The optimum timing for a position sale is in the months just prior to the outfitting deadline as stated in the OEM Purchase Contract. For example; Aviatrade knows of a G550 position that will deliver in December 2012. The position seller had a window until the end of March to select the floorplan/custom interior appointments and select the options package.

This is clearly the most advantageous time to both sell and buy a position because seller can offer a “fresh canvas” on which to “paint” and a buyer can personalize the aircraft. Obviously, this sort of timing generally generates the biggest premium for the seller.

Of course, timing is everything and a position–seller must balance the timing of the sale …if left too late, the OEM will require a commitment to the customization schedule and thereafter changes may be impossible  (for example, galley configuration forward or aft) or there will be change penalties (cost).

However, it doesn’t necessarily follow that a position sale price will be impacted if interior cosmetic and outfitting selections have been committed to. The price negotiation will be dictated by the respective priorities of both buyer and seller.  For example, a seller may be financially ‘squeezed’ in terms of having to sell, thereby more amenable to discounting, or a buyer may be anxious to secure a new-aircraft position at any cost, thereby more amenable to paying a premium. It is therefore advantageous to use the services of a company such as Aviatrade because we can provide access to non-public information that may give a position-buyer an advantage when negotiating with a seller…….knowledge is power !

THE LEGAL ASPECTS

The business and technical evaluations must be considered in concert with the legal requirements pertaining to the existing sale contract and transfer thereof.  Most OEM contracts provide for transfer or sale prior to delivery…..or, at least, they do not expressly forbid the practice. In fact Aviatrade has knowledge of these positions being transferred even when progress payments have been delinquent. Of course, under this scenario, there is rarely a premium being paid because the position seller is generally only too happy to be relieved of the financial burden. In some instances, a buyer may be fortunate enough to extract a greater discount that will result in the position seller contributing additional payments at the closing…..this occurs when a position is ‘under water’ and a seller must sell before an upcoming sizable progress payment.

A word about payment schedules because as can be seen from the above example, these payments can figure significantly in the position-sale rationale; After a purchase contract is signed, an initial deposit is placed with the OEM, followed by progress payments at various points in the pre-delivery period and a final delivery payment upon acceptance of the aircraft. At a certain point (fairly early on) in the pre-delivery, the deposit will become non-refundable. Under certain extenuating circumstances, the deposit may be returned to the position-holder (not surprisingly perhaps, most often when the OEM knows that it can immediately fill the vacant slot). At other times, the OEM may retain all or part of the deposit, depending upon such factors as the particular relationship with the position holder and any such deposit refund negotiation is usually handled by the aviation attorney.

The services of an aviation attorney are not only absolutely necessary when performing these sometimes risky transactions, it is also advantageous when notifying the OEM that a position sale is about to (or is) take place. The reason is that most of the top end aviation attorneys already have good relationships with the various OEM legal/contracts departments and so oftentimes the attorney can resolve what might be otherwise contentious issues between the position seller, the OEM and the position buyer. A good aviation attorney will also protect the position-buyer’s interests in the interim period leading up to the actual delivery. Aviatrade can recommend one of the most experienced international aviation attorneys for this sort of oversight.

THE G650 POSITIONS

In years past, major corporations and wealthy individuals would quite often place orders for multiple aircraft, then sell (say) two out of three positions at a profit. The profit would then be used against the cost of outfitting the remaining aircraft order……and ‘voila’, a free interior !

Gulfstream Aerospace, in an effort to strictly control the flow of its G650 positions and to prevent speculation has inserted language into the G650 purchase contract that specifically bars any form of position sale.

This has, of  course, thrown down the gauntlet at the feet of the legal community who have, not surprisingly, responded by developing and drafting legal solutions that will enable a quasi-position sale to be effected….or at least provide a mechanism whereby a position buyer can be assured of a G650 prior to the current late 2017 OEM  G650 delivery availability. Needless to say, Aviatrade is active in this G650 market with an appropriate aviation attorney-sponsored template for such a transaction and we are aware of G650 positions that are available for sale.

SPEED IS OF THE ESSENCE

In closing, we would be remiss if we did not point out that these position sales in the ultra-long-range category aircraft do not sit around for long before being snagged by buyers. Unfortunately, our experience in China has revealed a lack of appreciation of this key factor. Consequently, a number of Aviatrade’s clients have unfortunately lost out on what have subsequently proved to be extremely good deals in the position market, therefore perhaps a worthwhile reminder of the old adage……the early bird catches the worm !

Anyone know the Mandarin for “Cool Aid” ?

Shanghai ABACE show-goers and exhibitors can now breath a sigh of relief….the weather did cooperate and the show was a success.

Predictions for cold temperatures and rain (think English summer) did not materialize and in fact, the weather was perfect for strolling the static display and marveling at Jackie Chan’s paint job on his (is it really his ?) Legacy 650. As if Embraer Legacy re-sale values aren’t bad enough, his paint job will be top of the ‘hit-list’ for potential buyers come disposal time (but then again, this will probably be Embraer’s problem, not Jackie’s.).

We counted multiple Legacy 650 photo-ops in multiple aviation magazines during the show and ‘leaping Jackie Chans’ in almost every image, Jackie must have been a very tired celebrity after the show…..it was almost as if Jackie had invented aviation, however, we all know that either a Frenchman or an American were responsible for the mass of shiny and painted metal on the Hongqiao ramp area at Hawker Pacific.

The show was extremely well organized, even judged against US standards and we noticed very few hiccups. ‘Hats-off’ to NBAA for this and for clearly having learned some lessons from last year’s SIBAS-sponsored event.

The biggest ‘gotcha’ was the lines at security …. A few thousand visitors being shepherded through two screening portals led to some tiresome and annoying  (not to mention lengthy) delays at peak times of entry. Even at non-peak times the wait was ‘testing’. At least the serious-looking security-screeners were a lot more courteous and less intrusive than most of their TSA counterparts in the US. Perhaps there’s a cottage industry opportunity there for the taking….security-screening charm school ?

One other noteworthy observation….we tried to feed our starving masses (booth personnel) on the first day….not only  did the food line rival the security line at the entrance, but the price of a sandwich (actually a slice of a sandwich) was an astonishing 240RMB. The Ritzy sandwich stall ran out half way through what should have been ‘lunch break’, but not before hiking the price a further 60RMB to make it an almost even $50 (yes, you read that correctly…fifty US dollars !) for a lousy sandwich slice. We were saved by a savvy Ukrainian jet broker friend of mine who directed us to a noodle joint off the premises, about a ten minute walk from the rip-off Ritzy sandwich stall. Four of us (VIP show guest included) dined on four courses for 50RMB)…..the VIP noodle joint had obviously never had it so good and the food was delicious !

We discovered that press conferences in China are probably more popular than anywhere else on earth and are dutifully attended by anyone willing to drink the various flavors of cool aid on offer from the OEM’s and other spinmeisters.

Orders and commitments and cooperations and joint-ventures and MOU’s were being announced like bans being read for a wedding. Whether or not any of this will eventually bode well for extra-China participants remains to be seen.

Hawker is still trying to flog the Horizon (oops, sorry, the 4000) and is claiming that this jet is very popular amongst Chinese buyers because of its “strong brand name”……hmmmm….that must be “strong” as in “indestructible” because I do seem to remember an HS 800 landing minus an engine that was taken out by a SAM in Africa a few years ago. Whether or not Hawker will be in business much longer to deliver on that “strong brand” remains to be seen.

The other OEM’s seemed to be ‘entertaining’ at pre-2008 US financial meltdown levels, but then again, this is the same environment that spawned the plethora of orders at the Vegas NBAA show last October.

Support vendors are starting to gain a toehold in Asia in general and China in particular, but again, even though foot-binding is now outlawed in most of China, don’t expect to see unfettered access to this fertile territory. These are the aviation niches that are easiest to assimilate and replicate in China. One support services vendor has just announced an interior refurbishment facility in Hong Kong and mainland China is hot on its heels.

Training is assuming a “front and center” focus for the region, western expertise will be required to boost the core understanding and guidance of the training curriculums. Given that most of the indigenous talent will be starting from ab initio level, there’s a fairly long lead into the upper levels of experience and professionalism required to provide adequate safety margins in the cockpit and maintenance disciplines.

Manpower availability goes hand-in-hand with the above training issue. Given the non-aviation journalist descriptions of vast numbers of Chinese college students migrating overseas for their educations, it is not going to be easy to attract the quality of student required to enter the highly-skilled arenas of airline and private jet flying and maintenance.

There has been no formal indication as yet that China is willing to relax licensing rules so as to encourage and allow foreign pilots and mechanics to participate at a meaningful level in their nascent system. This does not even take into consideration the considerable language hurdle (written and spoken) that is probably the biggest natural barrier that can be invoked by China so as to protect its employment in the airline and private jet industries.

These manpower and training issues will constrain growth to a far greater extent than the much ballyhooed “airspace and airport access liberalization” program in China.

Onwards and Upwards…..!

Apparently Allen Stanford will not be needing any private jet transportation in the foreseeable future (he was recently convicted in $7BB ponzi scheme). Coincidentally, one of the two GIV’s that he acquired in late 2004 also suffered a ‘crash and burn‘ last month in the D.R. Congo.

Back in 2005, Aviatrade was supervising an interior refit for a client’s recently acquired Gulfstream IV in Dallas at Akridge Aircraft Interiors. When I asked about the two additional GIV’s in the Akridge hangar, Leo Akridge (owner) commented that they belonged to a “bank guy named Allen Stanford and money is no object on these interiors”…..I thought about this strange juxtaposition for a second and said to Leo “this guy is stealing money…there’s no way he’s legit”. To this day Leo Akfridge recalls that conversation …..and lo and behold, here we are seven years later.

My suspicion was confirmed on a trip to Antigua in 2007….Stanford Financial had a bank headquarters building on the Antigua airport perimeter road which put the Holmby Hills Spelling mansion to shame for its pure unadulterated ostentation……”bank” ?…..more like “piggy bank” !

As for the demise of the Gulfstream IV….apparently no-one told this crew that you can’t land a GIV when there’s only 33% of a 2000m strip remaining ahead the jet….as we said in the fighter jet world “there’s nothing more useless than fuel used, air above you and runway behind you“.