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The private jet company owned by Warren Buffett’s Berkshire Hathaway is moving into China, where it sees huge growth potential.
NetJets has secured a licence to fly from the Chinese civil aviation authority, allowing it to set up in a country where there is little private jet activity.
“With the wealth distribution in China right now, where you have over a million millionaires and quite some number of ultra-high net worth individuals growing each year in leaps and bounds, we see private flying becoming more dominant,” said Robert Molsbergen, chief operating officer of Executive Jet Management, the brand under which Netjets will operate in China.
Over time, Mr Molsbergen said he believed China could provide more business than NetJets’ main market in the US.
China’s vast distances and potential demand for corporate aviation could make it a lucrative market, but the main barrier to setting up in the country has been government regulation.
NetJets has been trying to win its operating certificate for two years, and to make its venture work it has partnered with two Chinese companies that together own a majority stake in the business – private equity firm Hony Capital and investment fund Fung Investments.
“If they’ve got a licence, that’s a start,” said Gerald Khoo, analyst at Liberum. “But there are all sorts of operational and regulatory restrictions. There is an awful lot of regulation over who can fly where – the Chinese military doesn’t like the idea of people flying wherever they like.”
China also lacks a developed infrastructure network for private aviation, although Mr Molsbergen said there were 200 airports private jets could fly to.
“You can argue that’s a chicken and egg situation,” said Mr Khoo, adding that operators would need “secondary and tertiary airfields which are away from the big, more congested airports, and the private jet terminals that go with that”.
NetJets has begun operations in China by basing two aircraft at Zhuhai Jinwan airport in the wealthy southern province of Guangdong, and will initially offer charter flying and services such as maintenance, crewing and storage of jets.
Because of the investment required it will not yet offer fractional ownership, the sale of a part share in an aircraft, a service that makes up a big part of its business elsewhere.
Ohio-based NetJets was set up 50 years ago and its biggest market is in the US – where business flying took a severe knock after the financial crisis but has since slowly recovered. Its other main market is Europe.
In Berkshire Hathaway’s annual report, NetJets’ 2013 revenues were recorded as increasing 7.5 per cent to $288m. Earnings were up 7 per cent to an undisclosed figure.