Story ID: 081EJM’sPlanforChinaOpsAINDec14MarkedUp
EJM Anticipates China Aircraft Management
By: Curt Epstein
Caption: With the awarding of an AOC to NetJets China Business Aviation, the company turns its attention to establishing a managed aircraft fleet.
Word Count: 711
Receipt of its air operator certificate (AOC) from the Civil Aviation Administration of China (CAAC) paved the way for NetJets to begin offering aircraft management services in addition to charter, through its Executive Jet Management (EJM) unit. Operating in that country as NetJets China Business Aviation Ltd., the enterprise is a joint venture among Columbus, Ohio-based NetJets and private-equity firm Hony Capital and Fung Investments. NetJets owns 24 percent, while the Chinese firms split the remainder. While EJM exists in the U.S. and Europe as a separate sister company to NetJets, in China its management services will be a product offered by NetJets Business Aviation under the EJM China brand.

While the company currently has a pair of company-owned, Chinese-registered Hawker 800XPs based in Zhuhai, one of which flew its first in-country charter customer on October 24, and manages an N-registered, Hong Kong-based Global 6000, it is ready to take on its first mainland managed client, according to Robert Molsbergen, EJM’s president and NetJets’s COO of global aircraft management.

“When we got our certificate from the CAAC, they mentioned that we are the gold standard right now in China,” recalled Molsbergen, who joined the Berkshire Hathaway subsidiary at the beginning of the year. “This is exactly what we want to do: lift the industry up for the betterment and growth of the industry in that country. We would all be benefiting from that.”

According to Molsbergen, the CAAC limits the number of aircraft that management companies can add to their AOC in a year. “I think that in China it’s a matter of making sure that the authorities understand that your operations can handle more and then they will be open to talk about it,” he said, adding that he expects the company to reach its initial limit of 12 aircraft in the coming year. “We’ll certainly abide by those rules and regulations, but at the same time we’ll have open dialog with the authorities that we feel we are able to take on more aircraft and that the market is there.”
Options Beyond Large-cabin, Long-range
As to what aircraft the company is looking to add on its certificate, Molsbergen told AIN there are several variables, among them who the owner is, the type and condition of the aircraft and how it would perform on certain well traveled charter routes. While large-cabin, long-range aircraft currently dominate the nascent Chinese market, they might not always be the best solution for domestic or regional routes. “Large aircraft are, I think, predominantly driven in the early stages by owners who basically wanted to have large-cabin aircraft,” he said. “If you look at the economics, there are certain routes, particularly on the East Coast––Beijing, Shanghai, Shenzhen, Macau, Zhuhai and Hong Kongthat do not necessarily need large-cabin aircraft, so at some point I think there is going to be a rationalization of aircraft size.”

At its Zhuhai operational headquarters, NetJets China Business Aviation has more than 50 employees, the majority of them Chinese nationals, while the company has eight more staffers at its Hong Kong sales office. As it expands Chinese operations, NetJets looks to integrate them with its other businesses. “If you are looking at EJM with more than 200 aircraft under management, that is the biggest in the industry, and if you are looking at our charter volume, that is the biggest in the industry, so NetJets’ intent is to leverage that globally,” noted Molsbergen, “to make sure that we have the most efficient way of flying our customers around the globe, which you see happening more and more.”

As far as current challenges to operators in the region are concerned, the company is banking on the fact that the Chinese government will make good on its promises to grant a higher priority to general aviation development. “With that comes a certain amount of infrastructure investment,” said Molsbergen, adding that in general the concept of private aviation in China is still in its infancy. “The other part is you want to see some loosening of the airspace restrictions at certain airports, and if this happens it will bode well for general aviation overall and our operation in China specifically.”