Private jet makers bet on US, not Asia for big orders

While Asia may be the hot spot for economic growth, private jet manufactures are looking to the U.S. to drive big orders as the world's largest economy turns a corner.
"The main driver fueling investment in a private jet is how comfortable business executives are in terms of the growth in their own business, and the stability of the economy," Jose Eduardo Costas, vice president, marketing and sales, executive jets at Brazilian aerospace conglomerate Embraer told CNBC on the sidelines of the Singapore Airshow.
"The U.S. is the main market to be watching - and that's where the rebound is coming from," Costas said.
Home to the world's biggest population of high net worth individuals, the U.S. is the largest market for private aviation, with around two-thirds of the world's 20,000 private business jets based in the country, according to Embraer.
The U.S. will continue to be the major source of demand over the coming years, said Costas. He forecasts the country will account for 50 percent of global demand in the next ten years, compared with around 20 percent in Asia. New business jet deliveries are expected to total $250 billion or 9,250 aircraft over this time frame.
Nilesh Pattanayak, vice president, sales, Asia-Pacific at Canadian aerospace and transportation company Bombardier shared an equally upbeat outlook for U.S. demand. 
"This is going to be a phenomenal year in the U.S. Demand is coming back because of the economic recovery and upgrader demand. People who wanted to upgrade have been waiting for a long time," said Pattanayak.
"Also remember, the market is a lot more mature than everywhere else in the world," he added.
Business tool or wealth symbol?
There is a key difference in the perception of private jets in the West and the East that partially explains the wide gap in the size of the U.S. and Asian markets, said experts. 
In mature markets such as the U.S., a private jet is widely viewed as a business tool that brings flexibility to business executives. While in Asia, they are still largely seen as a symbol of wealth. 
Furthermore, the infrastructure for private jets is far less developed in Asia as compared with the U.S.
"Infrastructure is a challenge for the sector- there's a shortage of skilled manpower - experienced pilots and mechanics - and ground infrastructure - such as airports, fixed-base operators," said Pattanayak.
Nevertheless, jet markers are continuing to focus their efforts in the Asia-Pacific region given the vast growth potential. 
Ultra-high net worth (UHNW) Asian owners account for only 6 percent of private jet owners globally, according to Wealth-X. This is despite the region accounting for 22 percent of the world's UHNW individuals.
Where's demand in Asia?
In addition to economic powerhouses China and India, business jet makers are highly optimistic on the demand outlook out of Southeast Asia, in particular Indonesia and Malaysia.
"We get caught up with the China/India story but the real story is in Indonesia and Malaysia - there's a tremendous amount of demand in these markets," said Pattanayak. 
"I spend more of my time in Malaysia and Indonesia, than China and India - that's a testament to where the market growth is," he added.
However, the potential of the China market cannot be understated, with the mainland set to become the world's third largest private aviation market after North America and Europe two decades from now, according to Bombardier.
"With China now the second largest economy in the world and still growing rapidly, the Chinese market will be crucial to the overall growth of Asian demand for private jets over the next 20 years," said Rajiv Biswas, chief economist, Asia-Pacific at IHS.
"A key obstacle to the development of the Chinese private jet market has been regulatory restrictions on private jets, with much of Chinese airspace controlled by the military. However some gradual reforms are expected to these airspace restrictions, which will encourage the greater use of private jets in China over the decade ahead," he said.

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