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Air Cargo &Logistics In-depth Insight:General Aviation,Policy Updates Should Support China’s General Aviation Industry

The general aviation industry is characterised by an extended value chain, which offers significant economic benefits. There are fundamental differences between the U.S. and China’s general aviation industries, and China still has a long way to go. Although several industry policies are in place in China, they are skewed towards the operational side. These policies are still in the nascent stage, barely covering aircraft manufacturing and logistics support.

Compared with Commercial Aviation, China’s General Aviation Market offers Unique Advantages and New Growth Drivers.

The general aviation industry comprises various segments and has an extended value chain. This helps boost investment and job creation, leading to significant economic benefits. In the U.S., the general aviation industry’s output value stands at c. US$150.0bn and it creates c.1.3m jobs. The industry accounts for over 1.0% of U.S. GDP. On May 17, 2016, China’s State Council released a guidance opinion on promoting the development of the general aviation industry, with a target of over 5,000 operational general aviation aircrafts by 2020. This will translate into a general aviation aircrafts CAGR of 21.6% and flight hours’ CAGR of 22.3% over the same period. The policy document forecasts over 500 general aviation airports in China with over 5,000 general aviation aircrafts operating for 2m hours per year. Therefore, the size of the general aviation industry is forecast to exceed CNY1tn by the end of the 13th Five-Year Plan, ending 2020.

Market Size: Significant Gap Between the U.S. and China. l Currently, there are only c.1,800(or more) registered general aviation aircrafts in China, less than 1% of that in the US. Moreover, aircraft manufacturing in China lacks sophistication and core parts are mostly imported. Of the 623 business jets and helicopters in China, only 15% is made domestically. Furthermore, overregulation in the airspace, fuel supply and staff training areas has resulted in high costs for operators. Also, logistics support is largely insufficient. The U.S. has over 200 Flight Service Stations (FSS), 10,000 Maintenance, Repair and Overhaul (MRO) stations and over 3,000 Fix-based Operators (FBO), signalling a mature value chain for the general aviation industry. However, many of these services are non-existent in the China market.

Policy Should Focus on Aircraft Manufacturing and Logistics Support, Strengthen International Cooperation and Attract Private Capital.

As general aviation aircrafts manufacturing is a monopolistic industry with a few global giants, it could be beneficial for domestic industry players to cooperate with international counterparts. A cooperation with global companies could benefit the general aviation industry in China. Also, policymakers could consider attracting private capital, with favorable policies and avoid dominance by state-owned enterprises.