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February 24, 2012(Reuters)

Hong Kong Private Jet Sector Gets China Boost

Private jet operators in Hong Kong are adding aircraft at a rapid pace as wealthier mainland Chinese keep luxury aircraft in the city to avoid bureaucratic hurdles and taxes at home, but a lack of infrastructure could limit the market's growth.

Hong Kong, the world's top initial public offering market for the past three years, has seen a flood of mainland Chinese companies list shares in the city. This influx has been accompanied by growth in the private jet business, said Hongkong Jet chief executive Chris Buchholz.

Hongkong Jet, a unit of China's HNA Group, parent of the mainland's number four carrier Hainan Airlines, charters and manages private jets. It has expanded its fleet to eleven aircraft, which it aims to expand nearly 10-fold to about 100, mostly managed on behalf of clients, in five years.

"Owning an aircraft in Hong Kong is a lot simpler than in China," Buchholz said, adding that the city's free-port status served as a draw for business jet owners.

Importing aircraft into China is a cumbersome process, and buyers must pay a 5 percent customs tax in addition to a 17 percent value-added tax. There is no tax on imports of private jets to Hong Kong.

The number of Hong Kong-based private jets jumped three-fold to about 60 in 2011, up from 20 in 2008, providing opportunities for other business jet operators such as Metrojet, Jet Aviation and TAG Aviation Asia.

Larry Flynn, president of Gulfstream Aerospace, said China needed more airports and a simpler process for obtaining permits.

"(Airport facilities) have expanded substantially in the last 10 years and made it much more viable for our airplanes, but there is room for improvement," said Flynn, who recently opened the first Asian flight training centre for business jets in Hong Kong.

Last September, Sino Jet Management, which looks after the USD$30 million aircraft that Brazil's Embraer recently delivered to Hong Kong movie star Jackie Chan to help the company sell planes in China, set up shop in Hong Kong to take advantage of the growing market. Sino Jet has four private jets based in Hong Kong and two in China.

"We are focusing on this market and would like to grow our fleet by 100 to 150 percent this year," said chief operating officer Jackie Wu. "But there are concerns about the limited infrastructure at Hong Kong's airport and how the Civil Aviation Department will support the growth."

Only a third of business jets in Hong Kong can park in the two hangars and apron area of the Business Aviation Centre at the city's only airport. The rest must be parked near the control tower, cargo area or far from the business aviation facilities.

"You have to tow the aircraft back and forth and that takes many hours to arrange because you have to cross the runway, so people are starting to get frustrated," Buchholz said.

Business Aviation Centre director Sheree Cheung said a new business jet hangar would soon be completed to help ease the situation.

"We will have a third hangar to accommodate about six aircraft, expected to start operation by the end of the second quarter," she said.

(Reuters)


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