April 18, 2011
By Russell Flannery
By any measure, China is undergoing a wealth explosion. The country ranked no. 2 on the 2011 Forbes Billionaire List with 115 members, a big increase from 64 a year earlier, and had 477,000 high net-worth individuals in 2009, according to research by Capgemini, a gain of 31% from a year earlier. That rapid growth in the number of well-off Chinese is helping companies like Bombardier of Canada to expand their sales of aircraft for businesses and private individuals in the country.
To learn more about how Bombardier pitches itself to affluent Chinese customers and sees the market unfolding, we talked last Friday to Bob Horner, senior vice president for sales at Bombardier Business Aircraft. Horner and executives from other major international private aircraft suppliers were in Shanghai last week for the Shanghai International Business Aviation Show.
Q. How is the policy environment changing in China in a way that will facilitate the development of the private aircraft industry?
A. I think to say “policy changes” is probably too much. I think what we’re seeing in China is great demand for our product, and that’s both commercial and business aircraft. We’re actually concerned with the business aviation side of things. Any regulatory change for the positive helps our business as well. We’re seeing some regulatory change in terms of applying for flying permits, slots and things like this is becoming much easier (and) much more efficient, so we welcome those changes. But, I think the overall thing that we’re seeing is great demand for business aircraft.
Q. What’s the potential for this market and the private aircraft industry in China?
A. We publish a 10-year forecast, and we anticipate 600 airplanes in addition to the existing fleet over the next 10 years – so an additional 600 business aircraft over the next 10-year period. The demand is coming from business users and private individuals alike.
Q. What countries are comparable to China’s market?
A. I hesitate to make comparisons. I think what is interesting is the needs of Chinese customers aren’t any different from the needs of our other customers around the world. They’re looking for efficiency, they’re looking to save time, they’re looking to travel safely, and that’s what we offer with our aircraft.
Q. What has it been like doing business with Chinese customers? What experience has your company built up in China that will help in exploiting this growing segment of the aircraft business?
A. One of the great things about our jobs is that it allows us to meet the most interesting people around the world, and China is no different. We’re meeting extremely influential, powerful and very interesting Chinese customers. And of course dealing with these people is a privilege.
Q. How is it different from doing business with, for instance, European customers or those in the States?
A. Because the market is relatively young, there’s perhaps a lot more introduction needed in terms of our product and in terms of the benefit of our product, but that’s becoming very quickly understood and hence the demand.
Q. What is the key to reaching out to your customers? How do you market to them?
A. What we sell and the services that we provide are very personal. We of course run advertisements (and) we’ll make people aware of the product, but a lot of what we do is identifying high net-worth individuals who we anticipate would have this demand. So we target individuals directly. It’s very much a direct marketing approach. Once we’ve establish this need, and got a rapport with these individuals, often we’ll demonstrate the airplane. So we’ll show them the airplane first out, (and) we demonstrate the benefits of flying a Bombardier business jet. It’s very much a direct marketing approach and it’s a very personal sales approach.
Q. How much of the market are you (holding) right now in China?
A. I can tell you exactly we have a 27% market share in China, with over 50 business jets currently operating here.
Q. How much of that is corporate and how much of that is individual?
A. It’s difficult to say. I would say that it’s roughly a 50-50 split. Interestingly, we’ve just sold five business aircraft of the same type to Shenzhen Donghai Airlines. They’re running a charter business for high net-worth individuals. There’s very much the opportunity to sell to airlines as well. We replicate that around the world. In addition, of course, we’re selling for solely private use.
Source: FORBES
Date: 2011-04-18