By Fang Yan and Siva Govindasamy
SHANGHAI/SINGAPORE (Reuters) - Makers of private jets for China's elite are shifting their focus from luxury to convenience, as a cooling economy and long-running crackdown on corruption prompt customers to demand smaller planes and even consider second-hand deals.
Utility is the watchword, say industry insiders, as buyers who once enlisted feng shui masters to help them design cabin interiors that might feature mahjong tables or karoake areas now look for functional desks to work at and rest areas to sleep.
China's richest businessmen remain Asia's top owners of luxury aircraft: the greater China region had 466 private jets in 2015, according to consultancy Asia Sky Group, compared with 65 in 2007. Mainland China accounted for 300 of those. But for manufacturers such as Bombardier (TO:BBDb), Dassault (PA:AVMD), Embraer (SA:EMBR3) and General Dynamics' (N:GD) subsidiary Gulfstream the market is cooling, especially for new aircraft, forcing them to prioritise efficiency, keeping production costs low and speeding up aircraft delivery times.
"The economy is weak and there are different political forces, as you know," said Bill Schultz, senior vice president of business development in China at Textron (N:TXT), which manufactures Cessna and Beechcraft-branded aircraft. "It's impacted jet sales, there is no question about that."
Against that backdrop the mood was subdued as plane makers, charter firms and buyers gathered this week for one of the industry's biggest annual air shows in Shanghai. Interest in specialized firms who manage, charter or refurbish planes was high.
KEEPING UNDER THE RADAR
President Xi Jinping's three-year-old campaign against official corruption has discouraged conspicuous consumption in China, hitting discretionary spending on everything from fine wine and jewelry to luxury cars, yachts and casino trips.
"Ten years ago, if you bought a business jet, you would show your shiny new plane off to reporters," said one China-based business jet broker, who has been helping wealthy individuals buy and sell aircraft for more than 15 years.
"These guys have seen their peers being hauled up, and they don't want any scrutiny of their wealth and business interests. So they would rather keep a low profile," said the broker, who did not want to be named due to the sensitivity of the issue.
Asia Sky Group put China's fleet growth in 2015 at 6.6 percent - from highs of more than 49 percent when the market hit its peak in 2012. With orders slowing, growth is set to dip further.
Schultz said that Textron, which has built its Caravan turboprop plane and the Citation XLS+ in China as part of a joint venture with state-owned aerospace firm AVIC, was focusing on the market for smaller jets and utilitarian turboprop craft.
Until recently mainland Chinese buyers have favored larger cabin jets, even including retrofitted versions of the Airbus (PA:AIR) A320 and Boeing (N:BA) 737 that can cost up to $90 million at list prices and another $10-15 million for fitting.
Now there is more interest in smaller aircraft.
"Instead of using too big a plane, people are flying in a smaller plane," said Fernando Grau, director of airline market analysis at Brazilian manufacturer Embraer, which uses actor Jackie Chan to sell its planes in China.
Of course, countering China's domestic slowdown is its push to do deals abroad, spending more than $100 billion in 2015 - a boom that has more top executives forced to consider fast, convenient and efficient options as they travel more frequently beyond the country's borders.
"We position the business jets also as a productivity tool," said Khader Mattar, who oversees sales for Bombardier in the Middle East, Asia Pacific and China. REDUCE, REUSE, RECYCLE But visible in Shanghai's exhibition halls this year has been the rising interest in second-hand deals, long frowned upon in China, and in companies that manage and charter flights.
A 14-seater Gulfstream jet, for example, can be chartered for roughly 50,000 yuan (around $7,700) an hour, making it reasonably affordable for China's rich entrepreneurs. While many charter trips in the past were for leisure or "unnecessary tours" said Fang Xinyu, vice-president at Beijing-based Deer Jet which manages more than 80 aircraft that are available for charter, these days it's strictly business.
Executives estimated second-hand planes now account for 30 percent of sales, still less than in a more mature market like the United States but up from 10 percent just three years ago.
A Gulfstream G550, one of the most popular business jets on the market, manufactured in 2010, for example, can be bought for half of the roughly $60 million it would have originally cost.
Prospective owners can spend another $2-3 million to retrofit the cabin with Gulfstream's latest interior.
"Compared to the price of a brand new plane, they are cheaper to buy and refurbish," said Jason Liao, CEO of China Business Aviation Group, which helps individuals buy and manage jets. "They are great value." ($1 = 6.4639 Chinese yuan renminbi)