Turbulent times await aircraft owners in Hong Kong

Before the COVID-19 pandemic hit Hong Kong, at least 120-130 private jets were parked outside their designated runway at the city’s busy international airport. But when Justin Young, chief strategist at Hong Kong-based commercial airline operator Metrojet, went there in February to count planes, he found only 30.
The pandemic has forced even the richest people in Asia’s largest financial center to make some difficult decisions. “We are talking about the Forbes 50 richest people in the world and we are counting down. They may own homes in many parts of the world and there are planes based here in Hong Kong that fly around the EU and the US,” says Young. .
Although some wealthy people from Hong Kong and mainland China preferred to operate their aircraft abroad, others decided to sell them. Border closures amid the strictest restrictions in the world have put significant pressure on the region’s private and business travel market.
China’s pursuit of a zero-covid strategy – including a multi-week quarantine requirement – has also shifted billionaires’ travel plans. Many choose to base themselves and their planes in other countries, where there are softer travel rules. However, those affected by the restrictions have found a ready market for their aircraft in the United States. The administration of former President Donald Trump has introduced a tax allowance that allows individuals to write off the cost of a plane against their federal taxes from September 2017.
The Chinese mainland’s business jet fleet has shrunk slightly from 346 aircraft in 2020 to 340 last year, while Hong Kong’s business jet fleet has fallen sharply, from 120 to 101, according to data from travel data provider Asia Sky Media.
“The management of private jets on behalf of customers who own their own aircraft has been severely affected – this is a common trend in the industry in Greater China,” says Young. Due to border closures, people do not want to fly – or if they want to go overseas. Hong Kong “.
Some owners had hoped restrictions would be eased, but only China seemed more committed to its strategy of eradicating Covid-19. The policy has led to severe restrictions – one of which paralyzed Shanghai in March – and severe restrictions in Hong Kong.
Quarantine periods, and regular suspension of entire airlines as a flight to transport a certain number of patients infected with the Covid virus, was a nightmare for commercial airlines such as Cathay Pacific, the de facto largest airline in the city-state.
In March, Cathay said its crew spent a total of more than 73,000 nights in quarantine hotels and government quarantine facilities last year. Hong Kong authorities also banned passenger flights from eight countries between January and April this year, reducing the number of planes entering.
Airlines had to find all sorts of innovative ways to comply with the rules while keeping planes in the air, says Simon Bambridge, commercial director at private jet management and rental service Taj Aviation. He adds that in one case, to avoid quarantine, the crew was flown by helicopter from Hong Kong to work on a flight from Macau, another nearby Chinese region.
“There are all sorts of strange things we had to do,” says Bambridge. He added that the logistics to support flight operations were expensive and sometimes impractical. “What you can do in one week, you can not do in the next.”
Top executives struggled to get an exemption from Hong Kong’s quarantine rules, while others were wary of making that choice for fear of a public setback. Among those who managed to circumvent the rules were Nicole Kidman, the Hollywood star, and Jamie Dimon, the head of JPMorgan Chase. Both avoided spending three weeks locked up in a hotel room, although both cases provoked public outrage.
Even if those on board are exempt from quarantine, it may not extend to the crew, which means the aircraft must list again immediately. Some international airlines completely canceled flights to Hong Kong, and in some cases, crews refused to visit the city, reducing production capacity on commercial routes.
In April, Willie Walsh, director general of the International Air Transport Association, the trade association for airlines, told the media in a brief statement: “Hong Kong has fallen as an international central airport, it is now virtually off the map. I thinks it will be difficult for Hong Kong to recover from this. “
The lack of flights was a problem earlier this year, when the government decided to impose restrictions in the wake of Hong Kong’s worst COVID-19 outbreak, which caused a massive exodus of expatriates and locals. While strict closures never took place, the now disbanded policy of separating children infected with Covid from their parents in hospitals and causing school closures for long periods of time led many residents to decide to move elsewhere.
Many Hong Kong residents accept immigration programs, such as the UK’s national overseas citizenship program. But the shortage of flights has led departing residents, especially those with pets, to decide to fly privately. In some cases, they combined their finances to pay for the flight, which led to a boom in private airline carriers. Hong Kong-based Pet Holiday has been arranging dozens of private jet flights for pet transport over the past two years. Such a service can cost about HK $ 200,000 (US $ 25,665) per owner with their pet.
Despite this, there were no such wealthy aircraft management companies. Macau Jet International, which transported drivers to and from that city, closed its operations. “Even our planes were sold,” says Mario Ton, the company’s chief information technology officer. “There have been a number of issues, but once you are quarantined, it becomes very difficult to move on.” Similarly, Duncan Dennis, chief marketing officer of private jet operator Gamma Aviation, said the company had to downsize in Hong Kong. “The team has become smaller, partly due to the low levels of touring activity due to the pandemic,” he explained.
The financial crisis at Evergrande, the second largest real estate developer in China, has also led to an increase in sales of private jets. Both the company and its president, Hui Ka Yan, own aircraft now on sale, as well as a huge 60-meter yacht moored in Hong Kong.
Desmond Shum, author of Red Roulette – a description of the “golden era” of Chinese businessmen in the mid-1990s – wrote that Hui “provided a floating mansion for officials to eat on the coast of China. , from the prying eyes of China’s anti-corruption police and emerging paparazzi “. Even other businessmen near Hui had to auction off their art collections to raise money in the wake of the Evergrande’s hardships.
“In terms of aircraft sales (…), the industry is definitely seeing more than has been seen historically. U.S. tax concessions are part of the story,” notes Bambridge of Taj.
Prior to the tightening of restrictions in China this year with the Omicron outbreak, wealthy Chinese were able to travel internally. It made domestic travel in mainland China the busiest private jet market in the region during the pandemic, Bambridge said.
Hong Kong, however, was a slightly different story, as the border it shares with mainland China was effectively closed, with any residents entering China subject to quarantine. So, instead of traveling, the city’s billionaires who decided to stay spent their time sailing between golf courses and their luxury yachts.
But at the same time, the city’s problems have put a spotlight on Singapore, which is seen as ready to take advantage of emerging consumer markets and a growing middle class across Southeast Asia. Bambridge says Taj plans to expand to the city-state, and he believes there is a renewed interest in private travel after the worst of the pandemic is over. “We are looking forward to expanding our presence in Singapore and spreading more of our business in the region,” he says. Greater China is expected to remain “vulnerable” this year. “There is not much rental capacity in Southeast Asia relative to the number of people and wealth in the area. When the borders open, we will see a lot of interest.”
Others elsewhere have sought temporary refuge as Hong Kong and China continue to enforce their own quarantine requirements. “Some of my friends moved to Thailand for a few months,” a city bank manager remarked. Another major Hong Kong businessman tells the Financial Times that he will “at least” be out of town for a few months where he will have to meet face-to-face clients, and he has seen Europe and the US really open up. “The show has to go on,” he says.

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