China's regional jet market is struggling to get off the ground as Beijing slows approvals for new airlines, industry executives say, dashing hopes that recent policy changes would drive aircraft sales.
Foreign companies such as Bombardier, Embraer and ATR had cheered a 2016 policy that required passenger carriers to operate at least 25 city-hopper jets before graduating to bigger aircraft.
It appeared to all but assure sales of such small planes in the world's fastest-growing aircraft market, currently dominated by wide-body jets, as the regulator tried to boost flights into China's smaller cities.
But there is a problem, executives say: the Civil Aviation Administration of China (CAAC) has only approved two new airlines since the "Rule 96" policy went into effect.
"The truth is that almost two years has passed and I have not succeeded in one single deal," said one executive from a Chinese aircraft lessor speaking on condition of anonymity, who added that he had met with numerous start-ups to promote regional aircraft.
Executives added that although the slowdown was probably well meaning, caused by regulators' concerns over safety and quality, it meant that there was a queue of at least six Chinese airlines waiting for approval.
The policy had stoked optimism among regional aircraft makers, as Chinese airlines have for years mostly focused on growing their fleets of Airbus and Boeing narrowbodies rather than buying smaller jets for short-haul flights.
Out of 3,311 commercial aircraft flying in China at the end of March, just 5 per cent were regional jets, the CAAC said in April. By comparison, regional jets in 2016 took up 30.6 per cent of the 7,039-strong fleet of aircraft in the United States, according to data from the Federal Aviation Administration. "The intention is that [the regulators] want to push, but they have enhanced the entry barriers so they have very high standards for the investors," said Wang Qi, chief China representative for French turboprop manufacturer ATR, which is renewing its Chinese certification.
Chinese airlines in general have a good safety record. The CAAC did not respond to requests for comment.
For many, Rule 96 underlined Beijing's intentions to improve regional air transport. The country's 13th five-year plan for 2016-2020 included 500 new airports.
But only Tianjiao Airlines in Inner Mongolia and Air China subsidiary Beijing Airlines, which converted from a private charter operator to a passenger airline, were approved last year.
An executive at Tianju Airlines, which is waiting for the green light to start carrier operations from central China's Shaanxi province, said regulators grew more cautious.
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But he said the airline hopes to fly next year, after four years of preparations and at least one change to its proposal to adjust to CAAC policies.
"We currently fulfil all conditions," said the executive, who only gave his surname as Li.
AirAsia Group, which is working with local partners to establish a low-cost carrier in China, has looked at options like buying an existing air operator's certification to speed things up, according to two sources familiar with their plans.
The company, which last year signed a memorandum of understanding with China Everbright Group and the Henan government, declined to comment.
The only aircraft that meet Rule 96's seat limits of 100 or less and are certified to be sold in China are Commercial Aircraft of China's (Comac) ARJ-21, AVIC Aircraft's MA60 turboprop and Bombardier's Q400 and CRJ 900 models.
Bombardier and Embraer said they remained optimistic about their prospects in China.
"The situation under Rule 96 continues to evolve," Bombardier commercial aircraft's president Fred Cromer said at the company's Montreal-area factory in the Canadian province of Quebec last week.
"The fact that we have a plane that's well known by the authorities there and an operator that operates quite a few works in our favour," he said in reference to Bombardier CRJ 900 operator China Express.
Embraer said it expects its E175 jet to obtain CAAC certification by September.
But Corrine Png, chief executive of transport consultancy Crucial Perspective, said Chinese airlines were still more inclined to buy larger jets to meet surging travel demand amid a shortage of landing slots and pilots.
"It would be costly to maintain a small number of regional jets in China which may not be economically efficient from the Chinese airlines standpoint," she said.
Industry insiders are also concerned that Beijing may be promoting China's domestically produced aircraft over more advanced models.
Comac put the ARJ-21 regional jet into service in 2016 and has delivered just five so far. But it has orders for 450 planes, dwarfing the numbers for Bombardier and Embraer's in China.
Tianju Airlines said it had considered Airbus' A320 and Embraer E190 jets but decided to buy the ARJ-21.
"We think it's the most suitable model for us," said Mr Li, who declined to comment further.
Mr Wang said the turboprop maker planned to look beyond regional jets and consider general aviation, which Beijing has also pledged to support with infrastructure investment.
Any company can buy an aircraft and begin operating it for charters, for instance. That means ATR could reconfigure its 42-seat model into a 30-seat offering for such businesses, he said.
"That category has very low barriers and there are potential investors for ATR," he said.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
ILT20%20UAE%20stars
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Awar Qalb
Director: Jamal Salem
Starring: Abdulla Zaid, Joma Ali, Neven Madi and Khadija Sleiman
Two stars
Company profile
Date started: 2015
Founder: John Tsioris and Ioanna Angelidaki
Based: Dubai
Sector: Online grocery delivery
Staff: 200
Funding: Undisclosed, but investors include the Jabbar Internet Group and Venture Friends
Profile
Name: Carzaty
Founders: Marwan Chaar and Hassan Jaffar
Launched: 2017
Employees: 22
Based: Dubai and Muscat
Sector: Automobile retail
Funding to date: $5.5 million
Book%20Details
%3Cp%3E%3Cem%3EThree%20Centuries%20of%20Travel%20Writing%20by%20Muslim%20Women%3C%2Fem%3E%3Cbr%3E%3Cstrong%3EEditors%3A%20%3C%2Fstrong%3ESiobhan%20Lambert-Hurley%2C%20Daniel%20Majchrowicz%2C%20Sunil%20Sharma%3Cbr%3E%3Cstrong%3EPublisher%3A%20%3C%2Fstrong%3EIndiana%20University%20Press%3B%20532%20pages%3Cbr%3E%3C%2Fp%3E%0A
A MINECRAFT MOVIE
Director: Jared Hess
Starring: Jack Black, Jennifer Coolidge, Jason Momoa
Rating: 3/5
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Formula Middle East Calendar (Formula Regional and Formula 4)
Round 1: January 17-19, Yas Marina Circuit – Abu Dhabi
Round 2: January 22-23, Yas Marina Circuit – Abu Dhabi
Round 3: February 7-9, Dubai Autodrome – Dubai
Round 4: February 14-16, Yas Marina Circuit – Abu Dhabi
Round 5: February 25-27, Jeddah Corniche Circuit – Saudi Arabia
Going grey? A stylist's advice
If you’re going to go grey, a great style, well-cared for hair (in a sleek, classy style, like a bob), and a young spirit and attitude go a long way, says Maria Dowling, founder of the Maria Dowling Salon in Dubai.
It’s easier to go grey from a lighter colour, so you may want to do that first. And this is the time to try a shorter style, she advises. Then a stylist can introduce highlights, start lightening up the roots, and let it fade out. Once it’s entirely grey, a purple shampoo will prevent yellowing.
“Get professional help – there’s no other way to go around it,” she says. “And don’t just let it grow out because that looks really bad. Put effort into it: properly condition, straighten, get regular trims, make sure it’s glossy.”
At a glance
Global events: Much of the UK’s economic woes were blamed on “increased global uncertainty”, which can be interpreted as the economic impact of the Ukraine war and the uncertainty over Donald Trump’s tariffs.
Growth forecasts: Cut for 2025 from 2 per cent to 1 per cent. The OBR watchdog also estimated inflation will average 3.2 per cent this year
Welfare: Universal credit health element cut by 50 per cent and frozen for new claimants, building on cuts to the disability and incapacity bill set out earlier this month
Spending cuts: Overall day-to day-spending across government cut by £6.1bn in 2029-30
Tax evasion: Steps to crack down on tax evasion to raise “£6.5bn per year” for the public purse
Defence: New high-tech weaponry, upgrading HM Naval Base in Portsmouth
Housing: Housebuilding to reach its highest in 40 years, with planning reforms helping generate an extra £3.4bn for public finances
