Buffet Enters China's Surging Business Jet Market
Warren Buffet’s NetJets has partnered with Chinese private equity firm Hony Capital and Fung Capital to tap China’s exploding demand for business and private jets, a spokesman announced Tuesday.
The joint venture NetJets China Business Aviation Limited will be headquartered in the city of Zhuhai in Guangdong province. The firm signed a lease with Zhuhai aviation industry park last August and is awaiting government approval, according to Shanghai Securities News.
China’s business jet market has grown 150% since the 2008 Beijing Olympics. Since 2007 the total number of business jets in China has trebled from 17 to 52, according to Jetnet. That number will mushroom tenfold in the coming decade, according to a projection by Brazilian jetmaker Embraer.
The industry’s anticipated growth spurred state-run China Aviation Industry Generaft to buy the US private jetmaker Cirrus last year while Canadian jetmaker Bombardier is partnering with China Development Bank to provide financing for buyers and lessees. The demand isn’t just from Chinese. The surging number of US and European companies operating in China is adding to the industry’s long-term growth potential, said NetJets China CEO Eric Wong.
The global demand has prompted Buffet to expand his bet in the corporate jet sector. In 2010 NetJets spent $1 billion for 125 jets from Embraer, followed by $6.7 billion for 120 business jets from Bombardier last March. He expects the China business jet market to mature within 10 years and sees this as the best time to secure a big market share.
NetJets will also offer private jet management service as another way to tap China’s growth potential, said CEO Jordan Hansell.
NetJets was founded in 1964 as one of the first companies to offer fractional ownership of business jets and jet management services. It was bought out by Warren Buffett in 1998 after he had been a customer for three years. Currently the firm is a subsidiary of Buffett’s investment firm Berkshire Hathaway.