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Corporate jets in vogue among Malaysia's wealthy
Publication Date : 27-07-2014
Private jets are often associated with the lifestyle of the rich and famous. The luxury of the past though is now giving way to practicality and such jets are becoming an indispensable tool of the corporate world.
Wealthy businessmen and corporations are increasingly relying on such a mode of transport as corporate profitability is pushing the realm of private jets into the mainstream as businesses start to see the value of exclusive travel in an increasingly globalised world.
There are a lot more business/corporate jets in the world compared with a decade ago. Many of the Fortune 500 companies own or lease corporate jets for their chief executives and chairman, and companies like Coca Cola, Revlon, Dell and Intel have several private jets, while newer global giants such as Google has at least two.
That way of travel has long reached the shores of Asia as individual wealth and companies grow bigger. In Asia today, there are over 900 corporate jets in operation, with over 200 each in China and Indonesia, about 100 in India and about 50 in Malaysia.
In Asia, China is said to be the biggest buyer of private jets over the past few years, though for some billionaires and millionaires in the world’s second largest economy, having a private jet is now a status symbol.
“If you are a billionaire (in China) and do not have a private jet or a corporate jet, that means you have not arrived,” exclaims one businessman.
In comparison, the Saudi market accounts for almost half of the 550 business jets in the Gulf Cooperation Council.
“We do business in several parts of Europe, Africa and South America. If several of our executives need to go for a meeting and if they have to take a commercial flight, then it will take them forever to reach their destination. And if there are multiple stops to get to their destination then they will be away from the office for a long duration.”
“We cannot allow that. In business we have to get somewhere fast to snap up opportunities and our corporate jets allows us to reach our location faster and we are in control of our business overseas.
“If you have businesses spread over the globe, it is unthinkable not to have a jet. It’s then either you own them or lease them because there is a need to get to where the business is. With a jet you can cover much more ground in a day than flying commercial. It is more efficient and saves time and money for the business,” says a businessman.
Another adds that “there is more privacy and safety in travel” as private jets normally don’t take off and land at commercial airports. Some of the airports commonly used by private jets are Subang Skypark, Selatar in Changi and Stansted in London.
Today, the worldwide fleet of corporate jets is diverse, ranging from the likes of the twin turboprop Beechcraft King Air and Embraer Phenom 100 to specially outfitted Boeing 747-400s with beds, meeting rooms, and showers, that would normally carry over 400 passengers for commercial use. There are eight major makers for jets namely Canada’s Bombadier, French-Dassult Falcon, Georgia-based-Gulfstream, Brazil’s Embraer, French-Airbus SAS, US-based Boeing, Beechcraft Corp (formerly Hawker Beechcraft), and Cessna.
Most of the wide-body aircraft are meant for head of states though some corporations also have them. The jets can fly 10 to 17 hours and seat more people, but the majority of companies and individuals prefer the small to medium sized aircraft that can fly three to 14 hours.
Jets that can fly such range include the BBJ (Boeing Business Jets), ACJ (Airbus Corporate Jets), Gulfstream, Embraer, Falcon, Global Express, Hawker 1000, and Challenger.
One reason why sales of private jets are on the rise is because of increasing affluence of the people. The world today has far more billionaires than previously with Forbes counting 1,645 billionaires globally today compared with 1,426 in 2013 and 1,226 a year earlier. In its recent report, Forbes says the region has a record 444 members of the new Forbes Billionaires List.
For companies, higher corporate earning and wealth creation is pushing demand for business/corporate/private jets. That is helping the industry recover from the steep downturn of 2009-2010, says a report.
Bombardier, one of the eight makers of private/business jets, has forecast 22,000 business jet deliveries valued at US$617 billion over a 20 year period from this year.
Of that number, it predicts 9,200 deliveries worth US$264 billion from 2014 to 2023, and 12,800 deliveries worth US$353 billion from 2024 to 2033.
During the recently concluded Farnborough International Airshow, most of the business jet makers were present to showcase their latest models and some had received orders for new aircraft.
Besides buying new aircraft, there is a second hand market to buy such planes. The leasing business is also rising as there are many companies that are involved in the leasing and charter business.
In the United States, billionaire Warren Buffett’s Berkshire Hathaway partly owns the biggest private jet leasing company, and in Malaysia, Vistajets is one of the many companies offering jets for hire.
The exact number of jets owned by Malaysian corporate and individuals is not known. Checks by StarBizWeek reveal there are about 50 jets owned by Malaysians but the actual number could very much exceed that.
Some keep their planes in Singapore though the parking rates there are pricey.
Most of the jets are not registered under the names of the individuals, mostly by companies. Most of the jets are also registered out of the country in the United States, Bermuda, Australia, Switzerland, Denmark and Taiwan, thereby making it difficult to trace actual ownership.
Several tycoons and companies though have confirmed they have jets, but there were others who did not respond to queries from StarBizWeek. But the who’s who in the corporate world do invariably, either own, lease or charter private jets.
Genting Malaysia Bhd is said to have at least five aircraft, but the company declined comment. It is not known if it owns or has them on a long-term lease. One the planes is said to be parked in Manila, the Philippines.
Two of its planes are the Global Express and Gulfstream 450 SP. Most of the jets, though, are used to ferry high rollers to their casinos but its top executives also use the planes given the geographical location of its casinos.
Its chairman and chief executive Tan Sri Lim Kok Thay, whose company runs casinos in the Bahamas, London, Singapore, Manila and New York besides the home-grown casino in Genting Highlands, has a net worth of US$6.5 billion which he shares with his mother, Puan Sri Lee Kim Hua and other family members.
The government has four jets, of which two are 15 and 25 years old, making it very costly for maintenance. The wide-body A319 jet is used by Prime Minister Datuk Seri Najib Tun Razak. At some point the Government will need to consolidate its fleet and plan for replacement, said someone in the know.
Another company that owns a number of jets is Weststar Aviation Group. The company is controlled by former AP King Tan Sri Syed Azman Syed Ibrahim and out of the four jets it owns, one was bought from famous businessman Donald Trump and another from a Middle Eastern prince.
Syed Azman is also into the business of leasing aircraft, hence, some of the jets he has are used for the business. He utilises a Boeing 737 (BBJ) and Gulfstream II for his business and personal travel.
Tycoon Ananda Krishnan, with a net worth of US$11.3 billion as per Forbes 2014 list, via Usaha Tegas has a long term lease of a Falcon 7-X, while Petroliam Nasional Bhd also has a long term lease for a Gulfstream 550 jet, though a source did say they have change the aircraft type.
Similarly, Tan Sri Syed Mokhtar Al Bukhary is said to use two aircraft, but StarBizWeek could only verify one, which is a Global Express aircraft. Tan Sri Vincent Tan has a Global X and a Challenger 300. Both the tycoons have net worth of US$3.1 billion and US$1.6 billion respectively as per Forbes list.
The Sapura Group brothers, both Tan Sri Shahril Shamsuddin and Datuk Shariman Shamsuddin, use their own jets, though the latter is more of an enthusiast and pilots his own plane, which is a Pilatus 12.
The brothers saw their net worth jump by a third to US$1.4 billion from US$1.05 billion due to the booming oil and gas sector as per the Forbes list.
Shahril uses a Falcon 7-X, similar to Ananda’s aircraft, and Shahril’s partner in Sapura Kencana Petroleum Bhd, Tan Sri Mokhzani Mahathir also has a Falcon 900LX.
Hong Leong Group chief Tan Sri Quek Leng Chan is said to be using a Global Express aircraft for his business trips.
Tan Sri Wong Yeon Chai, the timber tycoon from Pahang via Rimbaka Forestry is said to have three aircraft, though talk is he is trying to sell one, but this could not be verified. Others who also use private jets are the Johor Sultan with a Gulfstream IV, and the Selangor Sultan’s long time friend and businessman, Tan Sri Syed Yusof Tun Syed Nasir. He has a Hawker 1000.
Tun Taib Mahmud, the head of state of Sarawak, uses a Challenger 605.
Aviation tycoon Tan Sri Tony Fernandes and his long time partner, Datuk Kamarudin Meranun use the Global Express, while Datuk Seri Tiong King Sing is said to have two aircraft – Gulfstream 450 SP and III – though some say he has unloaded them.
Interestingly a minister regularly uses a Challenger 601 while a former minister has access to a Falcon 2000.
The Taiko Group of Companies is said to have several aircraft, and are also the authorised sales representative for Malaysia, Singapore and Brunei for the US-based Cessna Aircraft Company.
Airod Sdn Bhd boss Tan Sri Ahmad Johan has a CRJ200 which he uses and also leases out. Even water services tycoon Tan Sri Rozali Ismail is said to have the Citation Sobrane, and Time dotCom Bhd chief executive officer Afzal Abdul Rahim, also an enthusiast with 15 years of flying, has a four seater Cirius S22.
If someone says he owns a private or business jet, ask him again, whether it is leased, bought or is it based on time-sharing.
The concept of leasing aircraft is increasingly becoming common because not everyone can own a private jet. Some tycoons in Malaysia do not own the aircraft but lease one on a long-term charter.
There are several companies globally that lease out private jets to individuals and companies and there is a variety of luxury jets that are available for chartering. The only difference is how much people are willing to pay.
The jets vary in price from the ones that are relatively cheap, to aircraft that are only the truly wealthy can afford.
A report said one of the most luxurious private jets is the Gulfstream 550. A brand new one cost US$59.9 million to US$65 million and it has a large cabin that can comfortably accommodate up to 12 passengers. The plane can be configured to include a bed. The report said this aircraft is the first choice for some of the wealthiest travellers in the world.
A typical BBJ cost RM80 million to S$140 million and can seat up to 30 people. The Bombardier Global Express Jet is about US$47.7 million-US$55 million which can take up to 19 passengers.
The Gulfstream V-SP Luxury Private Jet is priced at about US$45.5 million, and a Dassault Falcon 7X Business Jet has a price tag of US$40 million.
Then there is also a second hand market for these jets, and the depreciation of jets is said to be steep. “You will be lucky to sell for half the price after a year’s usage,” says one businessman.
Time sharing is a concept where there is fractional ownership of the plane. It allows people to buy a portion of a plane and can use it at short notice. So the bigger the fraction paid for the plane, the more hours are allocated. “Time sharing is good so long you are not going to London in summer as that is when every owner wants the plane,” says a businessmen who opted for time sharing but now prefers to charter the aircraft.
Getting a plane, either on lease, new or second hand, also involves parking charges and maintenance. Then there is also the cost of keeping a crew for the aircraft.
Leasing a jet can cost anything from between US$8,000 to US$15,000 an hour, and like most things, the bigger the aircraft, the higher the charges. But the charges are only based on flight hours, not the waiting period. Among other costs involved is the hotel bill for the crew of the aircraft, airport taxes and ground handling charges.
The companies that hire jets are casino owners that fly their high rollers around, oil and gas companies as oil fields tend to be in remote places, and companies with a sprawling international presence.
Owning a jet means that it needs to be maintained too. There are several hangars owned by companies that do maintenance work on jets, but most are for light maintenance work. Most of the heavy work is done in Singapore.
Subang Skypark is investing to expand its hangar facilities, while there are others offering hangar services to private jets. Those companies include Airod, Taiko, Dnest Aviation and Weststar Aviation.
“Even though there are several hangars in Subang, there is still a shortage of space and more hangars need to be built,” says a businessman.
As for the group of enthusiasts, they prefer the single engine types. It is less costly compared with jets and easier to handle.
So if you feel like zipping to Penang for nasi kandar for lunch, then do what Afzal and Shariman did – get a pilot licence. Afzal does that during his free time.
There are five flying schools in the country to get a pilot licence, which can be obtained in three to four months. The clubs have 3,000 members.