NetJets, a private jet-sharing company owned by Warren Buffett's Berkshire Hathaway, named a Beijing-based private equity firm and a Hong Kong private investment company as its joint venture partners in China as it aims to tap soaring growth in the country's aviation market.
Chinese passengers are expected to account for around a quarter of the world's 800 million new passengers by 2014. Dozens of new airports are under construction and the executive jet market is expected to ride the crest of this wave.
NetJets' venture will be partly owned by a consortium of Chinese investors led by Hony Capital and Fung Investments, owned by Victor and William Fung. The brothers control Hong Kong-listed consumer goods exporter Li & Fung.
NetJets did not provide details of the investment in the venture, which is subject to regulatory approval. The initial agreement was signed in Hong Kong last August but no details were released.
"The Chinese aviation market has phenomenal growth potential and we believe that introducing the NetJets service in China will enhance our brand's global offering for customers around the globe," NetJets chairman and CEO, Jordan Hansell, said in a statement.
China had about 150 private jets by the end of 2011, up from more than 40 in 2005, according to industry groups. But the number is low relative to its population of 1.3 billion and compared with more than 11,000 private jets in North America.
One of the reasons for the disparity is the difficulty in acquiring landing slots in China from aviation authorities because China's airspace is largely controlled by the military.
Bombardier has forecast China's business jet fleet to grow at an annual compound rate of 15 percent over the next 20 years to 2,470 aircraft by 2030.
Deer Jet, a subsidiary of HNA Group, is China's largest business jet company. Industry sources said NetJets had been talking to Deer Jet about a deal, but failed to reach an agreement due to cultural clashes over operational details and because NetJets wanted to retain control of the venture.
NetJets China will be based in the country's southern city of Zhuhai, which borders the gambling resort of Macau.
Last year, NetJets posted a USD$227 million pre-tax profit, continuing a turnaround after prior management racked up USD$1.9 billion of debt and regularly posted quarterly losses.