A small private plane on display at the Zhuhai Air Show in November last year. Wang Haipeng / For China Daily

BEIJING - Yuan Yongmin, general manager of China's first privately owned airplane manufacturing company, doesn't want to be labeled a businessman because his business has not brought in any profit for years.

Since 1993, Yuan has invested more than 100 million yuan ($15 million) in his Beijing Keyuan Light Aircraft Company. But the company, with an annual production capacity of 100 aircraft, has only sold 21.

"I blamed it on the highly restricted low-altitude (usually below 4,000 meters) airspace in China. No one wants to buy a plane if he cannot fly it," he said.

Private aircraft have to get approval from the Civil Aviation Administration of China (CAAC) for every journey, a time-consuming process that has stopped many potential buyers.

Aircraft manufacturing is supposed to be lucrative, with profit margins said to be at about 40 percent. But it also requires strong financial and technology support.

However, private companies, unlike State-owned aircraft manufacturers, which mostly produce airliners, find it hard to get government funding.

About a dozen private enterprises, including Yuan's, entered the industry in the early 1990s. Most have failed, and Yuan said he survived because he supported his company with money earned from his catering business.

However, private aircraft manufacturers can see a break in the thick clouds. In November, the State Council and Central Military Commission said China will start opening part of its low-altitude airspace for private flights from this year to promote development of general aviation, which are other than those of airlines, the military and police.

Under the move, private aircraft will be able to fly at heights of up to 1,000 meters without the CAAC approval, which should lead to a rise in aircraft purchases, mostly small planes.

Michael Walsh, vice-president of Asia Jet, a leading private jet company, said last November that China will surpass the United States in having the most private jets in the world in the next 10 years.

Zhang Feng, vice-chairman of the Aircraft Owners and Pilots Association in China (AOPA-China), said international experience shows that if a country's GDP per capita reaches $1,000, its people are ready for cars. If this reaches $4,000, its people are ready for private jets.

Zhang said China is ready to enter the high-flying era as its GDP per capita has exceeded $4,000 and the demand for private aircraft is climbing among China's newly rich.

It is estimated that another 3,230 general aviation aircraft will be needed in China by 2015, and the opening of low-altitude airspace will create a market worth more than 1 trillion yuan.

The promising future has attracted investments from private companies. CAAC statistics show that at least 10 billion yuan have been poured into general aviation over the past two years, a large number for an industry with an annual output value of 1.79 billion yuan.

Many manufacturers believe the policy will boost sales. Sunward Tech, a manufacturer of two-seater sport airplanes in Changsha, Hunan province in Central China, said there has been a jump in calls from people wanting information about its aircraft.

Yi Bowen, its sales manager, expects between five and 20 orders this year, despite the fact it hasn't sold a single plane since the first rolled off production line in 2008.

Qingdao Haili Helicopter Manufacturing Company, founded in 2006, has sold a dozen of helicopters to pilot training schools and CEOs since May 2009.

"With the gradual opening of the airspace, our sales will rise to 100 a year in two to three years," Cheng Shenzong, its chairman, said.

Qingdao Haili has invested 50 million yuan for production and will add another 100 million to 200 million yuan for further development.

"General aviation is the last big cake in the Chinese market. I can see a future in this," Cheng said.

His faith had made him buy a US helicopter company in 2006 to acquire all the advanced technology from the US and to own full intellectual property rights for his products.

"Buying up a company is more expensive than investing on our own research and development team. But it is surely a shortcut to get those technologies," he said.

Industry insiders said the opening-up will also trigger more competition, especially from the US.

The US opened its low-altitude airspace for general aviation in 1978. There are 590,000 pilots and 224,000 aircraft for general aviation use in the US. In China, there are fewer than 2,000 pilots and 1,000 aircraft for general aviation.

Li Qiyong, chairman of Shanghai Kingwing General Aviation Company, said domestic helicopters are not attractive to Chinese buyers.

Li's company, which has 19 helicopters mainly for commercial flights, is the largest privately owned general aviation operator in China.

"All of our helicopters are imported from the West. Our customers prefer foreign products," he said.

"The brand of the helicopter will largely affect their decision on whether or not travel with our company."

Huang Zhaohui, general manager of Shanghai Sikorsky Aircraft Company, echoed Li, saying foreign brands are selling better than domestic ones in China at the moment, because Western countries have more than 100 years of history in aircraft manufacturing.

The company, a joint venture between Sikorsky Aircraft Corporation and some Chinese companies, is the exclusive sales agent for light helicopters produced by the Schweizer Aircraft Company in China.

He said private companies in China will not bring much competition as he sees strong sales of his company's products in China.

"We sold more than 10 helicopters in 2010, compared with three to five a year in 2008 and 2009. I think the number will increase to 20 to 30 a year in the next five years," he said.

Zhang Feng, from AOPA-China, said private companies need to learn fast from their Western counterparts.

"The opening-up of the general aviation sector is a start for a fierce competition. It will be a story of survival of the fittest," he said.

China Daily