Refurbs and rental planes in vogue as China's jet-set seek value

Brenda Goh

* China is world's second biggest market for private jets

* Lack of new orders announced at Shanghai air show

* Growth in China market seen slowing to 1 pct this year

* Second-hand jets now make up more than half of sales

* Industry sees hope from government plans to open up

airspace

SHANGHAI, April 14 (Reuters) - China's rich are foregoing

fancy new private jets in favour of second-hand planes or

rentals, reflecting how the country's business elite are

increasingly shunning flashy signs of wealth amid slower

economic growth.

Planemakers such as Embraer and Bombardier

are shifting focus to after-sales services in

response, while brokers are refurbishing older jets or hiring

out planes as the once high-flying industry braces for its

weakest growth in a decade.

Dealers at one of Asia's top industry shows in Shanghai this

week said second-hand jets now made up more than half of sales

to wealthy Chinese entrepreneurs and corporations, up from under

a third two years ago.

Chinese buyers, who began purchasing new business jets 30

years ago, were also becoming more pragmatic about buying

cheaper, second-hand jets and giving them a makeover, they said.

"Now ... while you can still get a Gulfstream 550 for around

$50 million for a new one, you can get an extremely adequate

aeroplane for $30 million," said David Dixon, president of

business jet brokerage Jetcraft Asia.

"So $20 million is a lot of money to anybody."

In part the shift reflects a broader trend that is making

life tougher for firms selling luxury goods in the world's

second biggest economy, as Chinese buyers increasingly push for

bargains on everything from high-end handbags to holidays.

In such a market, where new planes quickly lose their value,

dealers said second-hand jets were simply a less risky bet.

"When the economic climate is going down, there's fewer

buyers in the market honestly, so the depreciation rate is

higher," said Jackie Wu, president of Hong Kong-based plane

broker and charter firm JetSolution Aviation Group.

She said a new jet typically lost around 15 percent of its

value last year, faster than the 10 percent loss in 2015.

"Now pre-owned aircraft are a better buy," she said.

"COLD WIND"

Greater China is the world's second-largest business jet

market behind the United States and had seen annual growth of up

to 49 percent before 2012, when President Xi Jinping launched a

fierce crackdown on corruption that has discouraged conspicuous

displays of wealth.

Owners include China's richest man, Wang Jianlin, who flies

a Gulfstream 550, and Tencent founder Pony Ma who has a

Bombardier Global 6000, according to data compiled by Hurun

Report which tracks China's super-rich.

But growth has been slowing since 2012 and sales remain

subdued. At the Shanghai show there was a distinct lack of new

orders announced, while planemakers instead talked up their

after-sales service.

Consultancy Asian Sky Group estimates the private jet fleet

across Greater China will grow just 1 percent this year - with a

total of five new plane deliveries - its weakest on record.

There are currently around 480 private jets in China,

compared with 466 in 2015 and 67 in 2007.

"The entire market is now experiencing a cold wind," said

Guan Dongyuan, president of Embraer China.

Guan said, however, that the Brazilian planemaker was

holding out for better days, given the potential of a market

that is still a long way behind the United States, where there

are around 12,000 private jets.

"We want to use the period when the market is relatively

depressed to improve our after-sales services," he said,

referring to its spare parts and engineering units.

Canadian rival Bombardier, which has 110 aircraft based in

Greater China, last Friday opened its first business jet service

centre in the country in the coastal city of Tianjin.

GOVERNMENT SUPPORT

Executives said they were heartened by government signals to

encourage growth of the country's aviation industry, which

remains hampered by a lack of infrastructure and tight military

control of China's airspace.

Last year, China said it would have more than 500 airports

specifically for business jets by 2020, and would further open

up airspace for civilian use with a view to grow the country's

general aviation fleet to 5,000 aircraft by that year.

"It's good that there's commitment, it takes time and we

need to be patient," said Bjorn Naf, chief executive of Hong

Kong-based jet management firm Metrojet, who said competitors

were still swarming into the market despite the headwinds.

"The market will swing back, I'm convinced."

Fang Xinyu, Beijing-based vice president of Deer Jet, which

manages a fleet of 90 aircraft in China, said there had been a

period of "depression" but that business jets still made sense

for busy company executives.

"The value general aviation provides in terms of time

efficiency and privacy have always been present," he said. "This

is something no one can take away."

(Reporting by Brenda Goh; Editing by Alex Richardson)