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Mon 27 Dec 2010 09:00 AM

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Fasten your seatbelts

After two years in the doldrums, the GCC's private jet sector is pushing the throttle forward again

Fasten your seatbelts
Major private aviation companies are starting to focus their energy in the Middle East region instead of traditional powerhouses Europe and the US.

The gleaming jets sitting off the Emirates runway at Dubai International Airport don’t have much in common with the airliners thundering into the sky a few hundred feet away.

Their plush interiors and carpet-covered staircases aren’t found on commercial aircraft. Nor, more and more, are the very well-heeled men and women with money to burn who use them. What a difference a year makes.

Last year, as Gulf economies reeled in the wake of the global credit crunch, the smart set in the region could be found taking up room toward the front of commercial planes. Today, however, normal service is resuming — in fact, as of the end of 2010, you were likely to find the elite of the aviation crowd not in Dubai, but down the road, at Abu Dhabi’s Al Bateen Business Airport.

Newly renovated, it caters exclusively to the Gulf’s growing number of private business travellers. A recently unveiled state of the art runway navigational system has raised its technical capabilities to be on par with a commercial airport’s, the only private aviation facility in the world to claim that status.

After a rocky two years of economic downturn, private aviation is making a comeback in the Middle East, with the Gulf’s business aviation industry ascending to particular heights and establishing itself as a fast-growing transport industry with the potential to tap millions of oil and development rich business travellers.

Major companies are starting to focus their energy on the region instead of traditional powerhouses Europe and the US, both of which continue to slump as the global recession sees businesses cutting back on frills like the corporate plane charter in an attempt to save money and appease investors.

“Globally, Boeing does about $500mn annually in business jet sales,” says Stephen Taylor, president of Boeing’s business jet operation. That number will accelerate with sales of its new, bigger twin-aisle planes, which will be marketed to the region’s high-flying customers. “Traditionally the Middle East has been a third of our business, and [since] the twin aisles are at a higher price point, the Middle East now becomes our primary region,” he says. “From a dollars point of view, our focus really is about the Middle East.”

It’s a bright spot for private aviation, which took a major hit globally during the credit crunch and ensuing recession and is still struggling to find its wings.

Dave Edwards, managing director of the Gama Group, whose UK-based Gama Aviation Ltd established a separate Middle East arm earlier this year said business sales could be the key factor in raising the sagging charter sector’s overall tally.

In terms of recovery, “2011 won’t be the best year but towards the third quarter, business aviation will start to pick up and in 2012 we’ll be back to ’07 levels.”

It’s consolation for an industry which has been licking its wounds since the corporate jet set, faced with slashed budgets, began cancelling pricey private charters and sitting through commercial flights.

“Most operators saw a 40 percent [fall in their sales] level after November ‘08 — and in some cases it was a dramatic overnight fall,” Edwards says. “I’ve been back and forth the past three years now — after November of ‘08 there was a major downfall in charter, and we’re starting to see a lift now.”

Al Bateen’s general manager, Steve Jones, has seen the evidence firsthand. “I’ve been fairly sceptical, but in the last six to nine months you’ve sensed people starting to do business again,” he says. “We’re also seeing an organic increase in movements — for the next two years we’ll see steady growth, though not at the level of five years ago.”

Even a decade ago business aviation was a sapling in the shadow of general private aviation — a sector which included the swinging cruise-ships-in-the-sky of lore.

By marketing exclusively to business clients, jet companies found a small, exclusive niche market with often bottomless resources and ever-increasing need.

“The main characteristic of this market is that ten, fifteen years ago it was mainly focused on wire [non-business] groups and now we’ve seen the market expand to more business activity — [like for flying] managers and partners,” says Olivier Villa, Dassault Aviation’s senior vice president for civil aircraft. “The market is expanding and becoming more rational.”

“Charter remains depressed, but as MEBA showed there’s a lot of quality prospects,” says Edwards.

Edwards was referring to the Middle East Business Aviation Forum, a three-day affair that took over the sprawling indoor and outdoor event expo at Dubai International Airport in early December.

The third largest business aviation show in the world behind the National Business Aviation Association show in the United States and the European Business Aviation Conference and Exhibition, held last year in Geneva, it underlined the status of the Middle East (and the GCC in particular) as a major crossroads on the world business aviation stage.

The last show, in 2008, saw more than $1.5bn in transactions.

This month, typical orders placed included two Bombardier aircraft, sold at $285m each; a separate order by Comlux Aviation Group for two Bombardier Global 7000 business aircraft, in a $130m deal; and Munich-based Jet Air Flug’s order for five mid-size Learjet 85s and two large-cabin Challenger 605 jets, worth a total of $155m.

MEBA “shows also how important private aviation has become as a business tool in the region,” said Alison Weller, managing director of F&E Aerospace, which oversaw the show and maintains offices in Dubai and London.

With 338 vendors from 38 countries and 6,200 visitors hailing from 77 countries, the show represented the melting pot that is Middle East business aviation — different from the oft homogenous landscapes of a Western air show.

“We are a GCC company on a world stage,” said Patrick Enz, chief executive of RizonJet, a business charter provider with offices in Qatar, Sharjah and the United Kingdom.

This is partly because of its physical position on the globe, which allows the Middle East — specifically the airline-rich GCC and UAE — to serve as a middle ground for a rising wave of newly wealthy customers from power players like India and China, who might not have been persuaded to make a long-haul trip to the US for an air show.

“The work we do with MEBA is great,” Villa said. “You see Indian customers, customers coming from the States — that’s a sign.”

“India is an emerging market for us — we recently sold a couple of planes there — though one of the challenges [for people buying planes in that country] is the tax structure,” said Boeing’s Taylor. A short plane ride away, Dubai “is very much a destination for them.”

“India and Dubai are interconnected with customers,” Villa said. “Dubai is the stop for India.” His company had just received aircraft orders from Saudi customers, an oil and construction-rich group held by many in the industry as the GCC’s biggest potential consumer base.

“Saudia Arabia has been a very important part of our market,” Taylor said.

Edwards agrees: “In terms of potential growth, there’s still some ways to go before any of these regions can compete in numbers with places like America, but in terms of percentage growth — the market in the UAE is big but the market in Saudi is huge.”

He dismissed the stereotype held by many in the West of the GCC’s bigger-is-better theory. “I wouldn’t subscribe to the ‘most flashy’ idea,” he said. “You have to identify that business aviation is a [office] tool. There is a huge Saudi business aviation society — it’s one of the biggest operations down there.”

Taylor added that a single-aisle Boeing model, based on the commercial 737, has dominated the Chinese market. “China is an emerging opportunity and we’re putting a lot of energy there.”

A new angle

The financial crisis succeeded in largely putting to an end — temporarily — to the days of fancy private planes and what many outside the industry see as a luxurious extravagance enjoyed by over-privileged executives.

Execs at Boeing took to marketing their product as a time-saving tool, getting employees from board meetings in Europe to factory visits in America to their beds at home in Asia in the shortest amount of time possible.

“For us it’s very easy to sell business aviation — it’s such a good productivity tool — ‘we do deliver time,’ and it’s not a marketing gimmick,” Edwards said. “For lots of people it gives them time to catch up on rest.”

“The cost of a private jet is always higher than other means of transport — but it’s giving you the possibility to not waste time,” Villa concurred.

Al Bateen’s management has tangible proof of savings. “We’ve done some studies that show that for five executives who need to be in and out of a city pretty quickly, it saves a lot of time,” Jones said.

Take a team of board members traveling from their home base of Paris to meetings and inspections at factories in the Southern US, then back home to Paris. The amount of time and hassle saved by avoiding security and ticket lines, flight delays, and connections mean an entire day of travel could easily be saved.

Al Bateen has a large, plush conference room in its marbled, chandeliered terminal, meaning a business executive popping into Abu Dhabi for a quick meeting before jetting off can hold it right there — and skip pricey hotel expo room fees.

So business jet travel now thrives on the old adage – time really is money.

“There’s always a growing market for people who see [private travel] as a [fiscal] advantage,” Jones says, standing underneath those same crystal lights. “That’s what’s driving it.”

The future

With new technology advances and the UAE’s growing emphasis on giving business aviation the physical space it needs to truly take flight, companies are free to market their products to a veritable garden of untapped consumers — executives both in the region and those flying in and out of MENA as business continues to re-start following two years of downturn.

“Our Boeing business jets are at the high end of the business craft market,” Taylor said, “but our little part of the business is actually going to grow really dramatically in the years to come, driven by VIP planes we’ve sold in last few years.”

He said the backlog of planes left unsold during the crisis has begun to sell, boosting profits.  “What we’re seeing in 2011 is the delivery of planes which were ordered several years ago, and the market we’re addressing is the replacement of older Boeing products that were already in service with those customers,” he says. “We’re replacing older technology with current products.”

Those profits stand to grow dramatically with the introduction of a new twin-aisle plane, which will be marketed towards larger groups of fliers.

The use of middle-man companies like RizonJet — which buy planes, charter them to business and provide pilots, steward staff and book the airfield space — will also be responsible for industry growth.

They cater to a businessman who cannot afford to buy his own plane but has enough to charter, or to someone who doesn’t have the physical space, time or patience to store a jet, hire a pilot and oversee full-time staff.

Al Bateen will also take a key role in UAE expansion. With its high-tech Instrumental Landing System upgrade, it kicked off a long-term plan for upgrades, including improvements to its air traffic control and weather observation systems.

“Al Bateen is now firmly placed on the world airports’ map,” says James E Bennett, CEO of Abu Dhabi Airports Company, which oversees the facility. “It is within ADAC’s vision for Al Bateen to grow it into a business aviation hub, and with this ILS upgrade the airport is on the right track.”

At MEBA, visitors seemed to show the same child-like excitement for the planes as the corporate executives selling them. Well-heeled men and women strolled through the plane lot — just off the airport’s commercial runway, a stone’s throw from a row of serviced Emirates jets — and crawled in and out of their luxe interiors. Two-story company chalets, some complete with outdoor dining, ringed the proceedings. One might look at the dusty commercial liners nearby —  and want to purchase on the spot.

But the planes on display were not all for sale. Some of the jets were there just to demonstrate technology and show their interiors and size. Edwards called it a surprise.

“Here on the show line there’s fewer planes than two years ago, but two years ago [the planes on display] that were just for sale,” he says. “Here, they’re primarily manufactured planes to demonstrate the product. So you’re not just selling inventory but creating long- term business.”

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