By Neil Halligan
While global demand for business jets is flat to negative, the Middle East’s forecast $248bn worth of orders in the next decade has seen manufacturer Gulfstream turn its attention to the region. CEO Mark Burns talks range, speed and connectivity
In a region dominated by burgeoning Boeing and Airbus aircraft, private jet manufacturers are still managing to find a niche.
Orders for the typically customised aircraft — still largely the preserve of the ultra-high net worth individuals, corporates and governments — remain steady but there is a dip on the horizon, according to the most recent ten-year market outlook by Jetcraft, which facilitates the buying and selling of aircraft.
In the Middle East, the impact of low oil prices on government coffers and corporate earnings is impacting business aircraft sales, Jetcraft says.
“The current climate for aircraft transactions is challenging,” Jetcraft’s report says. “Customers in the region are sitting on their hands as a result and deal activity is slow. The few transactions that are closing are likely being facilitated by OEMs (original equipment manufacturer) who are able to extend significant discounts.
“Our outlook for the region throughout the forecast period is that it will under-perform as a result of the significant short-term headwinds.”
But there is one manufacturer breaking through the clouds: Gulfstream.
Jetcraft predicts that of the 7,879 business jet deliveries expected in the Middle East over next 10 years — representing $248bn in revenues (based on 2015 pricing) — Gulfstream will account for 30.6 percent, or $75bn.
The US-based company is a wholly owned subsidiary of Virginia-based General Dynamics, an aerospace and defence company valued at more than $58bn, with a 4.3 percent rise in its quarterly profit in January to $797m.
General Dynamics said its aerospace group – which includes Gulfstream and aviation services company Jet Aviation — reported $2.22bn in revenue for the fourth quarter of 2016, up 3.8 percent on the previous year.
While the results do not break down to reveal Gulfstream alone, in its financial statement, General Dynamics referred to Gulfstream’s two new large-cabin business jets as progressing ahead of schedule.
Gulfstream president and CEO Mark Burns says despite a gloomy global market outlook, he remains positive about the Middle East region and expects it will have a very good year. The manufacturer’s bright view is largely due to its expanding family of large aircraft.
Sitting inside one of the Gulfsteam’s market-leading G650 aircraft during a recent visit to Dubai, Burns is keen to underline the long-standing connection the planemaker has to the emirate, and the region.
“Dubai was the first place we delivered the Gulfstream to in the region,” he says. “Business continues to be good [in the Middle East]. We’ve got 120 airplanes based here. The G650 continues to be the strongest airplane in the market for us. We’ve delivered over 200 G650s [globally]; 25 of them are here in the Middle East.
“The market is still good, still active. We’ve got a very compelling story with the G650 and the [soon to be delivered] G500 and G600. They all fit this market well. The speed and the range of the airplanes really fit well with the customers that are here in the region.”
Burns dismisses suggestion that the oil price is affecting sales in the GCC, but says geopolitics is a concern.
“Not so much the price of oil, but certainly some of the geopolitical issues in the region have had an impact over the last five to ten years,” he says.
“But our airplanes are still very well received. We sell airplanes in just about every country in the Middle East. I think the price of oil had less of an impact on [Middle East sales]; it probably had more of an impact on our US customers.”
In the Middle East, Saudi Arabia has the most Gulfstream planes, followed by the UAE. Burns says the customers tend to be companies, corporations, rich individuals or heads of state and thus, their orders are typically for one or two planes at a time rather than the multiples that are associated with larger commercial aircraft operators.
However, that trend was broken with the order of 30 aircraft placed by Qatar Airways for its business aviation unit in May 2015. That order built on from a memorandum of understanding to buy 20, signed six months earlier.
The Doha-based carrier’s purchase includes a variety of G650s and new wide-cabins G500 and G600 for its Qatar Executive fleet. Gulfstream has started to deliver them, as the orders are confirmed.
“These airplanes are unique,” Burns says, speaking about the ultra-long range aircraft that is the mainstay of Gulfstream’s order book.
“The speed and range give us an opportunity to give an airplane to Qatar Executive that they can use for heads of state lift and charter, and things of that nature.
“In the US we see a lot more fractional ownership. It depends on the region and the customer and what they do with the airplane. Here it’s more heads of state, government, high-wealth individuals, and it’s short-term charter.
“I think the fact that Qatar is using this airplane in that executive charter role will expose the airplanes more here in the region.”
Burns says the G650 and the G650ER, with list prices of $65m and $68.8m, respectively, are ideal for a region with two-thirds of the world’s population living within eight hours flight of Dubai.
With a range of 7,000 nautical miles for the G650 and 7,500 nautical miles for the G650ER, the aircraft is also quick, he says. According to Gulfstream, it can fly from Los Angeles to London more than 30 minutes faster than its rival large-cabin aircraft, and from New York to Tokyo almost an hour faster.
In a recent flight from Taipei Taoyuan International Airport to Arizona’s Scottsdale Airport, the G650 flew 6,143 nautical miles in a total flight time of 10 hours and 57 minutes. The G650ER is capable of flying from Dubai to New York in 13 hours and 7 minutes.
That range and speed are the two most important factors for business aircraft buyers and renters, according to customers who sit on Gulfstream’s customer advisory board.
“When we were designing these airplanes, we had about 100 customers that actually sat on a board that met a couple of times a year and they gave us feedback on everything from the internet to the skylights in the airplane,” Burns says.
“We designed these planes based on what people need and what they think their business is going to do. Speed was a big one — the airplane has got to go faster.”
In a busy marketplace, where Gulfstream competes with Bombardier and Dassault, Burns says investing in innovation is vital. While there is often much talk about customers’ opulent aircraft fitouts, he says buyers are more interested in making sure the cabins are functional.
“What we’ve been able to do over the last ten years by investing in new products really gives us the most compelling story. G650 and G650ER we can deliver right now; we’ll soon deliver the G500, starting next year, and the G600 the following year,” he says.
“The speed, range and cabin comfort of those airplanes are second to none. G650 kind of stands alone at the upper end of this market for us. To get beyond a G650, then you’re talking about an airliner type configuration.
“For us, this is a good time. We’ve got no competitor to the G650 and continue to deliver at a very high rate for the G650 and G650ER.”
Fast connectivity on board has also become crucial.
“Anecdotally, you hear that it’s five, ten, 15 times faster, but the faster it gets, the more our customers want to use things like streaming video [and have the] ability to conference onto the airplane, where they can do business live,” Burns says. “Anytime you’re on an airplane for eight, ten, 12 hours, you want to make sure those are productive hours.”
Along the list of features in demand is reducing cabin pressure to simulate the feeling of flying at lower altitude.
“Most [commercial] aircraft are pressurised to make it seem like you’re at 8,000 feet. Our aircraft are about half of that, which makes it easier to breathe and it means you’re not so fatigued when you get off the airplane. The noise levels and cabin altitude make a difference on how fatigued you are getting off an airplane,” Burns says.
When Abu Dhabi-based Etihad Airways revealed its new ultra-luxury suite ‘The Residence’ and its first class ‘Apartments’ in 2014 it billed them as competitors to private business aviation, offering customers a flight that “felt like a business jet for half the price”.
While Burns acknowledges the product is innovative, he does not believe it will lure Gulfstream customers.
“I think it will have an impact further down the business jet line,” he says. “For us, at the large cabin end of [the business jet spectrum], our clients tend to prefer the security, privacy and flexibility of owning the airplane.
“As you get into the smaller jets, I think it may be disruptive but I think for us, at the upper end, it feels less disruptive, though I’m sure there will be instances where it will impact us.”
Gulfstream’s popularity in the GCC has seen it open a distribution centre in Dubai, one of only three regional hubs in the world (the other two are in Hong Kong and London). Inventory has grown to almost $25m, increasing each time a new plane model is added to the fleet.
“Any time you sell as many planes as we have in the region, you have to stand behind the product, the best way you can do that is to add people and parts in the region to service the airplane,” Burns says.
“We do that through Gulfstream and Jet Aviation, but having parts here at Dubai World [Central] as well as the international airport are very important as our client are at both places.”
Looking to the mid to long-term future outlook in the region, Burns sees plenty of growth opportunities in the Middle East.
“We’ve been here for 40 years. We delivered the first GII (a twin engine business jet) back in 1976 and since then this has been a very important market for us,” he says.
“When we’re designing new airplanes, we think about this market. We design airplanes that do the range and the speed that customers in this particular area covet.
"This is going to be a growth area for us. I really believe we’ve got the most compelling argument.”
And Jetcraft’s projected outlook appears to support his confidence, particularly when Gulfsteam’s highly anticipated G500 and G600 are launched.