Middle East corporate aviation – cautious optimism
Posted Date: 11/05/2009
Issue: Executive & VIP Aviation International June 2009
Publication: Executive & VIP Aviation International
Don Parry reports on the scene for business aviation in the Middle East and asks: what
Despite the current economic problems afflicting commercial aviation, there is a strong perception that the Middle East is proving to be an oasis of calm and to a certain degree is recession proof. There is little public comment about the “recession” and companies are anxious to highlight predictions of growth and continuing expansion, based upon a strong belief that the area is set to become the next generation aviation centre of the world. Company executives claim financial problems have hardly caused a ripple, citing economic prudence and factors such as Islamic law banning short selling (hedge funds) reducing exposure to risk. Currently, there are approximately 390 business jets in the Middle East and it is projected that by 2014 the figure will be 900.
Dubai International Airport is said to be the largest business aviation hub in the region, with Abu Dhabi being anxious to compete. Last November, the Abu Dhabi Airports Company announced an investment of some $55 million to refurbish Al Bateen Airport to cater for business and VIP aircraft and to be renamed Abu Dhabi City Airport. Said to be the first private jet airport in the Middle East and North Africa, stand capacity will grow from 50 to 120 spaces, with specific areas for maintenance of different sized aircraft. The instrument landing system will be upgraded and the latest global positioning system technology will be installed.
During 2008, private aviation facilities were opened also in Kuwait and Beirut, demonstrating a growing desire to cater to this sector throughout the Middle East region.
Business aviation is seen as a necessity in this area, with analysts forecasting a 40% increase in Middle East business aviation over the next five years, with Saudi and UAE in the forefront. Expansion among the service providers is very much to the fore and Jetex expanded its reach when it entered the European market with an FBO facility at le Bourget.
Prestige Jet is set to open five new FBOs in the local area and Europe during 2009. The company has acquired the Madrid-based Flylink Express Aviation Management and re-branded it as Prestige Jet Spain. Prestige Holding's likes to say that it "acts local, thinks global", a strategy currently being carried out as it develops its Spanish operation, Middle East FBO network and flight ambulance services. Meanwhile, the development of three new FBOs in Qatar, Jordan and Bahrain are at advanced stages.
Last year, Prestige Jet’s flight support division, Prestige Flight Support and Palm Aviation signed a service agreement. Under this agreement, Palm Aviation will provide ground handling services and logistical support for all Prestige Jet flights worldwide.
Palm Aviation is investing $10.9 million in a new facility and plans to commence operations at the new airport at Jebel Ali by the end of the year. The company also has a memorandum of understanding with Jordan Aircraft Mtce Ltd (JoAMCo) under which Palm Aviation will offer global flight support, ground handling and re-fuelling services to JorAMCo’s customers, on demand, during their maintenance visits to JorAMCo’s facilities at Queen Alia International Airport in Amman, Jordan.
Palm Aviation flirted with the very light jet (VLJ)market during MEBA 2008, when it introduced the Eclipse 500, to the area. Times have now moved on and some analysts consider that prospects for VLJs in the Middle East area will initially be inhibited by questions of range.
During MEBA it was stated that the Middle East MRO market would grow at 9%, per year, over next five years. This is a market sector that requires growth, as there tends to be a current lack of capacity in the area. However too quick an expansion could lead to problems of finding sufficient experienced staff. Local wisdom expresses caution over too fast an expansion suggesting that growth should take a reasonable time to develop in order to grow and stay on top.
When it was suggested that the economic situation may be impacting the area, Abdul Charafeddin, Operations Quality Controller for United Aviation Services (UAS) was both dismissive of the suggestion and confident for the future, stating that: “UAS so far is not affected in the current financial crises and we are always on the look out to make sure all our dealings are carefully monitored. In other words, we offer credit facility to credit worthy and trusted companies.” No argument there.
Given the dearth of handling companies in the Middle East, are prices for handling high? “The prices generally in the Middle East are much lower than what is currently offered in other parts of the world,” replies Charafeddin. “Furthermore, the market we serve is unique and is focused more on the service and quality of work and such service always has a price.”
UAS has enhanced its customer relationship management (CRM) system that will increase productivity and efficiency in customer service. Charafeddin emphasises that UAS is a company that has been developing and growing at a very steady pace. “For the past 10 years we have acquired good market share and stood very strongly among competitors. Due to the continuous expansion and increase in business volume we required a system that will cope with amount of business we have and for future business increases.”
The system helps the company keep track of and easily access information about the organisation it is dealing with, thereby increasing productivity and efficiency in providing a good service to customers. It uses the latest version of Microsoft Dynamics CRM 4.0.
In addition to CRM, UAS has also implemented an enterprise resource planning system, designed to coordinate all the resources, information and activities required to complete business processes from order fulfilment to billing.
These innovations have been welcomed and Charafeddin comments: “More importantly they will focus more on the quality of service and will enable us to service many clients per hour. They will reduce the user workload by approximately 60%, due to the customised screen and data availability. The staff will not search or call to enquire about information, rather all that he or she needs will be at their figure tips.”
A more recent entrant on the scene is Al-Ajneha, a consortium of companies based in the UAE, with the intention of becoming one of the region's largest integrated support providers for business jet owners and operators.
According to Basel Arrar, Chairman and Chief Executive Officer of Al-Ajneha, the private jet business in the region accounts for a substantial portion of the global industry and it will continue to grow in demand. Al-Ajneha will support this growth by providing a one-stop-shop for support services by partnering with companies that will bring best-in-class technical know-how to the enterprise.
With so much optimism and confidence on display it seems rather churlish to wonder if things are not quite as rosy as they may seem. There is no doubt that the US and UK recessions will impact the area, with some analysts suggesting that the main effect is a reduction in hours flown, rather than number of aircraft purchased. In March, Emirates announced that it would stop using the A380 to fly passengers between Dubai and New York because demand for the route had been hit by the global recession. However it said it would reschedule the two A380s it uses for two daily flights to New York onto routes between the Emirate and Toronto and Bangkok.
Another straw in the economic wind has been the decision to delay the new airport at Jebel Ali’s first phase, now being put back to 2010, one reason for which is easing of air travel. Other trends in the area include a slowdown in the construction and media industries, though local sentiment continues to be strong.
Given the enthusiasm currently being shown in the growth of general aviation, it was rather sad to note that this year’s General Aviation in the Middle East 2009 event was cancelled, at very short notice. With three weeks to go, the delegate registrations were insufficient to ensure the event was viable. The event will, however, take place again in 2010 when it is anticipated the global economy will be in better shape. Meanwhile, UK-based Farnborough International Limited has confirmed its first chalet sales for the inaugural Bahrain International Airshow, in January 2010.
The current situation could offer the area a breathing space to introduce enhanced air traffic management services, an area that has received some criticism due to increasing pressure on airspace. Typically, the UAE’s General Civil Aviation Authority has plans to increase the number of international air corridors this year to better serve Al Ain International Airport and the new Jebel Ali International Airport.
With such thoughts in mind, it should be remembered that although the short-term outlook may appear unsettled, analysts tend to be in agreement that the area enjoys high levels of economic resilience. There is general agreement that the longer term outlook for the area is good or at least cautiously optimistic.
