Competition heats up for Middle Eastern aircraft operators

An A319ACJ (A6-CJE) operated by Emirates.

Business jets operators in Dubai have had a tough 12 months. The closure of a runway at Dubai International Airport last year dragged the market’s centre of gravity across the desert. With operators scrapping to pick up new business at Dubai World Central – Al Maktoum Airport, some 50 km away from Dubai’s financial centre, with three FBOs – Jetex, ExecuJet and Jet Aviation – all sharing a makeshift home.

Dubai International has been fully operational since the end of last summer, but the message for companies operating business jets out of Dubai is clear: the future of their business is at Dubai World Central.

Competition high at Dubai World Central

“In five years, Dubai World Central is going to become the hub; you will see no business activity in Dubai International,” says Mike Berry, managing director at ExecuJet Middle East, which operates 25 aircraft (19 of which are managed), ranging from a Learjet 60 to a Boeing BBJ 1.

Richard Lineveldt, general manager at Gama Aviation in the UAE, which has 80 aircraft on its air operator’s certificate, agrees with Berry. “Dubai International is brilliant, but it is not the place for business aviation anymore,” he says.

Dubai-based FBOs are slowly starting a permanent migration to Dubai World Central, more and more companies are seeking hangarage space and aircraft operators are positive that it will be good for business in the long run, as they hope to capitalise upon Dubai’s urban sprawl and ambitious development plans.

“The runway closures had a positive effect, because they forced to use people to Dubai World Central,” says Berry. “People could test the facilities and see that the rates are actually more attractive.”

“Traffic has been down at Dubai International by 5-10 per cent since the runway closures, but the back end of October to November were fantastic for us,” he adds.

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While the future looks bright at Dubai World Centre, the consensus between private jet operators in the Middle East is that the market remains extremely competitive.

As a result, many operators have had to look at other activities to drive healthier profit margins.

“The charter market has become a very difficult field,” says Holder Ostheimerm, general manager at DC Aviation Al Futtaim. The company opened the first FBO at Dubai World Central in 2014 and also offers management, maintenance and, as Ostheimerm puts it, “limited brokering activities.”

Faster, higher, stronger

It is not a generalisation to say that aircraft in the Middle East are much bigger, passengers are richer and the purpose of a flight is less easy to distinguish. “It is still a maturing market, but I think the owners are very educated here,” says Berry.

In other parts of the world, business jets are frequently used by small and mid-size companies to reach regions which are not traditionally well-served by commercial aircraft. The geography of the Middle East is very different; cities are closer together and large parts of the region remain vastly unpopulated, which has created a very different flying culture.

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“Owners are flying from major city one to major city two; there are no remote cities or factories to get to,” says Khaldoun Ghalayini, general manager of Gulf Wings.

Operators like Comlux and Vertis, which are both based in Switzerland, have offices in Middle East to deal with demand for their VIP airliners.

“We fly royal families from the Middle East to destinations such as London, Paris, Geneva and the US,” says Luca Madone, a partner at Vertis.

“Ultra-long-range aircraft are a strong, strong focus. The bigger the aircraft gets, the more they are used for leisure. I would say about 80 per cent of our flights are for leisure, but the lines [between business and leisure] are very blurred in the Middle East.”

Sky-high pilot salaries and lack of infrastructure

Connecting the Middle East with the west is a huge opportunity for operators – Emirates now operates an Airbus ACJA319 through its own dedicated executive division to rival Qatar Airways – but there are further challenges, with operators agreeing that infrastructure – particularly maintenance – is still not quite up to scratch and that it is hard to find qualified pilots.

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With a lack of pilot training facilities in the Middle East, operators are having to pay over the odds to lure skilled pilots into the region and prevent them from leaving. “The salaries are so high, I regret not getting my pilot’s license,” jokes Ghalayini.

“There are no pilots out there anymore at the level we’re looking for, we have to make huge salary increases just to encourage them,” says one Middle Eastern operator.

“The pilot salaries are getting absolutely silly, but the infrastructure is what concerns me more,” agrees Lineveldt. “As an industry we’re not able to attract the right talent to this region.”

Disclaimer: Some of the comments used throughout this article were said at the pre-MEBA conference held by Clyde & Co on & December 2014.