Expert Opinion: Making it in the Middle East
Brand-new FBO and MRO services are springing up at an unprecedented rate in Dubai South. Facilities from ExecuJet, Jetex Flight Support, Falcon Aviation, Jet Aviation and DC Aviation are all underway, as Dubai’s general aviation industry makes the move to the rapidly expanding site.
Yet while new infrastructure spells a sunny outlook for Dubai, and the Middle East in general, statistics that support this market positivity can be difficult to find. The industry’s font of all knowledge, the WingX Advance report, focuses primarily on bizav movements to and from Europe. Therefore its analysis on the Middle East is, naturally, Euro-centric, and does not look at the Middle East as a standalone market. It is also tricky to glean accurate statistics from authorities like GCAA (the UAE General Civil Aviation Authority) or GACA (the Saudi Arabia General Authority of Civil Aviation), as the authorities favour commercial over general aviation, and collect data predominantly for the former.
UHNWI & growth
This means that we have to rely on other indicators of growth, such as the region’s accelerating population of ultra-high-net-worth individuals (UHNWIs). Jetcraft’s annual market forecast, published in 2017, tells us that total UHNWI wealth in the UAE is around USD $810bn, with UHNWI population growth expected to hit 60% by 2026.
This makes the UAE the fourth fastest growing market for new wealth in the world, after India, China and Russia.
“In the Middle East, wealth is around every corner,” says Mike Berry, Executive Vice President Aviation Services Luxaviation Group and Vice President of ExecuJet Middle East. Berry has worked in the region since 2002, when he joined ExecuJet as a financial director; the company itself has been in the market since 1998. Yet despite a dramatic increase in bizav movements since the early 2000s, he contends the Middle East is still a young market – and not without its growing pains.
“Ownership of aircraft is predominantly VVIP, UHNW individuals,” says Berry. “In 2007 and 2008, there was the start of a shift from the single owner to the use of aircraft by corporations as a business tool. Yet there has been no significant recovery in this corporate market since the economic downturn of 2008 – it is still vastly a single owner market.”
There are several effects that individual owners can have on a market. These include customer expectations impacting service costs; market fluctuations being linked to social, political and diplomatic events; and specific types of aircraft being favoured in the region.
Firstly, customers in the Middle East often have very high expectations of the services and costs that come with an aircraft. Many use consultants that are advising based on the American or European markets – with the result that customers can get inaccurate advice around issues such as costings for parts, services and repairs. In addition, challenging environmental conditions can spell a higher frequency of maintenance, as climactic conditions such as sandstorms cause erosion to aircraft as well as buildings.
Nick Weber, Maintenance Director at ExecuJet Middle East, explains that although the Middle East’s closest competitor geographically is Europe, rates and charges in the region are much more closely aligned to the Asian market. Companies may rely on expat forces for the kinds of technical specialists needed, which drives up overall operating costs. “The MRO market only really began to grow in the mid-2000s. Prior to this, aircraft would have to be taken into Europe to be serviced. Now we have the capability to fully service aircraft at home, but it can be difficult to remain marketable in comparison to Europe.”
Peaks and troughs
Business aviation in the Middle East is extremely seasonal, with peaks and troughs more pronounced than in any other market. In the summer months, aircraft disappear for weeks to Europe or Asia along with their holidaying owners, so movements drop off dramatically. Nevertheless, says Berry: “We have been experiencing an overall 5% year-on-year growth in business aviation movements through ExecuJet’s two FBOs in Dubai.”
This trend dropped, however, in October 2017, with a significant market slowdown directly related to the Saudi anti-corruption clean-ups. But, according to Berry: “we predict that by mid-2018 the aircraft that are currently grounded should be serviceable and flying again,” bringing the market back to a more consistent pattern of growth.
Single-owner aircraft often fly as much for leisure as for business, which can mean extended families, replete with nannies and pets, flying together. This has led to a preference for larger models with more seats – a trend which is supported in the global market, too. Jetcraft’s market forecast predicts that the period from 2017-2026 will see less units sold for more revenue, as buyers increasingly pick widebody aircraft. Though ‘widebody’ immediately brings converted Dreamliners and Boeing 747s to mind, this category also includes long and ultra-long range business jets.
“We’re seeing more Legacys, Challengers and increasing numbers of Globals coming through the doors,” commented Weber. The trend is evidently driven by the range capabilities of these jets as much as the additional space – the Global 6000 achieves 5,900nm, the equivalent of flying non-stop from Dubai to Boston.
A still-maturing market
As a market, the Middle East still has some maturing to do. The authorities are still geared much towards commercial aviation, and can be reluctant to recognise the value of implementing general aviation-specific regulations. For instance, ExecuJet’s fleet of 15 aircraft (changeable according to demand) is held under the same regulatory structure as Emirates airline. Running an AOC can be taxing under these cost structures – just one of the growing pains companies experience in the region.
Yet opportunities abound, and the steady upsurge in the value and types of aircraft entering the region is telling: Gulfstream 650s, Global 6000s and new model Falcons are increasingly popular, with Dassault Aviation’s ultra-long range Falcon 8X debuting at Abu Dhabi Air Expo 2018. It is still a very young market, but a rich one – and rich with possibility for the companies that choose to set up shop there.