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The current situation in the Middle East owes much to the U.S. property market collapse- which started the world financial crisis. Before the credit crunch Dubai was the world’s largest building site with house and apartment prices rocketing over a short period. But what suddenly goes up has a nasty habit of dropping like a brick.

Mike Vines   |   1st November 2009
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Weathering The Storm

An update on the Middle Eastern bizav markets.

The current situation in the Middle East owes much to the U.S. property market collapse- which started the world financial crisis. Before the credit crunch Dubai was the world’s largest building site with house and apartment prices rocketing over a short period. But what suddenly goes up has a nasty habit of dropping like a brick.

Soon after the first shivers of a world recession the real estate bubble burst in the Middle East region- with many foreign and local investors getting their fingers well and truly burnt. For many- having just sampled the convenience of business jet travel it is now something that they will have to do without for a time.

Business aviation like everything else has taken a hit in the region- and it is most marked at the lighter end of the jet charter market according to many. Pricing in this market has become “cut throat” reveals one insider.

At the other end of the spectrum- large corporations and the super-rich might have taken a hit- but they are better equipped to weather this financial storm and their large- long-range corporate jets are the last thing they’ll consider foregoing.

Ali Al Naqbi the founding Chairman of the Middle East Business Aviation Association says business aviation charter activity is around 30% down on last year- in the U.S.A it’s currently around 22% down- while the European Business Aviation Association hopes its region will only be down 15% by year end.

Steve Hartley the Executive Director of Dubai’s Empire Aviation Group reckons the 30% figure is about right- while Mike Berry the MD of ExecuJet Middle East puts it at between 25-30%. Both agree that it is difficult to forecast the next few months as the Middle East is just coming out of its hot summer and the month of Ramadan- so business travel should pick up again. But Berry says that even while taking this into account it’s been worse than usual this year.

Despite the financial situation- Middle Eastern and Asian companies continue to back top name western OEMs- though. Piaggio Aerospace is backed by Abu Dhabibased Mubadala Aerospace and Tata UK (part of the huge Indian Tata Group). Sino- Swearingen is now owned by Emivest Aerospace of Dubai and Piper Aircraft Inc. has most recently been acquired by Imprimis Strategic Investment Corporation of Brunei.

Both Royal Jet of Abu Dhabi- and start-up Al Jaber Aviation already famous for its 21 business jet order at last year’s MEBA show- have extended their business plans by a year. Royal Jet- a subsidiary of Abu Dhabi Aviation- says it has delayed its fleet increase from 12 to 20- but still plans to operate 50 business jets by 2020/21.

“In Europe and the Middle East there are opportunities for consolidation - certainly a lot of very small operations have gone out of business in the last six to eight months-” said Royal Jet’s CEO Shane O'Hare a few months back. “There are opportunities for strong players to look at equity swaps- mergers- or commercial alliances.”

AJA is a brand new subsidiary of the Al Jaber Group- which is the largest private sector employer in the UAE with 55-000 personnel. It only received its AOC this June and is already up and running with two charter Legacy 600s. On order it has five Embraer Lineage 1000s- four Airbus A318 Elites- two Airbus Corporate Jetliners and eight Legacy 450/500s.

AJA COO Mark Pierotti reveals- “We’re taking our first A318 Elite in the third quarter- 2010 and our first Lineage 1000 in the fourth quarter. The next Elite is due in first quarter- 2011 together with another Lineage. Fourth quarter 2011 will see us take another Lineage and Elite.” The first of the yet-to-bebuilt Legacy 450/500s is due in 2013. He adds that he can’t wait to get the larger aircraft as he feels that the wide-body VVIP market will be stronger- and that AJA will be more competitive.

The Government backed Abu Dhabi Aviation Company (ADAC) is another example of readying for the up-turn. It is encouraging business aviation related companies to base their operations at the Middle East’s first executive-only airport- the ex-Al Bateen Air Base- now re-named Abu Dhabi City Airport.

The airport- which is only a 10-minute drive from the capital’s business district- gained certification in June and is being upgraded at a cost of $55 million- and is managed by ADAC. It has a 3-200 meter ILS equipped runway and operators already based here include PrestigeJet and Falcon Aviation Services. Its private aircraft operators will have the option of providing their own FBO or operating through one of ADAC’s existing lounges which are being upgraded this year. ADAC offers four premium lounges equipped with the latest technologies- first-class catering- quick and efficient turnaround times and high quality passenger services.

Another major ADAC project is taking place at Abu Dhabi’s second city Al Ain where various joint ventures will create an aircraft engineering conclave. One group already signed-up is bavAIRia- the Bavarian aerospace organization which represents well-known German aerospace companies such as Atena- Aerotech Peissenberg- FAG Aerospace and MTU Aero Engines. The joint aerostructures team includes MT Aerospace- RUAG Aerospace and SGL Carbon.

His Exellency Khalifa Mohamed Al Mazrouei- Chairman of ADAC- said- “Given the small size of our population and the standard of living in the UAE- it becomes clear that our diversification strategy must cover high value-added science and technologybased sectors such as aerospace manufacturing. Add to that the fact that we hold one of the largest aircraft procurement programs in the world- it is no wonder that the Government has identified the aerospace sector as one of its strategic investment targets.”

Key areas of common interest to ADAC and bavAIRia include the fields of aero engines- aero structures- VIP interiors- satellite navigation applications- education and training.

Another two Gulf-based companies- PrestigeJet and Rizon Jet are expanding outward from the Middle East. Rizon Jet's parent Holding Group- is part of a consortium involved in building London Biggin Hill's new $15 million four star- 75-bed hotel.

PrestigeJet of Abu Dhabi which bought Torrejon-Madrid-based Flylink Express- an aircraft management and charter operator- last year has re-branded it PrestigeJet Spain. The company has the distinction of being the first Arabian business aircraft operator with a European AOC. PrestigeJet’s ambitions don’t stop here as it plans to open FBO operations in Jordan- Bahrain and Dohar. “We are Dohar’s first business jet charter operator- holding an AOC with certificate number 003-” said Faris Deeb- MD of PrestigeJet. Another of its operation in Qatar- will be known as Qjet.

Captain Saad Wallan- CEO of Saudi Arabia’s Wallan Aviation believes of the current Middle Eastern business aviation market- “business aviation awareness needs to be improved in the region. The region’s aviation authorities could help the more efficient use of business jets here as well. There is a lot of potential [for more growth] and we‘ve laid the foundations for it to grow.”

He adds that pressure needs to be kept on the authorities to affect change. “We have a staunch supporter in Sultan Salman bin Abdulaziz who is a board member of the Saudi Civil Aviation Authority.” Sultan Salman bin Abdulaziz was a Royal Saudi Air Force pilot and also flew on the Space Shuttle STS-51G mission as payload specialist.

Based at Riyadh- Wallan Aviation is Cessna’s Middle Eastern dealership as well as a Cessna Authorized Service Center. It is also a business jet charter operator. Saad Wallan observes the Citation Sovereign is proving very popular- with four delivered to Dubai- three to Saudi Arabia- four to Egypt and three to India so far. Wallan’s Cessna Service Center is now fully functioning- and by October will cover all Cessna training aircraft as well as all Citation models.

He is particularly excited about the new wingleted version of the Citation X- not only because he has ordered the first two out of the first three for Saudi customers- but because of the aircraft’s improved hot and high performance and better range. Riyadh is at 2-049ft elevation and it gets very hot there.

“It will make it possible to fly Riyadh- London non-stop. The winglets are bringing a lot of benefits for us long-distance people and the US is now only one stop from Riyadh.” He says he’s expecting the range to be around IFR 3-300nm.

The Wallan Flying school was due to open its doors to its first students last month (October)- flying the latest Cessna 172s with Garmin G1000 avionics. Further down the line Wallan sees commercial flight training taking place at his base at Thumama Airport- 14-miles NE of Riyadh’s King Khalid International Airport. Thumama has a 14-000 ft runway- and customers are not charged landing fees.

Relative newcomer Empire Aviation of Dubai- which started operations in 2007- is fast becoming another major player in the GCC region. Its foundations are built on its Hawker Beechcraft Dealership and managed business jet fleet. It already has 15 managed aircraft signed-up- a number expected to reach 20 by year-end- with around 75% available for charter.

“Growth has been tremendous-” observes Executive Director Steve Hartley. He adds that even though in-region charter is down around 30%- “our fleet will continue to be very active. Bearing in mind the economic climate- a lot of people did take financial hits- however- the extremely wealthy haven’t really been affected- and continue to look for quality in corporate aviation.”

Hartley- who’s been in the aviation business for 30 years- says that Empire Aviation offers a top class managed fleet solution. “There were quite a few organizations making all sorts of promises regarding utilizations. We tell customers that we’ll manage their aeroplanes and give them the best exposure we can in the GCC with charter as an added bonus. Some people thought initially that if they bought an aeroplane- charter would pay for it.

“The reality is slightly different - charter doesn’t buy aeroplanes- and we wouldn’t be in the sales business if it did.”
Empire’s fleet consists of five Hawker 800s- 850XPs- 900XPs and a recently arrived Hawker 4000. It also operates a Learjet 60XR- Challenger 604- Challenger 300- two Legacy 600s- a Gulfstream G450- Falcon 900EX EASy- and two amphibious VIP Grand Caravans operating to an exclusive Desert Island Resort.

According to Hartley- the company invests heavily in maintenance oversight- planning and quality assurance for his aircraft owners. “Our maintenance division oversees the quality of work done and more importantly we manage the invoicing. We have flat-rate manuals for all the aircraft so we can check on everything. It’s a square deal for the owners.”

Empire’s Hawker Beechcraft distributorship sold 16 new aeroplanes in its first year of operation and this trend is continuing this year- says Hartley. “We’ve got a product that has been unbelievably well accepted in the form of the Hawkers – there are now 40 of them operating in the GCC- we just delivered our second King Air 350 and a third is coming into Abu Dhabi in December.”

The company is to open a motorcar type showroom for bizjets and offer hangarage at Dubai’s new mega Al Maktoum International Airport possibly by late 2010. He says aircraft parking and hangarage is at a premium at his current base of Dubai International Airport. So the company has signed an MoU with Executive Flight Centre to offer hangarage in the airport’s largest business aviation hangar. It is currently finalizing a long-term deal with the Dubai Airports-owned company.

He says Empire Aviation might get involved in the FBO business longer-term and sees joint ventures as the way forward with a European base a possibility. The company is also about to start operations from Africa. “We’ve applied for an AOC – I’m not going to mention which country yet – but we’ll have four aeroplanes on that AOC from day one- which will be a G550- a couple of Hawkers and a Challenger.”

Hartley says his business is doing exceptionally well in a tough economic environment- “There’s no doubt there’s been a downturn in the region- but I think we might be starting to see the bottom of it.”

Meantime- commenting just as Ramadan was ending Mike Berry MD of ExecuJet Middle East told World Aircraft Sales Magazine he’d seen a lessening of business aviation activity at his Dubai International base.

“There have been a lot of aircraft on the ramp over the last few months but not too many movements at all. We’ve certainly felt it through our own FBO and maintenance facility - there were definitely less aircraft trafficking through.”

On a brighter note he adds- “On the charter side I think we might be seeing the first green shoots of recovery- as we were starting to get enquiries and bookings for October and November. Over the last few months- bookings have been mainly last minute ones. Maybe it’s encouraging that we’re now getting bookings two months out- and that they are a mixture of business and pleasure travel.”

Aircraft sales have been very difficult- he explains- with very few enquiries as buyers still wait for the market to bottomout. Lack of finance is adding to the problem- Berry concludes.

Dubai-based Global flight support and brokerage company Palm Aviation is to open its first FBO at Al Maktoum International Airport possibly by the third quarter next year. There is doubt as to the exact date though as building of this mega prestigious city/airport complex has been slowed by the world financial crisis. Mohammed S. Saideh- Palm Aviation’s vp/chief marketing officer- says that although building of his FBO is yet to start- his company can’t wait to start operations there.

Saideh told us that Palm is planning more FBOs and possibly farther afield. “It depends on how everyone weathers the storm – it’s not a good time to invest – so we’ll see how things work out.

“I am optimistic about the future- we have a plan- it’s going great- we are generating work and our balance sheets are positive. We have clients in Africa who haven’t even noticed the down-turn in the economy. In fact their economies have grown 200% since the down-turn started.”

Palm Aviation is offering flight support for a growing number of European customers who wish to travel to the Middle East and Africa. “We will sign more deals before the Dubai Air Show in November-” Saideh anticipated.

Qatar’s Doha International Airport (due to open in 2010) is to feature a dedicated area known as the ‘Emir Terminal’ for use by the Qatar royal family. The new airport will cover 8.5 sq miles and replace the existing airport some four kilometers to the west.

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