Mideast charter outgrowing supply

 - October 3, 2007, 9:48 AM

Too few business aircraft are based in the United Arab Emirates (UAE) and other Arabian Gulf states to meet rising demand for executive charter flights, according to International Air Charter (IAC), a UK-based charter brokering group that opened an office in Dubai two years ago. The company is urging charter operators to move aircraft into the region to increase capacity and stimulate further demand.

Describing a classic chicken-and-egg dilemma, IAC chief executive Hugh Courtenay told AIN that the lack of based aircraft in the Gulf states contributes to the high cost of charter. Equipment has to be flown in from Saudi Arabia, Kuwait and even farther afield, which can add thousands of dollars to the cost of a charter and discourage customers from booking flights. Nonetheless, IAC has detected strong underlying demand for charters and feels that the market would grow even more quickly if sufficient capacity were available locally.

“Very few operators have actually based aircraft here,” said Courtenay, speaking from Dubai, and pointing to locally based companies such as ExecuJet Aviation, Royal Jet, Elite Jets and Bexair. To operate aircraft for charter beyond short periods, operators are required to secure an aircraft operators certificate (AOC) from the UAE or one of the other states in the Gulf Cooperation Council. Courtenay said that this is not an unduly laborious process and claimed that operators would be well rewarded for the effort. In fact, foreign operators can opt to add their aircraft to the AOC of a local partner such as UAE-based Hamra Air, at least as an interim step to getting their own certificate.

Among the aircraft already based in the UAE and available for charter are a Bombardier Challenger 604, a pair of Boeing Business Jets, two Gulfstream 300s and a Cessna Citation Excel. Abu Dhabi-based Royal Jet, which operates the BBJs and the G300s, has just placed orders for two Bombardier Challenger 300s (plus options for two more) and the first of these will arrive in the first quarter of next year. South African-owned Elite Jets is set to locate a Raytheon Beechjet 400A and a Premier I at its new Dubai base.

A Market for Midsize Jets
The Middle East has long been associated with large airliners adapted for VIP use by the region’s large and extraordinarily wealthy royal families. But according to IAC, demand is now growing for executive charters using more utilitarian transports in the small and midsize classes of business jets. Many of the new prospective customers are western corporations that need greater flexibility traveling throughout the region than scheduled airlines can provide. Even though major airports such as Dubai are well served by international carriers, Courtenay said that there are often not enough business- and first-class seats available.

IAC also feels that demand could rise among the local business community, although historically Arab executives have not been eager to use shared business aircraft. “There are about 5,000 millionaires in Dubai alone,” Courtenay said. “But many rich people in this part of the world still take the view that if they can use a business aircraft at all they want to own it themselves.” That said, he maintained that if good quality aircraft were more readily available for charter, local people might well come to appreciate the benefits and cost effectiveness of this type of service.

According to Courtenay, operating restrictions continue to impede the growth of the Middle East charter market. Saudi Arabia, for example, requires flight permits for all operations into its airspace, and securing these can take anywhere from “a few hours” to a week. He said that some charter flight requests never result in bookings because it becomes clear that the paperwork  will prove too lengthy and inflexible.

In IAC’s view, long-term business aviation market growth in the Middle East will depend on greater political stability in the region. Courtenay takes an optimistic view of this prospect, arguing that even war-torn Iraq is beginning to settle down. His Dubai office is now brokering an increasing number of charters into and out of Iraq and recently started assisting the transport plans of the interim Iraqi government.

IAC has offices in the London area, as well as in Frankfurt, Germany, near Nice in the south of France and at Padova in Italy. Courtenay reported that overall executive charter demand is generally recovering from the past three or four years of economic uncertainty. “Fractional ownership has definitely taken some business away from the ad hoc charter sector in recent years, but many of these customers are not renewing [their fractional ownership contracts] and the charter market is starting to benefit from this,” he concluded. The company’s Dubai offices employ three fluent Arabic speakers, and Courtenay maintained that his investment in a local presence has positioned the company well for anticipated future growth.