Bizjet builders eye growing Middle East market

 - October 18, 2006, 5:12 AM

A decade ago, any discussion of the private aircraft market in the Middle East was generally limited to members of the royal families as customers, and the airplanes were for the most part executive/VIP versions of widebody airliners.

Ten years later, business aviation as a business tool is coming into its own in the Middle East, and the market includes wealthy entrepreneurs and individuals, corporations and an expanding list of business aircraft charter operators: from Arab Wings in Jordan, which recently added a Citation XLS to its fleet; to ExecuJet Middle East in Dubai, which saw its fleet grow with the addition this year of a Challenger 604 and a Pilatus PC-12; to Saudi Arabia’s National Air Services, partnered with NetJets Middle East; to Abu Dhabi-based Royal Jet, which, is hosting the inaugural Middle East Business Aviation (MEBA) conference one day before this year’s Dubai Air Show opens.

As for aircraft fractional ownership operator NetJets Middle East, it has matured from a somewhat tentative beginning in 1999 to a major presence six years later with a fleet of nearly 30 business jets. It has firm orders for three Gulfstream G350s and is negotiating to acquire more Falcon 2000EXs and Hawker 800XPs.

Taken at face value, it’s a Middle East market calculated to make the business jet manufacturers show up in unprecedented numbers this year at the Dubai Air Show. Clive Richardson, CEO of the organizing Fairs & Exhibitions aerospace division, said, “The flexibility and privacy of private jet charter has seen demand grow exponentially on the back of an increase in Middle East air passenger traffic of almost 25 percent [in the] last year.”

He attributes much of that increase to the growth of major international events in the area, such as the Bahrain Grand Prix, the Dubai World Cup (tennis) and the Dubai Desert Class (golf). But it is also the result of a growing class of entrepreneurs who are convinced that the peak of the burgeoning Middle East economy remains some years in the future. They form a growing market for private aviation travel, demanding air transport in every aircraft type from single-engine Pilatus PC-12s to Boeing Business Jets.

Boeing Business Jets Finds a Middle East Niche

Twenty-five Boeing Business Jets are in service in the Middle East, representing a 28-percent share of the worldwide BBJ market, “so it’s a huge market for us,” said Boeing Business Jets president Steven Hill. And he expects that market share to grow in the near future.

The rapidly growing economy, fueled in no small part by oil money, is a major factor, as is the fact that many of the Middle East private jet fleets are now ready for an upgrade. Some may choose to have a major overhaul and cabin interior makeover. Others may simply decide to replace the older airplane with a new one.

In recent years, Boeing has made an effort to bring service closer to its Middle East customer, rather than force the customer to take the airplane to a European center for maintenance.

“We have a spares warehouse center in Dubai, and we have a service center arrangement in Riyadh in Saudi Arabia,” said Hill. “And we’re near signing up a second authorized Middle East service center before year-end.

“We have dozens of service representatives throughout the Middle East, and we have a 24/7 dedicated field representative in Dubai who responds only to VIP customers who are operating Boeing airplanes.”

A spokesman for Airbus, whose Airbus Corporate Jetliner (ACJ) is a competitor to Boeing’s BBJ, made it clear that the European conglomerate has no intention of being Boeing’s Middle East water-boy, despite coming late to the party.

“We’ve had a lot of success in the Middle East,” said a spokes-man, noting there are now more than a dozen ACJs in service in the region, including an ACJ delivered to Al Kharafi Group of Kuwait and operated on its behalf by UK-based Twinjet of Luton.

Qatar Airways was the first Middle East customer to order an ACJ, initially planning to use it in its executive/VIP configuration on airline routes. But it proved so popular that the airline’s VIP flight division took it over. Now, in addition to charter, it’s being employed to open new routes, then being replaced by an A319LR in an all-business-class configuration.

National Air Services in Jeddah, said an Airbus spokesman, is “essentially” a business jet operator, with two executive version A319s equipped with fully reclining business-class seats.

Perhaps the biggest news is that Airbus is selling the first private jet version of the giant A380 airliner to a Middle East customer, with German outfitter Lufthansa Technik as the most likely choice to do the executive/VIP interior.

Airbus has numerous service centers worldwide capable of supporting the ACJ, including Qatar Airways in Doha, Qatar.

Bombardier Builds a Presence

Until the arrival of its Challenger 604 in 1996, Canadian OEM Bombardier had found it tough going in the Middle East. “But with the 604, we had a true nonstop transport from almost any point in the Middle East to London,” said a spokesman.

With the Global Express, Middle East customers found something even more to their taste–a business jet with a cabin larger than the Gulfstream’s, nonstop range from Riyadh to New York, and max cruise of Mach 0.89 from Riyadh to London. And as a further enticement, Bombardier opened a regional headquarters in Dubai the same year.

Today, the manufacturer has six Global Expresses and 46 assorted Challengers and Learjets in service in the Middle East. More recently, the company sold a Learjet 40 to Saudi businessman Mohamed Al Harasani, who plans to use it to expand his architectural business in the Middle East and Mediterranean.

“My business has grown to where it did not make sense to continue flying charter,” he said.

Early this year, Bombardier delivered the first Challenger 300 in the area, to HH Sheikh Saleh bin Mohammed Al Sharqi in the UAE. There are now four Challenger 300s in service in the Gulf region alone.

Bombardier’s Skyjet International charter operation opened its doors in Dubai in February and is offering global hourly block travel through its Skyjet membership card.

The program is positioned to provide a seamless global travel solution–in the Middle East primarily through association with a network of Middle East charter providers such as Royal Jet of Abu Dhabi, Bexair of Bahrain, Qatar Airways of Qatar and further abroad through such international operators as ExecuJet Aviation in Dubai and Cirrus Aviation in Beirut.

Bombardier plans a considerable display on the static line at the Dubai Air Show, with a Global 5000, a Challenger 300 and a Challenger 604, along with a Learjet 45XR. Also at the Dubai Air Show, Bombardier plans to announce a partnership with ExecuJet to open a service facility and spares depot for the entire Bombardier aircraft line.

A Re-emerging Market

“There’s no doubt,” said Jerry Gore, president of Gore Design Completions in San Antonio, “the Middle East is a re-emerging market for business aviation with a shifting demographic.

“There’s going to be a lot of activity, not merely based on the increasing price of oil, and some of that oil money is going to be spent on airplanes.” However, he also noted that “Not all that money is oil money, and some of that also is going into buying new airplanes.”

If that oil money, or any other money from an expanding economy, will be spent on airplanes, Wichita-based Cessna plans to collect its share.

The U.S. manufacturer has seen its business begin to develop more in the Middle East over the past several years, according to Trevor Esling, division sales director for Africa, Europe and the Middle East.

In most of the world’s markets, small aircraft make up the base of the pyramid, with larger aircraft making up a smaller market share near or at the top of the market pyramid. In the Middle East, that pyramid has traditionally been inverted, with larger aircraft making the greater market share at the base of the pyramid. “Now the smaller business aircraft–in particular midsize business jets–are starting to represent a growing market share.”

This summer, Cessna delivered two Citation XLSes to Jordanian charter operator Arab Wings and in the fall delivered two Citation Bravos to the Saudi Air Force.

Cessna’s long-term strategy is to focus on the market segment best served by its midsize cabin aircraft, such as the Citation XLS, “focusing on private individuals and successful businessmen who have an appreciation of value, and on the charter business.” To help achieve this end, Cessna is represented in the Middle East by Riyadh-based Wallan Aviation.

Esling said there is no approved Cessna service center in the Middle East. The nearest centers are in Europe. But he noted that the new Jet Aviation facility in Dubai can do the necessary maintenance and that Cessna is looking at a new facility near Riyadh that has applied for status as an approved Cessna service center.

Cessna has a long history of attending the Dubai Air Show, and, said Esling, it has been more productive every year. “With the growing economy and available funds, it will probably be the strongest show in years for us,” he added.

Dassault Dines Wellon a Middle Eastern Plate

Dassault Falcon Jet has long been active in the Middle East, and despite the company’s well established presence, activity in the past year has been remarkable, said Falcon Jet president John Rosanvallon.

While the company’s primary focus is currently on Egypt and Saudi Arabia, Rosanvallon said that after a long, quiet period, interest has also been picking up in Turkey.

Saudi Arabia, he said, has always been a good market for the Falcon line.

The driving force in this more recent interest in business aviation, he said, has been economic growth. “Money that has been invested abroad is finding its way back into these countries, and some basic industries–such as hotels and telecommunications–are developing well.”

Dassault has about 40 aircraft in service in the Middle East. Rosanvallon said the company expects to show its Falcon 2000EX and Falcon 900EX at the Dubai show. Demands of the certification program have been such that the new Falcon 7X will appear at the NBAA Convention early this month, but the program will not permit a debut at Dubai.

“It’s too bad,” said Rosanvallon. “We have orders [for the 7X] from customers in that region, and with its performance, cabin size and range, it’s an ideal airplane for the Middle East.”

Gulfstream Dominance

Since it introduced its products in the region, Gulfstream has held a dominant market position in the Middle East, partly because of a large cabin that is easily adapted to private use and partly because of the large-cabin airplanes’ ability to fly nonstop from any Middle Eastern city to any destination in Europe.

“And we continue to dominate the market,” said Tarek Ragheb, Gulfstream v-p of international sales, despite the best efforts of competitor Bombardier, which introduced the Global Express in the 1990s to complement the Challenger.

Gulfstream remains particularly well entrenched in the special-mission market. “With the exception of Jordan, Bombardier has never penetrated the special-mission market,” said Ragheb.

At this point, Gulfstream remains the most widely owned business jet in the Middle East, with the Savannah, Ga.-based manufacturer claiming an installed fleet–aircraft actually registered in the region– of 71 Gulfstreams. The disparity between Airclaims’ numbers (page 45) and manufacturers’ numbers serves to illustrate the difficulty of precisely defining the region’s business aviation market.

Ragheb agrees with other OEM representatives that there is a growing market for midsize business jets in the Middle East. “Clearly, private ownership is increasing [and] it will continue to increase.” He also noted that these customers are interested in the airplane as a business tool, rather than as a status symbol.

As a long-time market leader in the Middle East, Gulfstream has established an extensive support system. Technical representatives based in Jeddah and Riyadh have factory-direct connections and travel regularly throughout the region. The company maintains a major spares depot in Bahrain and is planning a second depot in Saudi Arabia.

And since it acquired BBA Aviation at London Luton Airport, Gulfstream has doubled the size of the facility and is capable of providing service to any aircraft in the Gulfstream line.

“The Middle East is an important market for Gulfstream,” said a spokesman in Savannah. “With respect to business jets, the region is one of the most sophisticated markets in the world.”

Raytheon Notes Greater Emphasis on Cost of Operation

“In the Middle East, there’s been greater interest in smaller business airplanes in the past few years,” said Ted Farid, v-p of international sales for Raytheon.

The royal families are still buying the big, bigger and biggest, he said, but he also noted a new generation of private businessmen now emerging who are focused on initial acquisition price, depreciation and operating costs. “We just delivered a new Hawker 800XP, and it went to a private company.”

Farid said in the Middle East, the Hawker 800XP is the most popular of Raytheon’s business jet line. “It has good cabin size and is a good performer in hot conditions.” The next most popular business airplane from the Raytheon stable is the Beech King Air 200, “also with a nice cabin but economical to operate and capable of getting into undeveloped airfields that could not accommodate a jet.”

Raytheon made an extensive tour of the Middle East earlier this year with the King Air 200 and the Beech Premier I. As part of the tour, one Premier I was sold to a Middle East customer, said Farid, “but he’s operating it out of the UK.” He added that there are 21 Hawkers and 46 Beech aircraft in service the Middle East.

Authorized service centers for the Raytheon Hawker and Beech series are located in Europe, and the new Jet Aviation FBO and maintenance facility opened this spring in Dubai has been appointed a Hawker service center. At this point, said Farid, the nearest technical representative remains in the UK, but the company plans to locate a tech rep in the Middle East.

Raytheon expects to have a substantial presence at the Dubai Air Show, including a Hawker 800XP, a King Air–maybe a 350–and a Premier I. After the show, the company hopes to spend some more time touring the region to show its aircraft line.

Piaggio Sees a Future for Its Avanti II

Massimo Isadori, senior v-p of Avanti II commercial sales, sees “very real” possibilities for the Italian manufacturer’s upgraded twin-turboprop Avanti II in the Middle East.

“They are accustomed to much larger airplanes, used on much longer routes,” said Isadori, “But there is a need for the Avanti II in the Middle East, and we are experiencing more interest from corporate operators, as well as from air ambulance carriers.”

With 1,500 nm range and a cabin the size of that of a midsize jet, the Avanti II will fly nonstop from Dubai to Lebanon, said Isadori, adding, “from Jeddah, it will cover the entire Middle East.” And he noted it will do so at a max cruise speed of Mach 0.70, “as fast as most of the light business jets, but with one-third less fuel burn.”

He said Piaggio had done several studies and determined that the typical route length for the Middle Eastern businessman is between 400 and 800 nm and that the Avanti II can easily manage some of the smaller airfields closed to jets.

“We have consolidated our sales activities in Europe and North America, which are a major part of our market, and now, we are definitely taking aim at the Middle East,” he concluded.

Isadori said Piaggio plans to be at Dubai with at least one Avanti, and possibly two airplanes at the static display line.