Business aviation finds broader Mideast appeal

 - January 30, 2007, 6:02 AM

The stereotypical business aircraft in the Middle East is a widebody airliner converted to money-no-object specifications for an omnipotent sheikh. While there are still plenty of lavish VIP and head-of-state transports fitting this description, business aviation in this region appears to be evolving to become more business-like, pragmatic and functional.

This is the consensus among business aircraft manufacturers, operators and support companies interviewed by AIN. They see growth in the market, spurred by an expanding group of businesses requiring the convenience of dedicated air transport more than pure opulence.

Over the past decade, the number of business/VIP/head-of-state aircraft registered in Middle East countries has grown by 28 percent from 189 to 241, according to statistics provided by London-based aviation data specialist Airclaims. The total includes 19 jets that are currently being stored by their operators.

Airclaims’ fleet analysis over the past decade also shows growing numbers of purpose-built business aircraft (versus specially equipped airliners). Manufacturers such as Bombardier, Cessna and Raytheon have seen their customer base grow in the Middle East, but so too have major airframers Boeing and Airbus (see chart).
Saudi Arabia still accounts for the lion’s share of the Middle East fleet, with 109 aircraft. The next largest national contingent is the United Arab Emirates (UAE), where 32 business aircraft are now registered. The other main countries with double-digit fleets are Iran (18), Egypt (17) and Israel (16).

Business aviation growth in the Middle East is exemplified by new executive charter operator Royal Jet, which began operations earlier this year from its headquarters in Abu Dhabi. The company is a joint venture between the emirate’s head-of-state Amiri Flight and helicopter operator Abu Dhabi Aviation.

Royal Jet offers a Boeing Business Jet (BBJ), which entered service last May, as well as a pair of Gulfstream 300s subsequently delivered in August and September.
The BBJ cabin is fitted with 42 seats in a three-class configuration (22 first class, eight business class and 12 economy class). The economy seats can be removed to make more space. The G300s have 14 seats and can quickly be refitted to serve as medevac transports.

According to Royal Jet chief executive Capt. Tilmann Gabriel, demand for the new charter aircraft has proved to be very strong and the company is already looking to add more capacity this year. Each of the three aircraft has flown more than 100 revenue hours and the G300s are currently performing about three medevac missions each week, mainly flying patients for treatment in European hospitals.
“We have generated demand just by starting operations,” said Gabriel. In his view, the Middle East offers a significant, untapped market for both executive charter and aircraft management. Until recently, he maintained, this market had been “amazingly under-developed”–held back by cultural obstacles to business aircraft being used beyond the highest echelons of royalty.

In addition to corporate bookings, the Royal Jet BBJ has been hired to carry large family groups. In this application its economy seats provide the servants’ quarters. The aircraft has put its intercontinental range to the test with flights from Gulf airports to New York and Tokyo.

The 3,600-nm-range G300s are commonly flying three- to four-hour legs. The operator has made several flights to Baghdad since the Iraqi capital was captured by U.S. forces.

Royal Jet has been offering promotional charter rates to stimulate demand. The BBJ is available for $9,800 per flight hour and the G300s for $6,000. Charter bookings have come from both locally based companies and individuals and visiting Western corporations. The company also flies for UAE government officials and foreign heads-of-state. Block charter packages of between 100 and 300 flight hours are now being offered to both travel agents and individual customers.

Over the summer months, Royal Jet used the BBJ for a weekly scheduled service between Abu Dhabi and Geneva on behalf of Gulf Air. It is now negotiating with the carrier to provide other scheduled services.

Royal Jet is making plans to build its own executive terminal at Abu Dhabi International Airport. According to Gabriel, unlike in the West where business aircraft passengers generally spend next to no time in FBOs, Middle Eastern customers often like to entertain sizable entourages at the airport.

In October Royal Jet established a sales team in Dubai, UAE. It is now negotiating to have a presence in the new business aviation enclave at Dubai International Airport (see sidebar). It also has an office in the Saudi capital, Riyadh, and intends to open another in Jeddah.

Another growing business aviation service company in the region is ExecuJet Middle East. The Dubai-based operation is part of the South African ExecuJet charter/management/sales/support organization, which also has divisions in Europe, Australasia and Mexico.

ExecuJet Middle East has just added a Bombardier Global Express business jet and a Pilatus PC-12 turboprop single to a charter fleet that already features a Learjet 60 and a Challenger 604. The company is Bombardier’s Learjet distributor for the UAE, Bahrain, Kuwait, Egypt, Jordan, Lebanon, Oman, Qatar, Saudi Arabia and Yemen. It is also the PC-12 distributor for the same territories. Bombardier Challenger and Global Express sales in the Middle East are handled by the TAG Aeronautics group.
Managing director Horm Irani confirmed that the business aviation customer base in the Middle East is broadening. He said that there is a distinct shift toward the routine use of aircraft as bona fide business tools, especially among younger-generation Arab businessmen, who are proving to be more “progressive” in this respect than their fathers. Most of the growth in charter demand experienced by ExecuJet is in the Gulf states.

As far as new aircraft sales are concerned, Irani commented, “The Middle East is traditionally big-iron territory, with customers wanting a lot of baggage space and range, but this profile is changing and there is now much more scope for midsize and super-midsize aircraft such as the new Challenger 300.”

ExecuJet is finding Middle Eastern clients to be more receptive to the benefits of having their aircraft managed and part-subsidized by work in the charter market. It is also fielding more inquiries about block charter and shared use of aircraft.

Currently ExecuJet manages four aircraft–all Bombardier types–and is looking to increase its staff to expand operations. Having opened for business in Dubai in 1998, it now has 34 employees and intends to boost this to 59 by June.

Jet Aviation Expects Growth
According to Maghradi Al Khodair, Jet Aviation Saudi Arabia’s business development director and deputy general manager, most business aviation growth over the next two years will be focused on Dubai, Jordan, Bahrain and Lebanon. He said that plans are being made to open new FBOs and executive charter operations in many parts of the region. Jet Aviation Saudi Arabia has facilities in both Riyadh and Jeddah, providing maintenance and handling. In both locations it operates out of the general aviation terminals.

“Charter demand is growing fast in Saudi Arabia and there are not enough aircraft,” said Al Khodair. “Over the last six months there has been very strong growth and it is requiring aircraft to be brought in from Europe.”

This shortfall in capacity is essentially artificial. Only two companies–flag carrier Saudia and National Air Services–are authorized to offer charter in Saudi Arabia. Al Khodair said he could not predict whether this restriction will be lifted. The average aircraft required for charter has 14 seats and many more are needed in the Saudi market.

However, Jet Aviation itself has no plans to enter this charter market, arguing that it does not want to compete with its handling and maintenance customers. Nonetheless, it is managing a growing number of aircraft owned by Middle Eastern clients, according to Jurg Reuthinger, senior vice president and general manager of Jet Aviation Business Jets’ management division. This Zurich-based group takes full responsibility for operating aircraft including Gulfstreams, BBJs, Challenger 604s and Dassault Falcons. Most of the crews come from Europe.

Reuthinger, who previously ran Jet Aviation’s Saudi operation, said that operating conditions in the Middle East are not particularly difficult for business aircraft as long as the local rules and procedures are properly understood. “The key is to have a really good working relationship with each country’s civil aviation authority,” he said. Jet Aviation’s management division is often involved from the earliest stages of aircraft acquisition, providing owners with independent guidance on operating costs.
Jet Aviation has seen around 10-percent growth in its handling business, with the Riyadh and Jeddah FBOs receiving at least 400 more aircraft last year than in 2002. Most of the additional aircraft are visiting from outside the Middle East and include numerous BBJs.

Fractional Ownership Takes Root
One of Jet Aviation’s main customers in the region is the NetJets Middle East fractional-ownership program and its operating partner NAS. NetJets was launched in the Middle East back in 1999 and now offers shares in Raytheon Hawker 800XPs, Falcon 2000s and Gulfstream GIV-SPs. According to the company, around $1 billion worth of aircraft and resources have been committed to the Middle East program, but, as of press time, no details were available on the current fleet breakdown and future deliveries.

NetJets Middle East customers can choose between occupied-hour pricing (based on acquisition cost, monthly management fees and fees for each flight hour spent in the aircraft) and “all-hours pricing” (with the same entry and management costs, but combined with a reduced hourly rate charged for both occupied and ferry-flight hours). A standard one-eighth share in an aircraft guarantees access to 75 flight hours per year.

Meanwhile, Bahrain Executive Air Services (Bexair) has a charter fleet consisting of a Bombardier Challenger 604, a Cessna Citation Excel and and Citation Bravo. The company, which was launched in 2001, is understood to be looking to buy a long-range model.

Bexair marketing support manager Sakeer Sheikh said that executive charter demand has been growing in the Middle East and that at least some of this is driven by security concerns. “Charter operations have not suffered the same ill effects as mainstream international airlines, although there are flight disruptions due to closure of certain air routes in the region,” he said.

Manufacturers See Wider Customer Base
Gulfstream Aerospace president Bryan Moss told AIN that it stands to benefit from the growth and diversification of business aviation in the Middle East thanks to its expanded product range. Whereas three years ago, the Savannah, Ga. manufacturer offered only two large aircraft types (now known as the G500 and G400), it now boasts an eight-member family that also includes large, super-midsize and midsize products.

“In the past, less attention was paid [in the Middle East market] to aircraft acquisition and operating costs. The fact that it is now shows how the market is evolving,” Moss remarked. “We expect to see a mix of new business aviation applications in the region, including charter and fractional ownership.”

Middle Eastern customers are now exposed to the cost-effectiveness of aircraft such as the G200, partly through its increased availability in the charter market through Gulfstream’s arrangement with TAG Aviation. The manufacturer has placed two G200s with the operator.

When Gulfstream parent company General Dynamics acquired the former Galaxy Aerospace product range–the Astra SPX and the Galaxy, now known as the G150 and G200, respectively–there was concern that the fact that the aircraft are substantially built by Israel Aircraft Industries might prove to be an obstacle to sales in the Arab world. But Moss said that the pragmatic appeal of both types has overridden any such political concerns, and the G200 was included in Gulfstream’s display at last month’s Dubai airshow along with a G400, G550 and Royal Jet G300s.

According to Gulfstream, it now has 70 aircraft operating in the Middle East and has historically sold a total of 120 units in the region. The company’s sales representation in the region is largely run from its office in Cairo. It offers product support through the Jet Aviation operation in Jeddah, Saudi Arabia, where there is also a field service representative based. A parts depot is located in Bahrain and Gulfstream’s new European service center at London Luton Airport is also at the disposal of Middle Eastern customers.

Cessna
Cessna senior sales and marketing vice president Roger Whyte acknowledged that the growing need for business aviation lift more pragmatic than that provided by VIP-configured airliners is boosting the Middle East market potential for the company’s growing Citation family. In his view, the diversification of the region’s economies away from the total dominance of the oil sector and increased intra-regional trade are important factors in this growth.

According to Whyte, the value placed on a stand-up cabin by Middle Eastern customers has increased the appeal of the Citation Excel, and several of this type have now been sold in the region. Along with the Citation Sovereign, the Excel and the new XLS model offer sufficient range for most operators, putting Europe within nonstop range from many locations. The ability to fly direct to the former Soviet republics, with which Gulf state companies are increasingly trading, is another important attribute of the new Citations. Somewhat surprisingly, Cessna has yet to sell one of its high-speed, stand-up-cabin Citation Xs in the Middle East, unless you include Turkey in this region.

Cessna’s Middle Eastern sales representation is largely focused on Riyadh, Saudi Arabia-based Wallan Aviation. In addition to the Saudi Kingdom, the company also covers Bahrain, the UAE, Yemen, Jordan and other neighboring states. Other regional coverage is provided by Pakistan Aviation Aerospace and Turkey’s Emekli Ticaret.

Product support for the Citation family is provided mainly from service centers outside the region, such as Jet Aviation’s Zurich and Singapore facilities, the factory-owned service center in Paris, Ruag in Germany, and Marshall Aerospace in the UK. The company also has field service representatives in various Middle Eastern locations.

Whyte indicated that legal restrictions on business aircraft ownership still constitute an obstacle to growth in some countries such as Saudi Arabia. However, he concluded that increased pragmatism is gradually overcoming such limitations.

Boeing Business Jets
Outside North America, the Middle East has proved to be the most important market for Boeing Business Jets, accounting as it does for around a quarter of all BBJs delivered to date. What’s more, of the six larger BBJ2s to enter service so far, no fewer than five are in this part of the world.

“Historically there have been a lot of VIP 727s [in the Middle East] and when it came to replacing these, quite a few people wanted more baggage space than even the BBJ can offer,” explained Boeing Business Jets president Lee Monson. The BBJ2 offers about double the cargo space of the standard BBJ, and about 25 percent more cabin space as well.

Monson, too, has seen increased interest in business aviation among successful business people outside the immediate circles of Middle Eastern royalty and government. In his view, this is more common in countries other than Saudi Arabia.

However, he took the view that the region will still not see explosive growth in this market because of abiding legal restrictions. “There is still a lot of government influence over what people do,” he maintained, identifying limited scheduled airline service in the region as one of the key drivers of business aviation.

That said, Monson added that the regulation of the charter market has proved to be relatively lax in the way it is actually enforced, and this has resulted in something of a gray market for executive charter. He said it is quite common for aircraft owners to lay on for-hire flights for business associates, friends and families on a semi-official basis. “It will be interesting to see if the regulations catch up with this,” he said.
Boeing Business Jets has its own Riyadh-based sales director in regional sales vice president John Stone, and also has a field service representative located in the Saudi capital. The U.S. manufacturer is in the process of striking a deal with Saudi engineering contractor Al-Salaam to provide maintenance coverage for BBJ operators in the region. Customers can also turn to new-generation 737 operators in the region, such as Oman Airlines and Yemenia, for technical support.

Most BBJs in the region are fitted with just three or four of the auxiliary long-range fuel tanks that are optional on the type. This means that they typically have a range of up to 5,000 nm and so can operate into Europe and, increasingly, eastward into Asia. One customer has had his aircraft fitted with nine fuel tanks and a relatively lightweight interior that allows him to fly non-stop to the U.S. West Coast and to Japan.

Monson was candid in his assessment of prevailing geo-political concerns in the Middle East. He said that, on the face of it, the need to expand trade and commerce in the region presented significant opportunities for Boeing, while also conceding that the manufacturer’s U.S. roots constitute a potential drawback in view of political polarization.

Universal Weather & Aviation
Flight-planning group Universal Weather & Aviation is responding to growing business-aviation traffic volume in the Middle East by seeking to expand its own presence in the region. Its Global Network of handling partners already includes United Aviation Services in Damascus, Syria, National Air Services in Jordan and Z-Aviation Services in Cairo. It also has agents in most countries.

According to Jonathan Howells, Universal’s head of sales for Europe, the Middle East, Africa and Southeast Asia, the Houston-based group has been active in the Middle East for more than 30 years supporting corporate, government and royal flight operations. It provides flight-planning services and manages fuel supplies and ground handling. Assisting with overflight permits and visa requirements for foreign operators is a particularly important part of its function in the Middle East.

New Business Aviation Center to Open in Dubai

A new business aviation center in the International Free Zone of Dubai International Airport will open this year. The facilities will include three hangars and an adjoining executive terminal. The center will confirm Dubai’s importance as a hub for burgeoning business aviation demand in the Middle East.

The hangars will be occupied by ExecuJet Middle East, Executive Flight Services (EFS) and Jet Aviation. EFS will provide handling out of the new terminal, relocating this operation from the airport’s current VIP Pavilion (also known as Al Majlis). Both ExecuJet and Jet Aviation have plans to use their new Dubai hangars for maintenance.

ExecuJet is working with Bombardier to establish a service and spare parts center for the Canadian business aircraft manufacturer. This will be able to perform overhauls up to the level of C checks for both the Learjet and Challenger families. The facility, which is set to open in May, will also work on Pilatus PC-12 turboprop singles, as well as providing line maintenance for other corporate types.

According to ExecuJet Middle East managing director Horm Irani, Dubai is certainly not the least expensive city in the region to develop new facilities. “But it is worth making the investment because this is really where a lot of the business growth is happening,” he commented.

Jet Aviation’s new maintenance base will be able to accommodate two BBJs simultaneously and will supplement the facility the company already operates in Jeddah, Saudi Arabia. This specializes in Hawkers, Gulfstreams and Falcons and does warranty work on the charter fleet of Saudi Arabian operator National Air Services, which is the operating partner for the NetJets Middle East fractional ownership program. The Dubai facility will provide C check capability on all the above types, as well as on the Bombardier Global Express.

The Jet Aviation facility is being built jointly with the company’s local partner, the Almulla group–a Dubai-based property and telecommunications enterprise. In addition to the maintenance operation, it will also include an FBO providing executive/VIP handling and should be ready to open in September.

According to Jet Aviation group chief executive Heinz Köhli, the Middle East will see further growth in business aviation and he expects Dubai and the surrounding Gulf states to be at the heart of this. He indicated that limited scheduled airline service and security concerns are key drivers of increased private-aircraft use.

Jet Aviation also considered developments in neighboring Abu Dhabi and Sharjah, as well as in Bahrain. Köhli indicated that Dubai’s “liberal” business environment and the availability of skilled technical staff made it an especially attractive location for expansion. There are currently almost 3,000 business aircraft using Dubai International Airport each year and this traffic has seen annual growth of between 14 and 25 percent in recent years.

Acknowledging continuing security concerns and political tensions in the Middle East, Köhli indicated that there can be some advantages to being from neutral Switzerland. However, in a terrorist attack in Riyadh, Saudi Arabia earlier this year, a Jet Aviation employee was killed and almost 20 others were injured. The company has significantly increased security at its facilities in response to these incidents.

The new Dubai business aviation center was to have opened this year. According to the Department of Civil Aviation, the design is now being finalized.