Middle East Business Aviation: After a slow start, NetJets is taking hold

Dubai Air Show » 2005
December 6, 2006, 1:02 PM

The idea of aircraft fractional ownership took some time to germinate in the Middle East. But the seed NetJets Middle East planted in 1999 has now started to bear fruit, according to company president Mohammed Al-Zeer. “Our biggest challenge at this point is to add aircraft quickly enough to meet demand,” he told Aviation International News.

The Saudi Arabia-based company has enrolled 25 new share owners in the first six months of this year, “The same number added for the entire of 2004,” explained Al-Zeer. “One company tripled its own share holdings in just the past year.”

In an effort to accommodate demand, the company holds firm orders for three 14-passenger Gulfstream G350s, which will gradually replace the Gulfstream IV-SPs. Al-Zeer is also negotiating for additional Dassault 2000EXs and Hawker 800XPs. The fleet now totals nearly 30 aircraft. Al-Zeer called the fleet of Hawker 800XPs, Dassault 2000EXs and Gulfstream G350s most appropriate for the typical mission requirements throughout the Middle East, into Europe and nonstop as far as London.

Watching the demographics closely, Al-Zeer said that in the past several years Dubai, Cairo and Sharm el Sheik have become increasingly popular. “Those destinations have developed nicely in terms of both business and pleasure travel. NetJets travel is generally 80 percent business and 20 percent pleasure,” he added.

Approximately 80 percent of the Hawker 800XP operations occur within the Middle East, as do about 60 percent of the Dassault 2000EX and 50 percent of he Gulfstream 350 flights.

Al-Zeer credits much of the growth to the booming local economies, fueled in no small part by the rapidly increasing price of oil. He maintained that the Middle East has had the best performing stock markets in the world for the past two consecutive years.

In NetJets’ experience, the typical Middle East share owner is an individual who owns his own business. Major corporations and banks, many of which have joined the program just within the past 24 months, account for most others.

To simplify travel for those shareholders who may occasionally travel farther abroad, NetJets Middle East maintains close ties with the NetJets Europe and NetJets U.S. programs, affording “seamless travel across three continents.”

While the U.S.-based NetJets group maintains operational control, National Air Services in Jeddah satisfies the legal requirements and contributes a cultural continuity, as well as local marketing services.

The fee structure at NetJets Middle East mirrors that of the other NetJets programs, with its one-eighth share entry-level requirement, and more shares added in one-sixteenth increments. The usual acquisition fee, a fixed monthly fee, and a per-flight-hour fee all apply. The company also offers a program for share owners who need more hours than they originally bought but whose requirements don’t warrant an additional share. The actual rates charged within this structure differ from those in the U.S. and Europe to reflect the Middle East’s cost structure.

With the growth has come a need for more crews, a requirement the company appears to have little trouble filling. Al-Zeer said NetJets Middle East hires pilots every day, and needs experienced flight attendants. Both pilots and flight attendants return to the U.S. for annual recurrent training.

The crew schedule differs from the other two NetJets operations. NetJets Middle East crews–pilots and flight attendants alike–work five weeks and then are off duty for the next four weeks. During duty periods, they get one day off at full salary every seven days.

Crews do not have to reside in Saudi Arabia or even in the Middle East. “They can live anywhere they wish, and every fifth week they receive a free ticket home or to a place of their choice, full-fare coach or business class, depending on he distance being traveled,” said Al-Zeer.

Crew pay, he said, runs about 30 percent higher than that of NetJets crews in the U.S., and Saudi Arabia maintains “a very friendly tax environment.” Although crews get paid in U.S. dollars, if the Euro rises beyond a certain exchange rate, “salaries are increased appropriately.”

The rapid growth does not appear to make Al-Zeer nervous. Rather, he sees a bright future for NetJets Middle East for some time to come. “Our initial feasibility studies showed a potential client market of about 2,500 individuals and companies, and to date we have captured only about 17 percent of that market, which tells us there remains a lot of potential,” he said.

When the company opened for business, NetJets Middle East also ran a charter service. “By 2003, we had stopped doing charter, simply because there were no aircraft available,” explained Al-Zeer.

“We had some initial issues to deal with, such as finding local support in the Middle East, and there remains the challenge of overflight permits. But we are continuing to grow, to meet our own expectations and those of our customers,” he concluded.

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