Can Dubai ride it out?

With its economy dependent on international trade, city's bustling business aviation community is more exposed to global shocks

With few natural resources, Dubai has in the past quarter century transformed itself from a sleepy port to global trading hub and glamorous holiday destination. From its radical policy of inviting airlines to compete as part of an open skies policy with its domestic carrier Emirates to selling real estate to international investors, its success has been based on the rules of the souk and opening its economy to those happy to come in and compete.

In many ways, its business aviation sector is a microcosm of its wider economy. While its richer neighbour Abu Dhabi has opted to officially back a small handful of charter operators, providing them with hundreds of millions of dollars of funds to acquire aircraft, Dubai has relied largely on outside players to provide the impetus.

The city remains the heart of business aviation for the whole Middle East, the base for dozens of distributorships, brokerages, management companies, service providers and charter operators, none of them dominant. Most of them are clustered in office blocks and trade units at the free zone at Dubai International airport, although the new Dubai World Central airport and commercial development at Jebel Ali may become the new centre of the sector.

Although the city's infamous traffic jams, packed airport and crane-dotted skyline do not hint at a recession on the way, Dubai's economy, dependent on inward-investment and global trade, is more vulnerable than most of its neighbours. Turning the heat down on Dubai's property boom is likely to have an immediate impact on its business aviation sector, although most believe that worst that will happen in the short term is a shake-out of some of the smaller and under-resourced entrants.

Elite Jets is perhaps typical of the better-funded start-ups. Based at the free zone but with plans to move to Jebel Ali, it has been since March 51%-owned by local entrepreneurs led by chief executive Ammar Balkar, with French investors holding the rest. Starting with one Hawker 850XP, Elite has a Gulfstream G450 and Bombardier Challenger 604 under management, and owns a Cessna Citation CJ3.

FLEET PLANS

Two more leased aircraft - a Dassault Falcon 900 and a second 850XP - will join the fleet by year-end. Balkar's plan is to acquire two Boeing Business Jets next year and take the fleet to 15 aircraft by 2010. The company has teamed with Jet Aviation in Dubai to act as its preferred charter operator. "Rather than set up another AOC [air operator's certificate], they partnered with us," says Balkar. "It's a win-win situation. We use their insurance rates, fuel prices and maintenance and FBO facilities around the world."

Elite's customer base ranges from European executives and celebrities to Russian entrepreneurs combining business in the Gulf with leisure trips to the Seychelles and Maldives. There is also a local market mainly of "a new generation of young guys not long out of university who have made some money in business and can pamper themselves, but aren't quite able to afford a widebody". These often Western-educated Arabs are "learning the meaning of time in business", he says, and view private aviation as a way of making their working week more efficient.

© Elite Jets Elite Jets: One of many operators competing out of Dubai airport free zone

Executive director Paras Dhamecha describes Empire Aviation, also based at the free zone, as a "pure asset management company". With eight aircraft under management and three more to be added by the end of the year, the company sees its role primarily as taking care of business jets on behalf of their owners rather than as a charter operator. In fact, only about half the aircraft it has on its books - a Falcon 900EX, Challenger 604, Gulfstream GIII, two Embraer Legacy 600s and three mid-size Hawkers - are available on charter.

Although Dhamecha says the charter market is still growing, he sees some signs of an impending consolidation. "Our growth has been on the back of the growth of the world economy, but if bankers, for instance, start flying in on airlines rather than business jets, the market will be affected," he says.

© Empire Aviation Dhamecha: Pure asset management

One new operator that will be hoping its reputation in the European market will help it win a sizeable niche is UK-based Gama Aviation. The 25-year-old Farnborough-based charter operator, which recently expanded into North America with the acquisition of Privat­Air's US arm, is opening a sales office at the free zone. It plans to apply for an AOC with an operating base in the next-door emirate of Sharjah - effectively a twin city with Dubai. "What we bring in is experience," says general manager Dave Edwards. "We've had 25 years to make all our mistakes."

Also operating from Dubai is Bahrain-based Rizon, which has AOCs in the UAE and Bahrain. It has a Hawker 900XP and Beechcraft Premier I under management and will soon take delivery of the first of three Challenger 605s. Five 16-seat VIP-configured Bombardier CRJ200s and a Hawker 900XP are on order. With building under way on a facility at the UK's Biggin Hill airport, near London, Rizon intends to be the first Gulf-based charter operator with a European base, tapping in, says chief executive Will Curtis, to the "huge Gulf to Europe market" driven by business links and the exodus of wealthy families to European vacation resorts in the hot Arabian summer.

Elite Jets: one of many operators competing out of Dubai airport free zone

Source: Flight International