After a torrid 12 months a mood of cautious optimism seems to be returning to the business aviation market. There are high hopes that the Middle East will be at the forefront of the recovery when it finally arrives.
Honeywell has broken down its latest business aviation market outlook to provide specific details of the demand it foresees coming from the Middle East over the next five years, and the results are encouraging.
In the Middle East and Africa, more than half of survey respondents indicated that they intended to purchase a business aircraft during the next five years, representing a more than 10-point improvement compared with last year's survey.
"I would say that the region is showing very resilient demand for business aircraft, and I would attribute that in a large part to the need for transport that can deal with the types of distances involved, as the Middle East becomes more and more of a global commerce centre," says Honeywell Aerospace business and general aviation president Rob Wilson.
"Demand in that region - in terms of purchase expectation - in the next five years went from 44% to 55% in one year, in what would appear to be some pretty difficult economic conditions worldwide," he adds.
On that basis, Wilson believes that the Middle East will lead business aviation out of its slump towards the end of the five-year forecast period - a sentiment with which Brazilian manufacturer Embraer agrees.
Embraer regional sales director, executive jets, Tony Fitzpatrick, says: "I think a lot of it is to do with the higher GDPs and the reliance on oil revenue, the boom that's happening in Dubai with tourism. A lot of other countries have taken their lead and now they're diversifying into real estate and tourism.
"Even Saudi Arabia is developing tourism, which was unheard of five or six years ago," he says. "I think as a region it will be a leader with regard to investment, which will lead to people having money to spend on business aircraft."
The Middle East is proportionally more valuable to the manufacturers due to its preference for larger-cabin aircraft, and according to Honeywell's Wilson this is the largest factor driving the purchase plans of Middle East operators.
"When we asked them for reasons to buy a new aircraft, the number one reason in that region was a bigger cabin, so there's certainly a move towards having a larger cabin," says Wilson. "The second most prominent response was operating cost."
But with the positive outlook for the region being driven primarily by the desire of existing business jet owners to upgrade their aircraft, will there still be an opportunity to grow the customer base?
"Based on economic growth and the increase in leased business jets, there's still going to be some significant first-time buying going on in the region and new customers are going to enter the market," says Wilson. "It's not our view at all that the market is saturated."
Another characteristic of the Middle East is its relative lack of appetite for used business aircraft, which also tends to push up demand for new jets.
"When we look at the reasons for purchase of aircraft, number three on the list is age, so they would prefer an aircraft which is newer, with a larger cabin and lower operating cost," says Wilson.
"So all of those things would factor in to putting a higher value on a newer aircraft versus older. I wouldn't say that the only aircraft people want are new, but there's a value placed on lower age.
"Number four on the list was warranty, so having that type of coverage for a new aircraft is also valued. This is not typically in the top five in other regions of the world. That comes down to that sense of security of having all of those things taken care of, considering the location of the region."
Honeywell, as a systems supplier to business aircraft manufacturers, is using the show - which Wilson is himself attending for the first time - to promote various upgrades to operators planning to keep hold of their aircraft in the short to medium term.
"The data we have is that in the next five years the majority of people in the region will be purchasing later in the five-year horizon, not unlike the rest of the world. So while they keep some of these larger aircraft in service, we want to be able to offer them upgrades and modifications to add value to the aircraft.
"We are pushing our Primus Elite cockpit upgrades for the Gulfstream IV and V and [Bombardier] Global Express, making sure the customers in the region know that there are things they can do to continue to make their aircraft more productive," says Wilson.
Embraer is exhibiting from its business jet range a Phenom 100, Legacy 600 and Lineage 1000. According to Fitzpatrick, the Middle East is expected to be "by far" the biggest market for the Lineage 1000, the company's largest business jet.
He says Saudi Arabia and the United Arab Emirates account for more than half of the Middle East business jet fleet, which numbers 342 aircraft. Most are operated by high-net-worth individuals and charter operators, and around 90 aircraft were delivered in the last three years.
"Heavy" aircraft make up 43% of the fleet, and medium-sized 47%.
"There is probably nowhere else in the world where you're going to get heavy metal figures like this. There are a lot of big-sized aircraft in the Middle East," says Fitzpatrick.
"In the Middle East, smaller jets are not as popular as the large jets - they don't like small cabins. On saying that, a lot of businesses are expanding around the Middle East.
"There are a lot more people travelling to places like Beirut. There's a lot of Middle East money going to Beirut and there are a lot of people travelling there. The same in Amman and other parts of the Middle East. I think the smaller jets will start to get more popular with charter companies and people like banks, who have four or five executives travelling at a time, where it will be more cost-effective because time is money."
Embraer's upbeat outlook for the region is based on the fact that the Middle East has not been affected as severely by the global recession as have Europe and North America, plus its expectation of a relatively swift return to GDP growth in the region.
"Middle East GDP growth was higher than the rest of the world, and the decline is less than the rest of the world, and I think that's because revenues in the Middle East are mostly based on oil rather than manufacturing," says Fitzpatrick.
"We've got less unemployment in the Middle East. Oil is coming out of the ground and the world needs oil even in a recession."
Two other factors come into play - the lack of airline frequencies between key city pairs, and the fact that major investment is going into new airport facilities. Abu Dhabi, for example, will bring on line the Middle East's first dedicated business aviation airport.
"It's still a hassle flying in the Middle East," says Fitzpatrick. "Four-fifths of routes have fewer than two flights a day. And investments in airports are still on track."
Embraer has already made significant inroads in the region with the ERJ-135-based Legacy 600, and has already booked several orders for its latest Legacy 450 and 500 business jets. Around 20 Legacy 600s are flying with customers in the Middle East, alongside a single Lineage 1000.
"To me the biggest sellers in the Middle East will be the mid-size [aircraft], the 450, 500 and the Legacy," says Fitzpatrick. "The 650 is going to be a great asset for us in the Middle East because now you've got an aircraft that will give you the cabin of a Gulfstream 450 that will take you Dubai-London nonstop for a lot less acquisition cost and operating cost."
Fitzpatrick is also enjoying having the new, longer-range Legacy 650 to sell, following the announcement of the launch of the aircraft at last month's National Business Aviation Association convention in Orlando, USA.
"I was asking for the 650 five years ago, so now I'm a happy man," he says.
As an indication of the speed with which Embraer has expanded its business jet product line, Fitzpatrick recalls that "if you went to the Dubai air show four years ago, we had only one aircraft to sell - the Legacy 600".
Worldwide, Embraer is forecasting an overall market for 10,000 new business jets between 2010 and 2019, worth $190 billion.
Source: Flight Daily News
