The past few years have witnessed a feeding frenzy of demand for business aviation in the Arabian peninsula. More than a quarter of the entire business jet orderbook is destined for a region that a decade ago scarcely figured on the manufacturers' radars beyond supplying a handful of converted widebody airliners - flying palaces - to the ruling elites.
But around the turn of the century that began to change as oil prices rose, the breakneck expansion of cities such as Dubai really kicked in and annual GDP growth rates reached well into double figures. Arabia's wider business elite developed a taste for private air travel that is unlikely to go away. According to every market prediction, a fleet of around 380 business aircraft based in the Gulf today will grow to around 900 by 2014.
OIL REVENUES
But is that a done deal? Could next week's Middle East Business Aviation expo in Dubai exhibit the first signs of that appetite being sated as a result of the global financial downturn? Do not count on it. At a time when fuel prices are crippling airlines and hurting business aviation operators elsewhere, it helps when you own the wells. And when most of the world is struggling for credit, having hundreds of billions in oil revenues sitting in government surpluses gives you a distinct advantage.
That is not to say that the Gulf is immune to global economic pressures. Dubai - long the hub of the region's business aviation activities - has built its fortunes on commerce, tourism and financial services rather than black gold. Its prospects both as a trading crossroads and a business and leisure destination depend largely on flows of goods and money around the world. From the investment bank pulling out of an infrastructure project to the couple whose pension has been slashed having second thoughts about the retirement beachfront villa, the credit crunch and stock market falls are likely to have an impact on the emirate's grand vision, at least in the short term.
Even those whose fortunes are built on oil are beginning to watch their dollars, although that might amount to leaving the Boeing Business Jet at home and taking the Gulfstream on the business trip to Geneva instead. This is not necessarily a bad thing, believes Faris Deeb, chief executive of one of the region's newest and most successful charter businesses, Prestige Jet of Abu Dhabi.
Greater astuteness about business aviation products means end-users are taking informed decisions about which aircraft to deploy for which mission, and this awareness is helping to break down some of the psychological hang-ups about business aviation among the wider business community.
"Clients now ask which is the right product for me," says Deeb. "They are looking at their options. Two years ago, operators were suffering because when they said they had a Cessna or a Hawker, people thought of prop planes or old Hawker-Siddeley airliners. Now they are educated about size, range and cost."
Ali Ahmed Al Naqbi, chairman of the Middle East Business Aviation Association, which hosts the MEBA show, agrees that much of the mystique that existed around private air travel has been removed and a much wider group of individuals are prepared to consider its advantages. There is also, he says, a greater understanding of asset management and the benefits of leasing or outsourcing the running of a jet. "Wealthy people used to hide their aircraft. Now people are shopping around for management. It's a transparent, open industry today."
MARKET JITTERS
Few expect the global economic crisis to lead to a deluge of cancelled orders or corporate collapses in the region and some believe a dampening of what has been a hyperactive area of business could actually do some good. "The market has a few jitters and confidence has gone a bit, but it will return," says Will Curtis, chief executive of Bahrain-based charter operator Rizon Jet.
"There may be some casualties, but adjustment sometimes benefits operators that know what they're doing. It also brings a bit of reality to the demands of the skills pool and a softening of speculative positions where people were selling at higher than list."
Curtis also endorses the view that the momentum built in the sector over the past few years will take some stopping. "Business aviation here broke the glass ceiling of acceptability in the last upcycle. Big business is just not going to go back to flying scheduled. These guys may have lost $200,000 of their net worth, but it isn't going to send them back on the legacy carriers."
The previous few years have seen an explosion in numbers of start-ups in the charter market, but Ammar Balkar, chief executive of Dubai-based Elite Jets, does not think that all will survive. "We've gone from one operator in the whole region 10 years ago, Arab Wings of Jordan, to around 24 today. In Saudi Arabia alone there are 46 new operator applications. Qatar, Bahrain and Kuwait are also opening up. But there is probably not room for everybody," he says.
With its prospects so much dependent on the oil revenues that drive the region's economic growth, the Middle Eastern business aviation sector is unlikely to be in too sanguine a mood when it convenes in Dubai on 16 November.
Philip Markham, general manager of Abu Dhabi-based charter operator Falcon Aviation Services, puts it simply: "As long as oil remains above $70 a barrel, the market here will remain in good shape."
Source: Flight International
