Gulf corporate jet market down but not out

The Middle East was slow to enter the corporate jet market compared to the US and Europe, but the region's booming economy prior to the current downturn fuelled strong growth in corporate jet travel.

Statistics from the Centre for Asia Pacific Aviation show that the corporate market in the Middle East grew at an average of 13% per year from 2000-2008, with the number of private jets based in the region more than doubling in size to 450 over that same period.

At its height, the corporate jet market in the Middle East was estimated to be worth between $500m and $700m a year, but like most industries it has taken a beating with the onset of the global economic crisis.

'This region got a delayed impact compared to other regions of the world, but we are clearly feeling the economic crisis and have felt it over the past few months,' Mike Berry, managing director of Execujet Middle East told AME Info.

'I think there was clearly a shift in demand; you could see it in the charter market. Customers were rescheduling trips to get the most efficient use out of the business jet, where before maybe that wasn't the case. And customers were maybe downgrading aircraft to accomplish the mission,' he said.

Berry estimates that the company's charter business fell 25%-30%, noting that charter prices over the past few months have come under pressure. 'Travellers have been taking their time about finding the right aircraft and the right pricing, so there has been a lot of squeezing on pricing across the region,' he said.

Meanwhile aircraft sale prices have dipped below pre-9/11 levels, and customers are mostly remaining on the sidelines to see how much lower they will go.

Although the downturn has taken its toll, Berry believes that the market may have bottomed out. 'The promising signs are there in the past six weeks. We have seen demand grow for charter aircraft, we have also seen aircraft buyers coming back into the picture. And there have been a few recorded sales around the globe now in aircraft transactions,' he said.

Empire sees 60% decline

The impact of the downturn has been felt even deeper at Dubai-based Empire Aviation Group, which saw its charter business fall 50%-60% beginning late last year and into the early part of 2009, according to the company's CEO Paras Dhamecha.

'Definitely the view has been that when business is doing well, the corporate jet is considered a business tool. But in the current situation every company is being careful with their budgets. The rest of the year is going to be a wait and watch for all corporates,' he said.

Looking at the bright side, Dhamecha said that the company's charter business began to stabilise in March and April, and May and June were some of its best months since the company began in 2007.

'Having said that, we are still not sure we can identify any trend as yet. It's very difficult to make a call, because while the past few months have been steady, every now and then you see a bit of a dip and you don't know where it is going. It's very difficult to strategise on,' he noted.

Dhamecha acknowledged that Empire has lowered its prices for its charter business, but said it was mostly because oil prices have fallen so dramatically. 'Fuel prices had become, in our business, ridiculous,' he said.

The company is confident that sales will revive soon as customers are getting unbeatable deals on aircraft. 'The prices of both new and used aircraft have dropped dramatically. For people who have any disposable cash and have ever thought of buying an airplane, there is no better time than now, because they will never get these values again,' Dhamecha said.

International markets

The downturn has prompted the company to look at international markets for new business, and it is starting to manage remote airplanes that are not nationally based in the UAE or available for charter on the UAE charter certificate.

However, despite branching out overseas, Empire does not believe that the private jet market has been saturated. 'While the speed of the corporate jet market growth in the region has been unheard of, we have always felt that this market has been in its infancy. Just a few years ago, private jets were considered simply a toy for the rich in this region, and only recently have they been considered to be a business tool, which is why you have seen huge growth,' he said.

Dhamecha believes that business will remain flat for the rest of 2009 then rebound in 2010. 'We are starting to see a stabilisation of aircraft values, a level where there is resistance, where prices are not falling below, and hopefully that is a sign for positive things to come,' he said.

Qatar is a one country in the region that has shown promise, he noted, and Saudi Arabia and the UAE are expected to remain strong markets.

Outlook remains bright

Ammar Balkar, President and CEO of the Middle East Business Aviation Association, agrees that the industry has hit bottom, adding that he believes that the private jet market will pick up after Ramadan this year.

'The drop in the charter market was around 20% at the beginning of this year and increased to 40% in March and April. However, although the charter market was hit badly, we have started seeing an increase in the number of high net worth individuals looking at buying jets as prices have dropped and banks have been offering lower interest rates.'

Balkar is bullish on growth for the corporate jet market in this region, predicting a 10% rise per year beginning in 2010. 'I am very optimistic about the market in the coming years, despite the hit it has taken. Our market is still not matured or saturated and we will see a 10% increase in 2010 onward. There will be more aircraft coming to the region and once businessmen are back on track we will see more demand in the charter market.'

Royal Jet changes fare structure

Abu Dhabi-based Royal Jet says charter bookings this summer have risen 15% compared to the same period last year.

'We are finding that there is a trend for our guests to make their bookings much later than what they used to, often leaving this to within two to four days of when they wish to travel,' said the company's President and CEO Shane O'Hare.

'But we are finding that within the GCC there is strong demand, with a steady stream of bookings from Qatar and, especially, Saudi Arabia.'

The company's charter business is also getting a boost from a new pricing policy that it introduced in the Gulf a few months ago, he noted. Under the revised scheme, Royal Jet prices the charter from where the guests commence their flight, whereby previously it calculated its prices based on where the aircraft originated from. 'This has led to dramatic reductions in charter rates, sometimes by as much as 20%,' O'Hare said.

Royal Jet's strategy to diversify into a number of different service offerings has also helped to protect the company from the worst of the economic turbulence, he added.