Business jets fly high in the GCC (page 1 of 3)

With your own jet, you are free to fly when you want, where you want, without delays or connection hassles.

Flying by private jet, in recent years, has become the preferred means of long-distance travel for government leaders and corporate chiefs. And while the United States remains the world leader in corporate jet sales, the Middle East has become a clear growth area for the sector.

In the region, the competition among the leading manufacturers is increasingly intense - which is hardly surprising, considering that a single sale means millions in profits.

However, the industry is facing a crisis of confidence in a time of global belt-tightening: hard questions are now being asked about the necessity of private jet travel, and the impact of this enormous expense on a company's bottom line.

A new study, "Flights of Fancy," written by David Yermack, New York University professor of business, argues that corporate jet use represents the "most costly and fastest growing fringe benefit" enjoyed by corporate CEOs.
"The central result of this study," writes Yermack, "is that CEOs' personal use of company aircraft is associated with severe and significant underperformance of their employer's stock."

The key word, of course, is "personal": few question the competitive advantage of having a company CEO travel by private jet for a business meeting; hopping on a Gulfstream for a family vacation is an altogether different story.

Yermack's study found a "dramatic, almost shocking" link between a company's stock price and the use of its shareholder-owned aircraft. It's too soon to say if this study will have any impact at Fortune 500 companies, but it has certainly caused a great deal of worry at leading manufacturers like Boeing, Bombardier and Dassault Falcon Jet.

Nevertheless, executive jets are still regarded as a strategic business tool for major corporations and investors - worldwide and, increasingly, in the Middle East. With a variety of ownership options available, they are also within reach of a larger proportion of the elite.

In terms of the biggest jet markets in the Middle East region, Saudi Arabia is likely to remain the largest by far, says Jean Rosanvallon, CEO of Dassault Falcon Jet, based in the United States. The Egyptian market is now the second largest, he says, having grown substantially over the last 10 years.

The nature of jet ownership has changed dramatically in recent years. Besides total ownership, customers can opt for charter hire, or buy into fractional ownership programs. This scheme gives the access and time advantages of owning a jet at a fraction of the cost. Owners can choose from a wide variety of aircraft, and they do not have to worry about day-to-day management and maintenance issues.

The fractional ownership concept was introduced to the market by NetJets in 1986. The company has more customers than all other fractional ownership programs combined. Fifty percent of NetJet's customers are private companies, 30 percent public companies and 20 percent private individuals.

All told, this year NetJets will fly over 250,000 flights to more than 140 countries.
Fractional ownership makes economic sense for people with jet requirements of between 50 and 400 hours per year, says a NetJets spokesman. In the United States, a 1/16th ownership interest entitles 50 occupied hours per year, and a 1/8th interest is equivalent to 100 occupied hours per year.

Recently, a new concept has appeared in the fractional market, Jet Card.