The Middle East for quite some time now has been in the midst of some crisis or the other. If it is not the slump in oil prices, it is some ongoing conflict or the other in the region that has been weighing down the economies. The dual effect can be disastrous. The International Monetary Fund (IMF) has said that uncertainties arising from conflicts in Iraq, Libya, Syria and Yemen are weakening confidence and lower oil prices are taking a toll on exports and economic activity in oil exporters. It said the growth in the region will be modest at 3.5 per cent in 2016 with little improvement expected in 2017. This has certainly impacted the aviation sector, particularly business aviation which is in the doldrums in the region. There is selling of pre-owned private jets and the global situation isn’t either encouraging, as there are not many takers for the business jets, though it is a buyer’s market. The asset value of the business jets has taken a significant hit.

During the seventh biennial Middle East and North Africa Business Aviation Association (MEBAA) event recently, industry leaders and experts were handing out advice to companies to adapt themselves as quickly as possible to the situation for survival. They were encouraging companies to consolidate on the businesses through cost-cutting measures, innovative marketing, etc. Though there may be pockets in the Middle East where some players have been able to navigate through these difficult circumstances, but it’s gloom elsewhere.

UAE and Saudi Arabia hold key

The founding Chairman of MEBAA, Ali Alnaqbi, has said: “The Middle East and North African market is developing well despite everything that is going on there in terms of [political] uprisings and destabilisation.” Of the many Gulf states, only Saudi Arabia and the United Arab Emirates (UAE) are holding some semblance of positivity. The two countries account for 35 per cent and 26 per cent respectively of the Middle East business aircraft fleet. Alnaqbi has pointed that there has been growth in other countries such as Morocco and Jordan.

Saudi Arabia, the world’s largest oil exporter, is also going through economic woes. Of late, its strong leadership has shown greater appreciation for business aviation needs and have started relaxing rules to prop up the sector. Recently, it scrapped the Part 91 aircraft registrations which was being misused for illegal charter flights. Now all operators need to get a commercial air operators certification. Alnaqbi said that the Saudis had opened up the market for new operators and the market was growing by around 8 to 9 per cent each year.

EXPERTS STATE THAT BUSINESS AVIATION NEEDS TO BE FACTORED IN WHEN THE AUTHORITIES ARE PLANNING AIRPORT AND MASTER ECONOMIC PLANNING AS THIS SEGMENT IS A CRITICAL COMPONENT IN ECONOMIC DEVELOPMENT

The window to the Middle East, no doubt, is the UAE with the Emirate of Dubai taking the lead when it comes to being business savvy. The policies and regulations for the business aviation community are lot more liberal and forthcoming here. The exclusive business aviation airport at Al Bateen and now the recent opening of a VIP terminal housing multiple FBOs at the Dubai World Central Airport, are indicative of the fact that the authorities are addressing the needs of the segment. While the other countries in the region are trying to grow the sector, they are kind of eclipsed by UAE, Saudi Arabia and Jordan.

Ali Alnaqbi said: “Jordan introduced business aviation into the Middle East when the first operator in the region began flying with support of the late King Hussein, who was keen to make Amman a business aviation centre for the region. Today Jordan is still making steady progress and is one of four countries whose industry has grown in the last year. Its renovation of Queen Alia Airport will only help provide improved infrastructure to support business aviation and we are delighted to be in Jordan to support and promote its progression.”

MEBAA has work cut-out

The Association has acknowledged that there is a lot more work to promote business aviation across the vast region. In Qatar, only Qatar Executive, a subsidiary of government-run Qatar Airways, is operating with no competition whatsoever and MEBAA is impressing upon Qatar to end such monopolistic policy.

The question before the business aviation community is how fast it will prioritise investment and adapt itself to the situation, failing which the segment is going to be in a worse off situation. After the recent Global Aerospace Summit in Abu Dhabi, a white paper was released, in which the problems were highlighted, so were the steps that needed to be taken and they included infrastructure creation, technology upgradation, staffing crunch and real estate growth.

Kurt Edwards, Director General of the International Business Aviation Council (IBAC), said that the business realities of the sector cannot be underestimated. “Business aviation is an industry that connects all parts of the world, it connects financial capitals, political capitals, remote regions, underserved cities and its growth really depends on the safety and access of the industry, as well as a regulatory environment that understands and recognises its unique and diverse roles.”

The IBAC chief said regulators still need to get a better grip on it. “It’s a very diverse industry, you have owner operated aircraft, corporate flight departments, on demand charters and air taxis and fractional ownership to name a few – each of those is a little bit different, each of those requires a slightly different way, a different treatment and, of course, it poses some interesting challenges for regulators that may not understand models other than scheduled air transport.”

The Middle East accounts for a small percentage of the 34,000 plus worldwide business aviation fleet, but has experienced good growth in the recent past. The realisation that business aviation is a ‘productivity tool’ propels growth and Middle Eastern buyers have been buying for helping businesses and also for luxury travel. Experts state that business aviation needs to be factored in when the authorities are planning airport and master economic planning as this segment is a critical component in economic development.

Most of the jets in the Middle East region are midsized, typically seating between six and 19 passengers. While small and midsize jets are regularly used for domestic requirements there was spurt in demand for larger jets for key international connections, but that now has slowed down considerably.

UAE planning own jet in 2019

The Middle East knows that this cyclical economic downturn will soon be a thing of the past and it has started looking at coming up with its own aircraft. Mubadala Aerospace, a business unit of the Abu Dhabi-based Mubadala Development Company, is already working at it. It has set an ambitious target of rolling out the first aircraft from the Arab region by 2019. The business jet is going to be with the help of Italian Piaggio Aero Industries in which it has 31.5 per cent stake.

With or without its own aircraft, the Middle East will be a hunting ground for OEMs for a long time to come. Hamburg-based WINGX Advance, commissioned by MEBAA, provided an analysis of the regional industry, highlighting a mixed picture. Whilst the number of active and registered business jets has leveled off since 2000, with a CAGR of -0.1 per cent, the number of operators has increased at an annual rate of 2.7 per cent, reinforcing MEBAA predictions that the industry will be worth $1 billion by 2020.

The reasons for that are Middle East is ranked tenth in the top global market for luxury spending, according to consultancy firm Bain & Co. The consumption of luxury goods increased by 11 per cent in 2014, while Knight Frank has named Qatar, the UAE and Saudi Arabia as the top three countries in the new luxury opportunity index. This augurs well for the business aviation market which not only falls in the luxury segment, but also as a business tool in the Middle East which is becoming a major aviation hub on the East-West axis.