Above, a Gulfstream aircraft on display at the Abu Dhabi Air Expo. Gulfstream has already enjoyed significant growth in the Middle East in the past five years and is expecting more. Sammy Dallal / The National
Above, a Gulfstream aircraft on display at the Abu Dhabi Air Expo. Gulfstream has already enjoyed significant growth in the Middle East in the past five years and is expecting more. Sammy Dallal / The

Abu Dhabi Air Expo: business jets that fill the need for speed and range

The Middle East market for business jets is taking off as companies become more aware of the benefits of private flights, according to manufacturers.

Some of the industry’s biggest players are looking to capitalise on the trend by taking part in the second annual Abu Dhabi Air Expo, which opened yesterday in the capital.

The three-day event is the only general aviation exhibition in the region and is expected to draw more than 12,000 visitors.
"I think it's fair to say business aviation is well established in the Middle East, but there is a notable shift now," said Philip Nasskau, a spokesman for Bombardier.

“[Jets] are becoming much more used by businesses and corporations because of the efficiency gains that you get. With a private aircraft you get to fly to the cities that you need to be in when you need to be there.”

Orders have been rising in the region, according to manufacturers, and the industry is projected to keep growing.

Bombardier estimates that there will be 735 new business jets in the region by 2021, and a further 1,260 bought between 2022 and 2031.

Gulfstream, a US-based manufacturer, has already enjoyed significant growth in the Middle East in the past five years and is expecting more.

It had 146 aircraft in the region last year, up from about 110 in 2007.

“You can see just by the growth in numbers, almost a 50 per cent increase in sales of Gulfstream operating in the area, that the [business jet industry] is definitely coming into its own in the Middle East,” said Heidi Fedak, the senior manager of social media and external communications at Gulfstream.

“I expect [more] growth in the region, especially now we have the Gulfstream G650 available for sale,” added Ms Fedak.

The G650, which is being exhibited for the first time in the Middle East at the air expo, is the fastest business jet on the market, and can fly from Melbourne to Abu Dhabi in about 13 hours, shaving about two hours off the journey time of a larger passenger plane.

Range is also becoming more important as more companies are flying farther on business.

“Here the aircraft are very used to going outside the region and connecting to Europe and the US and a lot now are connecting to Asia,” said Renaud Cloatre, the general manager of Dassault Falcon Middle East. “The business jet is a tremendous tool for any businessman. It gives you flexibility, and for businessmen in the region it is a tool that they are well educated to use now.”

About 10 years ago, buyers would use consultants when choosing their aircraft, but today, many clients are directly involved in the purchasing process.

“We are seeing a different buyer today than what we saw some time ago in the Middle East,” said Colin Steven, the vice president of sales and marketing for Europe, the Middle East and Africa at Embraer Executive Jets.

“Today there is so much information out there that the guys understand range is the priority, comfort is the priority, so I want to go big and I don’t want anything small.”

Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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