Airbus Corporate Jets, a division of Airbus Group, expects to sell 10 aircraft worldwide this year, as the parent company reported a 21 per cent rise in earnings for 2013.
“The Middle East is our most important market, historically and even today,” said David Velupillai, the marketing director at Airbus Corporate Jets.
“If you look at the Middle East you will notice that it is a well-developed market for business jets. It’s well developed in the sense that you have billionaires and governments in the region, which have owned wealth for a long time.”
Several private jet operators in the region are looking to expand their fleet and replace ageing aircraft.
Mr Velupillai said that Airbus had sold around 170 corporate jets to date, since the inception of its corporate jet business in the mid-1980s. About half of their sales have come from the Middle East from clients including Emirates Airline, Abu Dhabi's Al Jaber Group, Qatari emirs and Kuwait's Al Kharafi Group.
“Demand from the region will continue to grow. Part of it is new customers and part of it is replacing old aircraft,” he said.
At the Abu Dhabi Air Expo, Airbus had on display the US$87 million ACJ319, configured to seat 19 people. The company said the plane's spacious interior gave it a "competitive edge".
Emirates Executive, the corporate jet division of Emirates, has customised the aircraft to fit 10 mini-suites and a lounge.
“On the airline side, the main interest is economics. On the corporate jet side, it’s the cabin,” Mr Velupillai said. “What most people like to do is to give wings to their lifestyle on the ground.”
In the region, the ACJs are targeted at governments, companies, and high net worth individuals. “Governments need an aircraft that might be 30-40 people to accommodate their officials, advisers, and journalists,” he said.
For individuals, the demand is for an aircraft that would fit an “extended family”.
Airbus, Europe’s largest aerospace group, yesterday reported €3.6 billion (Dh18.14bn) earnings before interest, tax and one-time items. Sales grew 5 per cent to €59.3bn. It plans to increase the production of its A320 narrow-body aircraft to 46 a month in 2016, up from 42 currently.
Airbus delivered 626 aircraft in 2013 and is targeting a similar number this year.
“Order intake was particularly strong for our Airbus commercial aircraft and provides a solid platform for the future growth of the group,” the chief executive Tom Enders said. “Strong demand allows us now to increase the single-aisle production rate.”
At the Dubai Airshow in November, Airbus won a total of 160 orders and commitments worth $44bn. Demand was mostly for its A380 superjumbo and wide body A350 XWB version. Emirates placed the single largest order for 50 A380s worth $20bn.
The airplane manufacturer said it would deliver the first A350 to Qatar Airways this year.
selgazzar@thenational.ae
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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.”
