Airbus has said the "vast majority" of its A320 fleet affected by a software issue have undergone the necessary modifications, helping contain wider disruption from the biggest emergency recall in the company's history.
Three days ago, the European plane maker called for "immediate precautionary action" on its in-service A320s – thought to number 6,000 – its most popular model and a workhorse of the aviation industry.
"We are working with our airline customers to support the modification of less than 100 remaining aircraft to ensure they can be returned to service," the Toulouse-based company said on Monday. "Airbus apologises for any challenges and delays caused to passengers and airlines by this event."
The statement follows an apology from Airbus chief executive Guillaume Faury to airlines and passengers after the surprise recall of the 6,000 A320 planes, which compete with the Boeing 737 model.
"The fix required on some A320 aircraft has been causing significant logistical challenges and delays," Mr Faury said. "I want to sincerely apologise to our airline customers and passengers who are impacted now. But we consider that nothing is more important than safety when people fly on one of our Airbus aircraft."
In the UAE, the General Civil Aviation Authority (GCAA) confirmed on Sunday that all UAE operators of Airbus A319, A320 and A321 planes had complied fully with the Emergency Airworthiness Directive and that all affected operators were able to continue safe flight operations.
More than 100 UAE-registered aircraft were affected by this directive, the GCAA added.
In Saudi Arabia, chief executive of flyadeal, Steven Greenway, said the urgent software update had affected more than a quarter of the airline's fleet.
"Teams from across the company leapt into action, immediately grounding the affected aircraft, undertaking the software update and working to minimise disruption to our Saturday schedule," he said.
While a total of 28 flights were cancelled, the airline tried to reaccommodate the majority of affected passengers on to 14 wide-body, wet-lease aircraft replacement flights that were "stood up in a very short time", he said.
Differing approaches
The weekend's turmoil underscored the aviation industry's changed approach to responding to crises, after Boeing's much-criticised handling of the fatal 737 Max crashes that were blamed on a software design error.
"The A320 is the backbone for short-to-medium haul travel for many airlines, however, the non-routine maintenance event and the responsiveness of the industry strongly demonstrates the industry's safety-first philosophy," Usman Tahir, head of aviation at consultancy Roland Berger Middle East, told The National. "The actions taken are reflective of proactive and preventive maintenance to ensure risk mitigation for the affected fleet."
While in the short-term, this has resulted in flight cancellations and "significant" revenue loss, in the longer term airlines are expected to rethink their fleet strategy to minimise the risk of focusing on one type of aircraft, he said.
The incident also highlights the difference in approaches between Airbus and US rival Boeing in dealing with crises.
"In comparing Airbus and Boeing, we see two different organisational philosophies," said Linus Bauer, founder and managing director of UAE-based boutique consultancy BAA & Partners.
"Airbus typically acts earlier and more conservatively, supported by a deeply engineering-driven culture and close European regulatory engagement."
Meanwhile, Boeing, having faced several high-profile crises, "operates under a far harsher spotlight, which shapes market reactions", Mr Bauer said. Airbus’s robust backlog and delivery also give it a "faster recovery arc" in situations like this, he added.
Company profile
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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.”
