Airbus heads into the third day of the Dubai Airshow with no announced orders, raising pressure on the manufacturer to clinch some deals and gain ground on arch-rival Boeing, which built an early lead at the event.
Airbus is working to turn around its fortunes during the remainder of the show, according to people familiar with the negotiations. Among prospective orders are accords with EgyptAir Airlines for A320neo single-aisle aircraft, as well as a deal with Dubai-based discount carrier FlyDubai, which is negotiating for as many as 175 narrow-body planes, said the people, who asked not to be identified.
The European plane maker remains confident it can bring home a highly anticipated order for about 36 additional A380 superjumbos from Emirates. That deal has eluded the company so far, dealing an embarrassing blow to Airbus that was compounded when Boeing signed its own pact with the airline.
Boeing is not done with deals yet, either. Among the transactions in its pipeline is a deal to place about half a dozen 787 Dreamliners with EgyptAir, according to people familiar with the talks. Representatives for Airbus, Boeing and the airlines involved declined to comment.
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Air shows are forums that bring together manufacturers and customers and offer a prime opportunity to close deals that have been brewing in the background for weeks or months. Airbus in particular has used the events for bragging rights, tallying its overall haul at the end of each show and comparing its wins with those of Boeing.
As Airbus finds itself in the unusual situation of not having a single buyer after two days, it has to deliver in the last two days to avoid its biggest commercial humiliation in years. The company typically excels at air shows, having perfected the art of the aircraft deal under longtime sales chief John Leahy, who relishes clinching last-minute accords and counting up gains at the expense of Boeing. With Mr Leahy set to step down in coming months, that carefully honed choreography is facing an uncertain future.
The changing fortunes were on display on the opening day of the event Sunday, when Airbus had planned to make its debut with the A380 order. Instead, Boeing stole the limelight with a US$15.1 billion deal from Emirates for its 787 Dreamliner, followed shortly thereafter with a follow-up accord with Azerbaijan Airlines.
When asked what was behind the hold-up with an Airbus order, the Emirates president Tim Clark said Airbus needs to show greater commitment to the A380, whose future has been thrown into doubt as the order book for the giant aircraft dries up.
This year’s air show has lacked the urgency of previous years, when Emirates and its Arabian Gulf peers such as Etihad Airways worked up an order frenzy on opening day. Etihad is undergoing a dramatic overhaul of its management and strategy after its alliance of partner airlines around the globe hit trouble.
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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Based: Dubai and Abu Dhabi
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