Bombardier expects lower oil prices to hit business aircraft sales

If the prices of oil continue to drop, as we have seen it in the past four to five weeks, then I suspect that there will be some decrease of sales in the region, says Khader Mattar of Bombardier.

Employees look at the CSeries aircraft after its first test flight in Mirabel, Quebec in 2013. Christinne Muschi / Reuters

The Canadian plane maker Bombardier expects lower oil prices to hurt sales of business aircraft in the Middle East.

The Montreal-based company says the energy sector is the biggest client for its business jets.

“If the prices of oil continue to drop, as we have seen it in the past four to five weeks, then I suspect that there will be some decrease of sales in the region,” said Khader Mattar, regional vice-president of sales for the Middle East, Africa and Turkey.

Oil has shed nearly 40 per cent of its value since peaking at around US$115 per barrel in June, amid an increase in production in the US.

Putting oil prices aside, Mr Mattar still expects the Middle East to be one of the fastest- growing regions for business aviation. He expects the number of business aircraft in the region to reach 1,400 by 2033.

Separately, the Middle East Business Aviation Association has predicted that the number of business jets in the region will reach 1,200 registered aircraft by 2020, up from 530 in 2013.

“One of the main drivers in those markets is that the number of wealthy people in Turkey has increased dramatically the last few years,” said Mr Mattar.

“Saudi Arabia has been a traditional market for us in terms of business jets. It’s a leader in the Middle East.”

However, a US-based maker of airplane engines is less optimistic.

Honeywell Aerospace said in a report in late October that demand from the Middle East and Africa for business jets had moved below its historical growth rate of 4 to 7 per cent a year. The report said that the region’s purchases have been affected by ongoing conflict in the region, lower oil prices and health crises in Africa.

Bombardier has 100 business jets flying in the Middle East, representing a 25 per cent market share. The plane maker has 22 aircraft in Saudi Arabia, 20 in Turkey, and 18 in the UAE.

For medium-size business jets, Bombardier’s Challenger series accounts for 60 per cent of deliveries in the region. The medium-haul aircraft can fly directly from Dubai to London. Its wide-body and luggage space have helped to make it popular in the region, according to Mr Mattar.

He said the sectors that demand business jets in the Middle East are: oil, construction, and banking. Governments and entrepreneurs are also among the strong buyers of business aircraft in the region.

“People need a tool to travel, particularly to areas that lack an airline travelling into small destinations,” said Mr Mattar.

“Frequency of small airlines is also affecting people to travel within the region. They look at the private jet as a good tool for their business to expand.”

One area that hinders growth of business aviation in the Middle East is financing.

“Banks worry that governments may change or regulations may change and they cannot get our money out,” Mr Mattar said.

“The regulations here need to be developed. It’s coming, but I would like to see more of that.”

“It is the manufacturers’ job to educate banks here on how to finance aircraft,” he added.

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