Flydubai's expansion underscores the high demand for the UAE's sun-and-sand holidays for residents of Eastern Europe and Russia.Galen Clarke / The National
Flydubai's expansion underscores the high demand for the UAE's sun-and-sand holidays for residents of Eastern Europe and Russia.Galen Clarke / The National

Flydubai will help Russians top up their winter tan



Dubai's budget airline plans to tap demand for winter sun and sand from Russian tourists.

Flydubai is planning a major foray into the country and neighbouring Ukraine with five new routes next month.

The expansion, an unusually heavy focus on one region for a budget airline that flies throughout the Middle East, Africa and South Asia, underscores the high demand for the UAE's sun-and-sand holidays for residents of eastern Europe and Russia.

Tourism will serve as a "launching pad" for the flights, said Ghaith Al Ghaith, the chief executive of flydubai, who said next month's launch date was timed to coincide with the start of the winter travel season.

The UAE competes against Egypt and Turkey for tourists from this region, he said. "These routes are mainly targeting tourists coming into the UAE. But the services will also cater to business traffic." The new services starting up next month include Kiev, Kharkov and Donetsk in Ukraine, and Kazan and Ufa in southern Russia. Flydubai already operates two other services to Russia, to Samara and Yekaterinburg.

The services are the latest in the airline's steep growth path, which includes flying a total of 40 destinations in just over two years, targeting markets such as Djibouti, Armenia and Azerbaijan.

Although the Middle East is home to some of the world's largest international carries, southern Russia and Ukraine have limited connectivity with the Gulf. Emirates does not have any services to the region, although the Sharjah-based Air Arabia serves Kiev, and Etihad uses a code-share arrangement to fly to the Ukrainian capital, as well as operating its own services to Minsk, in neighbouring Belarus.

In the wider eastern European region, Qatar Airways flies to Tbilisi, Baku and Bucharest.

Flydubai was spreading the risk of flying to three destinations in one country by servicing each Ukrainian city just twice or three times weekly, Mr Al Ghaith said.

"We are tied up in a way that pretty much guarantees a certain level of business to ensure all routes will be successful from day one," he said.

The designation of Ukraine as a co-host for the Euro 2012 football championship, a major tournament that attracted 1.1 million spectators when it was last held in 2008, would help to boost flydubai's operations next summer.

The airline was also planning to market the flights to UAE residents seeking a taste of the region's antiquated charm and its historic palaces and churches, said Mr Al Ghaith.

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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.”

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Europe’s rearming plan
  • Suspend strict budget rules to allow member countries to step up defence spending
  • Create new "instrument" providing €150 billion of loans to member countries for defence investment
  • Use the existing EU budget to direct more funds towards defence-related investment
  • Engage the bloc's European Investment Bank to drop limits on lending to defence firms
  • Create a savings and investments union to help companies access capital
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