As the Dubai Airshow kicks off today, business aviation here and in the wider Middle East and North Africa (Mena) region is booming, as more corporations charter aircraft and the wealth of high-net worth individuals continues to increase, helping them travel more.
The business aviation market is estimated to worth be more than US$500 million in the Mena region, and is expected to grow by 12 per cent this year and 15 per cent next year, according to Ali Al Naqbi, the founding chairman of the Middle East Business Aviation Association (Mebaa). The association expects the Mena market to be worth about $1.2 billion by 2018.
The number of registered aircraft in the region currently exceeds 500 and will see at least another 700 aircraft join the fleet by 2020, Mr Al Naqbi adds.
This country is leading the boom in the region, with annual growth currently of 12 to 15 per cent in the business aviation sector, he says.
“The reason is it is a good environment for investment, so most investors are coming with their aircraft and that generates a lot of movement. They come from Saudi Arabia to invest here, [for example],” says Mr Al Naqbi.
Saudi Arabia, the biggest Arab economy and the Arabian Gulf country with the largest population, has the most number of registered aircraft and enjoys a healthy domestic business aviation sector. Annual growth in business aviation in Saudi is about 7 per cent. Both Saudi Arabia and the UAE represent 70 per cent of the Mena business aviation market, Mr Al Naqbi says.
“The difference between the UAE and Saudi Arabia is that there is a lot of internal movement within Saudi Arabia, which we don’t have it there [in this country],” he points out.
“In Saudi Arabia there are a lot of flights between East and West. Domestic flights for business aviation in Saudi Arabia is increasing very quickly.”
The rapid growth in business aviation will be reflected in attendances and the number of aircraft at the Dubai Airshow this week in its new venue, the Dubai World Central airport, the emirate’s second airport.
“Business aviation continues to play an increasingly important role within the Middle East region, helping to sustain current economic activity and drive new developments within the market,” says Sharief Fahmy, the chief executive of F&E Aerospace, the organiser of the show, last held two years ago.
“We are expecting up to 50 business aircraft to be displayed at the Dubai Airshow – an increase of 8 per cent in comparison to 2011.
We are seeing UAE-based business aviation companies coming in strong followed by USA,” Mr Fahmy says.
The jets on display include family fleets from all the major original equipment manufacturers including Bombardier, Embraer, Gulfstream and Dassault Aviation, he adds.
The demand for business aviation in this country is not just related to economic growth and increased corporate profitability. Many firms are basing their aircraft here, which is attracting investors and their planes.
“The UAE is a very excellent environment for investment and the owners of the aircraft have some investment in one of the cities in the UAE and that’s why they moved their aircraft there,” says Mr Al Naqbi.
“The UAE has become a hub. If you are coming from East to West, the technical stop you make is in the UAE that’s why UAE has become more attractive, especially since we have dedicated airports for business aviation like [Abu Dhabi’s] Al Bateen.”
The airport is the first dedicated business aviation hub in the region.
The demand for business travel has increased as the number of flights between the Mena region and Asia rises and economic activity in the Middle East generates more inter-regional traffic.
“The trend remains from the traditional sources – for us in the Middle East the local business community has increased as has the tourist traffic from Russia and the ‘Stans,” says Mike Berry, the managing director of ExecuJet Middle East.
“Corporate profitability is on the increase within the region, which remains a fundamental catalyst to increased activity within general aviation.”
The region has witnessed a shift from luxury to business in the use of aircraft. Twenty years ago, the majority of people flying private jets were high-net worth individuals and statesmen but now business travel for executives is taking over, Mr Al Naqbi says.
“In our latest analysis, we found that 70 per cent are for business use and 30 per cent are for luxury and high-net worth individuals,” he says.
“This is an indication of how important business aviation is as a business tool.”
Still, high-net worth individuals continue to drive business aviation growth.
Despite the Arab Spring, private wealth in the Middle East and Africa region grew 9.1 per cent to $4.8 trillion last year from $4.4tn a year earlier, and is forecast to reach $6.5tn by the end of 2017, according to a wealth report by Boston Consulting Group.
The UAE’s Private Jet Charter, which has a big mix of customers from sheikhs to VIPs and high-net worth individuals, has seen its business rise by 20 per cent this year from last year.
“It is on the rise here because the economies in the GCC are doing well and that is kind of fuelling the demand,” says Ross Kelly, the managing director for the Middle East for Private Jet Charter.
“It is an area where there is a lot of wealth.”
But the business aviation sector does face challenges.
Individuals in the region tend to favour wide-bodied aircraft and there is a lack of smaller aircraft that could be used for business travel by corporates.
“Predominantly in this region and Russia as well, they like bigger aircraft, as opposed to Europe, where there is not as much wealth and people in Europe are more practical in getting smaller aircraft,” says Mr Kelly.
“There is probably a lack of smaller aircraft in this region, especially for corporate clients who use jets as a business tool.”
There are also shortage of airports dedicated to business aviation jets and the region suffers from the lack of skilled labour, including flight planners, engineers, pilots and air traffic controllers.
Also the limited private aircraft slots at airports in the region is creating problems for flights, particularly at Dubai International Airport, where the increase in commercial flights is restricting slot allocations to chartered flights.
Another less well realised issue facing the industry is the illegal operation of private jets.
“The grey market – where owners of privately-registered jets illegally operate them on revenue service – remains a challenge for charter operators in the Middle East,” says Mr Berry.
“This practice threatens the safety standards we want to see as an industry.”
But, as the Dubai Airshow will undoubtedly prove, for the vast majority of the region’s private aviation sector, the sky is the limit.