Optimism is returning to the executive jet travel market after several months of improving demand but a note of caution remains even as the gloom fades.
Discretionary spending for purposes such as luxury air travel was one of the first things consumers ditched during the credit crisis two years ago, forcing operators around the world to cut costs and delay expansion plans.
But now, the UAE operators say they are receiving more enquiries as companies, government delegations and wealthy individuals start spending again.
"We are an upward curve," said Shane O'Hare, the president and chief executive of Royal Jet, which operates mid-size and large VIP jets. "We are way off calling it a recovery of the market."
The UAE has almost a dozen companies operating business charters as well as aircraft owned by individuals, giving it the second-largest executive fleet in the Middle East after Saudi Arabia's.
In the heady days of the mid-decade boom in the UAE, business jet travel took off, spurring new entrants. The year-old Al Jaber Aviation (AJA) launched its executive jet business during the worst of the downturn. Like other operators, it reviewed its growth plans and pushed back deliveries of new aircraft by one year.
AJA is targeting the large VIP business jet category, a space occupied by Royal Jet and just a few other major operators around the world, said Mark Pierotti, the chief operating officer.
"With the market for smaller aircraft, the [profit] margins are tight," he said. "There are so many small aircraft, it is price sensitive, and there are a lot of operators [charging] under their direct operating costs."
Mr Pierotti said he was encouraged by the level of business his company had in the spring season and hoped for an even busier summer.
"Certainly, for charters, the last months for AJA have been fantastic,' he said. "We are getting many, many requests every day."
Mr O'Hare said the downturn helped weed out some of the weaker companies worldwide.
"In the business jet market, a lot of new competitors come in but, at the end of the day, a lot of those new players fall by the wayside," he said.
"What this recession has done is accelerate this process."
In the UAE, no operators are known to have shut down. But last December, Istithmar World Aviation Executive Jets, which managed executive jets on behalf of their owners, closed its doors, citing "commercial reasons".
With its enormous investments in airport infrastructure, the UAE boasts some of the best facilities for private jet travel. Royal Jet is based at a private terminal at Abu Dhabi International Airport, while Al Bateen Executive Airport opened last year on Abu Dhabi island as a dedicated facility for business jets, after being converted from a military base.
In Dubai, Al Maktoum International Airport opens this month as the emirate's second flight facility and has allotted a significant portion of its space for executive jet travel.
Most of the emirate's business jet charters currently operate from Dubai International Airport.
UAE business jet companies were recently rattled by sharply higher costs on flights to Iraq, one of the most promising new markets. The increased costs amounted to tens of thousands of dollars per flight, Mr Pierotti said. It is believed the Iraqi government increased the fees to protect its own business jet operators, which were just starting up.
A delegation of the companies visited Iraq's civil aviation ministry in co-ordination with the Dubai-based Middle East Business Aviation Administration this year, with some positive results.
"We think we have sorted it," Mr Pierotti said.
"We have not seen high commissions recently but you never know. It could come back."
igale@thenational.ae
Coming soon
Torno Subito by Massimo Bottura
When the W Dubai – The Palm hotel opens at the end of this year, one of the highlights will be Massimo Bottura’s new restaurant, Torno Subito, which promises “to take guests on a journey back to 1960s Italy”. It is the three Michelinstarred chef’s first venture in Dubai and should be every bit as ambitious as you would expect from the man whose restaurant in Italy, Osteria Francescana, was crowned number one in this year’s list of the World’s 50 Best Restaurants.
Akira Back Dubai
Another exciting opening at the W Dubai – The Palm hotel is South Korean chef Akira Back’s new restaurant, which will continue to showcase some of the finest Asian food in the world. Back, whose Seoul restaurant, Dosa, won a Michelin star last year, describes his menu as, “an innovative Japanese cuisine prepared with a Korean accent”.
Dinner by Heston Blumenthal
The highly experimental chef, whose dishes are as much about spectacle as taste, opens his first restaurant in Dubai next year. Housed at The Royal Atlantis Resort & Residences, Dinner by Heston Blumenthal will feature contemporary twists on recipes that date back to the 1300s, including goats’ milk cheesecake. Always remember with a Blumenthal dish: nothing is quite as it seems.
In numbers: PKK’s money network in Europe
Germany: PKK collectors typically bring in $18 million in cash a year – amount has trebled since 2010
Revolutionary tax: Investigators say about $2 million a year raised from ‘tax collection’ around Marseille
Extortion: Gunman convicted in 2023 of demanding $10,000 from Kurdish businessman in Stockholm
Drug trade: PKK income claimed by Turkish anti-drugs force in 2024 to be as high as $500 million a year
Denmark: PKK one of two terrorist groups along with Iranian separatists ASMLA to raise “two-digit million amounts”
Contributions: Hundreds of euros expected from typical Kurdish families and thousands from business owners
TV channel: Kurdish Roj TV accounts frozen and went bankrupt after Denmark fined it more than $1 million over PKK links in 2013
The specs
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On sale: Now
Price: From Dh1.05 million ($286,000)
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Members of Syria's Alawite minority community face threat in their heartland after one of the deadliest days in country’s recent history. Read more
The White Lotus: Season three
Creator: Mike White
Starring: Walton Goggins, Jason Isaacs, Natasha Rothwell
Rating: 4.5/5
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.”