Fri, Dec 09, 2011
Industry Seems To Be Stabilizing Its Self, According To Brian
Foley
Since the conclusion of last month’s Dubai Air Show,
market analyst Brian Foley has called attention to the 6% shrinkage
of the region's business jet fleet over the last year and what it
means.
"The Middle Eastern business jet population has declined from
550 to 516 aircraft in the last 12 months," Foley said. "It
represents a fleet contraction of roughly 6%, mostly in large and
midsize business jets with an aggregate value approaching
three-quarters of a billion dollars that were either sold, grounded
or repossessed. That seems quite startling -- particularly
when linked to the localized upheavals, conflicts, leadership
changes and general unrest since the so-called Arab Spring.
But that link doesn't seem to hold. Instead, what we've observed is
simply residual fallout from the worldwide economic recession --
certainly not a cause for celebration, but still a sign of normal
economic behavior as opposed to the repercussion of political
events, and that's a very healthy signal."
Together with previously reported cancellations and
postponements of aircraft orders, this adjustment has been painful
for some but probably also necessary for the community as a
whole. Foley explained that marginal players and
underfinanced newcomers were generally the hardest hit. The
larger, older and more solidly established operators were less
affected -- "scared but not scarred." Even so, this episode
has reinforced their need to manage wisely -- for example, to be
more careful in selecting not only future aircraft but also future
service providers based on performance and value.
Indeed, the industry seems to be stabilizing itself nicely even
ahead of politics. Some of Foley's contacts are already reporting
brisk business activity led by midsize firms involved in
construction, retail, telecommunications and, of course,
oil. Tourism has been steady, and there has been more
regular business travel to Iraq.
"This shakeout has removed some unsustainable elements and
helped consolidate the business aviation sector. Ultimately
it will make for a healthier and more even environment going
forward," Foley added. “Ironically, there’s
actually been stabilization in the local Mideast business aviation
market this year and things have been going quite well.”
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