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.”

FMI: www.BRiFO.com