Region Has Diversified Interests In World Economies, Says Brian Foley

Just looking at the health and resiliency of the business aviation market in the Middle East, which has held relatively strong for the first ten years of this century, the casual observer might want to link it to the soaring price of oil. But speaking on the eve of the Middle East Business Aviation (MEBA) Show in Dubai, market analyst Brian Foley sees otherwise.

"Thirty years ago that may have been the case, but today we see a region with multiple, robust ties to all the other world economies," Foley maintains after conferring with his local contacts. "And these interests are diversifying, no longer based so narrowly on oil. Certainly oil still plays a role, but today its influence is much less direct. Just look at the investment and financial front; the need to work with partners in Europe, Asia and the Americas. That alone requires a well developed business aviation fleet and infrastructure."

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Foley noted that, of about 550 business jets based in the Middle Eastern countries, nearly 90% are considered medium- or large-size jets. This fleet perspective is significant, because the worldwide average is closer to 60%. And it is a measure of utility, not just luxury and prestige.  All these Gulfstreams, Falcons and Globals (along with the occasional Boeing and Airbus models) fill a need for range and comfort reaching far beyond the Middle East that smaller jets can't match.   

Business aircraft sales in the Middle East peaked in 2007 and took a tumble with the rest of the world in late 2008. "Here, however, the market swing was less extreme than in the USA," Foley points out. "The older, more established operators generally survived the downturn rather well. In contrast, some of the newcomers who were more dependent on credit and cash flow had to leave the market, at least temporarily. But it's fair to say that all operators took a lesson from this economy. Today they're a lot more cost-conscious and increasingly sophisticated in their use of planes and other assets."

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Foley sees conditions as improving now, with smart operators snapping up late model pre-owned aircraft at prices 30% lower in this buyer's market. Flight activity is up too, and not just in reaction to world oil prices.  Foley's contacts cite the fact that Dubai, for example, has virtually no oil, and that even in oil-rich states many jets are owned by individuals and corporations engaged in banking, real estate, construction, consumer goods, transportation and so forth. "These entities rely on jets to support their business activities internationally, many of which are oil-independent.  While the price of oil is obviously important from a macro-economic standpoint, its effect on airplane sales and utilization is indirect and less than one might think."

FMI: www.brifo.com