x Abu Dhabi, UAEFriday 28 July 2017

Abu Dhabi’s Royal Jet to spend up to $700 million renewing fleet

Royal Jet will replace all nine of its aircraft with 11 new ones. Of these, seven will be large-bodied, two will be super to mid-sized and two will be corporate size.

Shane O’Hare, the president and chief executive of Royal Jet, says there is a market potential for the company to grow at 6 per cent annually in the next few years. Sarah Dea/ The National
Shane O’Hare, the president and chief executive of Royal Jet, says there is a market potential for the company to grow at 6 per cent annually in the next few years. Sarah Dea/ The National
Abu Dhabi's Royal Jet plans to renew its entire fleet by 2019 at a cost of up to US$700 million, as regional private jet operators follow in the slipstream of regional carriers adding capacity.
Royal Jet will replace all nine of its aircraft with 11 new ones. Of these, seven will be large-bodied, two will be super to mid-sized and two will be corporate size. The fleet expansion and replacement will be funded by selling off old aircraft and through bank lending.
The company has started the tendering process and will decide on suppliers by early next year.
The fleet currently has six Boeing business jets, two short-range Gulfstream G350s and one Learjet 60, a mid-sized, medium-range aircraft. The fleet can seat anywhere between 18 to 50 people in each aircraft, and can be fitted with a bedroom and a washroom.
“We want to replace the fleet now because the average age of the fleet is 10 years, and to keep up with the technical updates and onboard facilities such as live TV, mobile telephone and internet connectivity that is now expected by the customer base,” said Shane O'Hare, the president and chief executive of Royal Jet. “And there is a market potential to grow at 6 per cent per annum in the next few years largely in line with the GDP growth of the UAE.”
The first day of the Dubai Airshow broke all records as Boeing and Airbus bagged orders worth about $200 billion between them.
“The manufacturers enjoy a diverse global customer base; so while they are not dependent on orders from the region, it represents a strategically highly important part of their overall business,” said John Strickland, the director of the London-based air transport consultancy JLS Consulting, referring to the two Airbus and Boeing.
The slow growth in US and European economies, however, has affected the charter business in the Gulf and Middle East.
“This has a knock-on effect on the pricing and it puts pressure on us as other jets bring their competition here,” Mr O'Hare said.
Royal Jet, which does not reveal its profits as a private company, has kept its pricing steady for the past three years.
“There is an opportunity to command a premium because of the investment we are putting in, but there are no immediate plans to increase prices,” Mr O'Hare said.
The leading markets for Royal Jet have been Europe and the Middle East, followed by Africa and North Asia. The average sector length its aircraft flies to is four-and-a-half hours. Its Boeing business jets can fly 10 hours, which can take in London, Morocco, Singapore and Johannesburg.
ExecuJet Middle East also said yesterday said that demand from executive and VIP travellers had picked up more strongly than expected this year.
Unrest in a number of Arab countries in addition to the global economic downturn slowed the demand for executive aviation services in the region in recent years. ExecuJet operates facilities at Dubai International Airport, King Khalid International Airport in Riyadh and Ataturk Airport in Istanbul.
“At Dubai International Airport at the moment we are at the equivalent of – if not marginally surpassed – the 2008-09 level of activity,” said Mike Berry, the managing director of ExecuJet Middle East. “We have definitely seen in the last year a significant increase in traffic coming through our FBO passenger lounges as well as using our maintenance services.” FBO stands for fixed-based operator, an industry term to mean ground facility.
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 the Middle East Business Aviation Association.
Mr Berry said he was also “very happy” with operations at its new base in Riyadh, which has been open for a few months, and aim to open other facilities in Saudi Arabia next year. ExecuJet had expected to handle 3,000 airplane movements in the first year or operation in Riyadh but now expects that to be “at least 25 per cent higher”.
Charter business in the UAE has been growing as the economy picks up. DC Aviation Al Futtaim, a joint venture between Al Futtaim Group and Germany's DC Aviation, opened its 5,700 square-metre hangar facility at Dubai World Central's Aviation District in September. It has a fleet of 30 aircraft in the UAE, Germany and Switzerland, including two in Dubai. The company aircraft provides aircraft maintenance, management and business jet chartering to local, regional and international clients.
“The general economic situation in Dubai and Gulf is among the reasons driving the private business jets sector,” said Holger Ostheimer, general manager of DC Aviation Al Futtaim. “Moreover, people are in the position of luxury of owning an aircraft.”
ssahoo@thenational.ae
lgutcher@thenational.ae