x Abu Dhabi, UAETuesday 16 January 2018

Demand for private jets takes off in post-crisis climate

Abu Dhabi Air Expo: After the intense turbulence caused by the 2007-08 financial crisis, the global market for private and executive jets is staging a major recovery, aided by growing demand in the Middle East.

After the intense turbulence caused by the 2007-08 financial crisis, when sales went into a tailspin, the global market for private and executive jets is staging a major recovery, aided by growing demand in the Middle East, especially in Gulf states such as the UAE, and in China and other fast-growing emerging economies.

The market ranges from so-called very light jets that seat just four passengers to long-haul planes seating up to 35 that can fly distances comparable with commercial airlines - with the key difference that they are often custom-designed with luxury interiors, full-sized beds and high-end entertainment systems.

As manufacturers and customers convened for the start of the Abu Dhabi Air Expo at Al Bateen Executive Airport yesterday, they could be confident that they had left the global downturn behind them, even though the world market volume will not reach its pre-crisis level of more than US$22 billion (Dh80.8bn) until 2016, say analysts.

Annual sales of new aircraft and overhauled second-hand ones are expected to double to almost $35bn by 2030, and the annual global growth rate in the years between 2010 and 2030 will amount to about 4 per cent, according to a study by Roland Berger Strategy Consultants.

The growth rate in the Middle East is projected at 5.5 per cent per year up to 2030.

"Countries such as the United Arab Emirates are driving this growth and will even exceed the region's growth rate," Holger Lipowsky,the project manager at Roland Berger, said.

France's Dassault,which will be exhibiting its range of business jets at the Abu Dhabi Air Expo, expects the market for business jets to recover across the Middle East.

"The Middle East business jet market is maturing," said John Rosanvallon, the chief executive of Dassault Falcon, a unit of Dassault Aviation.

"The region has world-class infrastructure, including magnificent new airports. The economy is growing. The future remains promising."

Growth in China is expected to be as high as 13.5 per cent because of strong pent-up demand from an expanding class of wealthy individuals and companies.

North America, the most developed market for business jets, is expected to grow just 2.3 per cent.

In a sign of growing confidence in the market, the American billionaire investor, Warren Buffett, last year ordered 425 private jets from Bombardier and Cessna worth about $9.6bn to expand the fleet of private jet charter group NetJets, which belongs to his investment company Berkshire Hathaway.

In Europe, the world's second-largest business jet market, the recovery is more sluggish because much of the continent remains mired in recession.

"There is a strong link between the performance of the top 10 or top 100 companies in Europe and business jet activity," said Belarmino Gonçalves Paradela,the senior manager for economics and operational activities at the European Business Aviation Association.

Sales worldwide are being boosted partly by the launch of new, more fuel-efficient models. But the main drivers of growth are and will remain GDP, corporate profits - and executive bonus payments, all of which are under pressure in austerity-hit Europe.

"We're noticing an increase in the number of passengers per aircraft. This is linked to the crisis because people are rationalising their travel," said Mr Paradela.

The biggest manufacturers are Canada's Bombardier with a market share of just under 25 per cent, followed by Gulfstream of the US and Dassault of France with 20 per cent each and Cessna of the US with 15 per cent. Others include Hawker, Embraer, Airbus and Boeing.

"New manufacturers from Russia and China are trying to get into the market for business and private jets," said Jörg Wahler,a principal at Roland Berger Strategy Consultants. "The established manufacturers are trying to counter the new competitors with better-performing aircraft."

"Firms with their own fleets appreciate the advantages like independence, speed and flexibility," said Mr Wahler. "That is why the market for business jets will develop more strongly than the market for private jets.

"Manufacturers are focusing on bigger planes that offer more economy and greater comfort."

Since the crisis, two segments of the market have expanded strongly - the low-cost very light jets, which cost about $5 million, and the very large models for wealthy private individuals, priced at about $50m, said Mr Lipowsky.

"At the moment we're seeing very strong growth in the secondary market for used and overhauled jets. The engines and the cabin are modernised to cut the flying costs and to upgrade comfort levels to the most modern level," said Mr Lipowsky.

Overhauled jets tend to be 30 to 40 per cent cheaper to buy than new planes. "We expect that this market will absorb price-sensitive demand in future."