The Arabian MRO Crisis

I grew up in England in the 1970s and I still remember the Sunday Times photographs of abandoned Rolls-Royce, Cadillac and Mercedes vehicles along the hard-shoulders of highways across the Arabian Desert. The stories accompanying those images told of how the immense wealth created from the sale of crude oil had enabled the locals to purchase imported luxury vehicles – long before any maintenance and repair garages were established. A broken drive-shaft, thrown connecting rod, or the simple problem of a failed fuel pump, left the roadsides littered with abandoned luxury cars.

Fortunately the same cannot be said about the ramps and taxi-ways of most of the airports in the region today. However, the same principle almost applies. Prior to the global financial meltdown of 2008, the number of business jet aircraft that were being bought and based in the Middle East was rising at an unprecedented rate.

Incredible Growth

According to Andrew Young, Sales Director at AMSTAT Corporation, there were 143 business jet and turboprop aircraft based in Bahrain, Iran, Jordan, Kuwait, Oman, Qatar, Saudi Arabia, the United Arab Emirates, and Yemen in 2000. The fleet grew to 247 business aircraft by 2005, and now totals more than 400 today. Included in these figures are the 40 aircraft in NetJets Middle-Eastern fleet.

This rapid growth – almost 300% over 15 years or 100% every five years – far outpaces the growth seen in the United States. In 1984 there were 9,811 business aircraft in the US; while today there are 19,166. That effectively puts the US five-year growth-rate at about 33%.

The question begs to be asked, why is the growth rate for business aircraft operating in the Middle East growing three-times faster than the United States?

The Arab Economies

Commenting in 1989, His Highness Sheikh Ahmed bin Saeed Al Maktoum – now President of Dubai’s Department of Civil Aviation and Chief Executive and Chairman of The Emirates Group – gave a strong indication that the UAE and Dubai were set for huge growth when he stated: “…it’s a free market. We are not a communist country.”

The Gross Domestic Product (GDP) of Dubai alone is about US$100 billion and climbing, while the total for the UAE is over US$200 billion. Saudi Arabia has a GDP of almost US$600 billion, while Qatar, Bahrain, Jordan, Kuwait, Oman, and Yemen have a collective GDP of about US$550 billion. The disposable wealth generated in these economies enables more and more of the rapidly growing wealthy population to afford the benefits of private business aircraft. Until as recently as 1995, the use of private aircraft was mostly limited to the Royal households in the region.

Destinations and a Trend to Smaller Aircraft

Ever since the 1970s, Arab-owned business aircraft have worn grooves in the airways between the Gulf-states and London, Paris, Geneva, Houston and Hong Kong. Many of the trips were to bespoke tailors, private bankers, oil buyers and ‘wild cat’ oil specialists. Now these traditional routes have expanded to include New Delhi, Mumbai, Singapore, Bangkok, Kuala Lumpur, Shanghai, Beijing, and Rio de Janeiro; all mostly with a business purpose.

Large cabin aircraft with a range of more than 4,000 nautical miles have been the first choice for Middle Eastern buyers. However, now the focus has turned towards Asia, cabin sizes and ranges appear to be shrinking, and small to mid-size aircraft are becoming more popular with business owners.

Certification and Oversight

In the early days of aviation in the Gulf of Arabia, the British Civil Aviation Authority (CAA) rules and regulations were loosely followed. Today the Saudi Arabian General Authority of Civil Aviation and the UAE General Civil Aviation Authority both have their own Regulations. They are heavily based on the International Civil Aviation Organization’s (ICAO) Convention on International Civil Aviation – often referred to as the Chicago Convention. Both systems lean towards Air Carrier Operations, therefore the ICAO Safety Management Systems (SMS) are being phased-in for business aviation operations. The Middle East Business Aviation Association (MEBAA) is taking on an active oversight role to ensure that bizav is not held-back by a regulatory system that is better suited to the commercial airlines rather than general aviation.

The licensing requirements for maintenance engineers generally follow the British CAA system. However, licensing of approved maintenance facilities mostly follows US Federal Aviation Administration (FAA) system. In fact, the name of the Civil Aviation Regulation section that deals with these organisational approvals is known as Section 145, the same name used for the Repair Station System in the US.

MRO Capacity

To date, four manufacturers have established service centres in the region. There is an expectation that more manufacturers will follow suit, either in the Middle East or in nearby India. Another seven independent organisations that have also opened their doors as approved maintenance facilities for the growing fleet of business aircraft operating within the region.

In the US, which has a fleet of 19,166 business aircraft – the world’s largest, there are currently 4,126 FAA-certified repair stations. That is a ratio of just over 4.6 aircraft per Maintenance Repair and Overhaul (MRO) facility. With the current infrastructure in the Gulf, there is a ratio of 37 aircraft to each MRO station. The capabilities available are extremely varied, especially when it involves interior completion services.

Many Middle Eastern business aircraft operators find it easier and faster to take their aircraft offshore for maintenance, sometimes as far afield as the US, Europe or even Australia. The positioning costs to get the aircraft and its crew to the MRO facility can be enormous. But often the toll on the employees is the highest cost paid due to the length of time that they need to be away from home. Many offshore MROs use the gift of free or discounted fuel as an incentive for Middle East operators to make the long journey to their facilities. Some even offer housing, cars and other incentives to lessen the burden on the owner and crew.

Purpose-built new Boeing and Airbus are well catered for in the Middle East. However, it is the slightly smaller aircraft such as Gulfstreams, Falcons, and the ultra-long range Challengers and Globals face a transcontinental flight to get heavy maintenance and refurbishment done. It is a whole different problem for owners and operators of small- to mid-size aircraft.

Fortunately we are not at the point where aircraft are being left by the side of a runway because of a failed fuel pump. However if the fleet continues to grow at its current pace, by 2015 there will be a staggering ratio of 80 aircraft to each local MRO facility if the support infrastructure does not expand. This does not allow for any increase in drop-in traffic from operators in neighbouring Asian states who come to the Middle East to do business.

If you are an MRO company, an aircraft inspector or an aerospace maintenance engineer, and you want to create a new life for yourself in the Gulf; then I strongly urge you to fly, not run, to the Middle East because there is true opportunity to be found.

The Middle East: A Historical Aviation Perspective

The people of the Middle East have been entrepreneurs for more than 7,000 years. They helped to develop the Silk Routes that crisscross Asia, Africa and Europe and travelled them trading a diverse range of products from coral to metal goods.

The discovery of underground crude oil deposits in Bahrain in 1932 immediately redefined the region and its importance to the world. Oil and natural gas deposits were quickly found throughout the Middle East, and the world has clamoured for a slice of these resources ever since.

Starting in the early 1970s, the increasing revenue from oil has contributed to an extensive modernisation of the Gulf. The Arab Organisation for Industrialisation (AOI) was founded in 1975 by Egypt, Qatar, Saudi Arabia and the UAE as the basis of a military aerospace industry. The Gulf Cooperation Council (GCC) was formed in 1981 to promote economic coordination between Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE.

The Middle-Eastern regulatory authorities differ greatly on many airworthiness and air operation governance system issues. Until recently, there were three distinct aviation branches: military; airline and royal transportation. The concept of business aviation simply did not exist outside of the royal courts, and the foreign oil companies that came and went on their own aircraft.

This has all changed, especially since the Middle Eastern Business Aviation Association (MEBAA) was formed in 2006. The modern-day architect of aviation promotion, technology and growth is undoubtedly His Highness Sheikh Ahmed bin Saeed Al Maktoum who founded Emirates, the Dubai-based airline, and was instrumental in forming MEBAA. His Highness still keeps watch over the development of general civil aviation in the UAE in his role as President of Dubai’s Department of Civil Aviation.

Sheikh Ahmed bin Saeed Al Maktoum created Emirates in 1986 to provide direct air links to Dubai. The Emirate of Dubai lacks the oil resources of its neighbours, so it focussed efforts on establishing a leading financial industry and tourist infrastructure thanks to its beachfront location. Emirates initially focused on the Asian markets, bringing Thai, Indonesian and Chinese holidaymakers to Dubai. Emirates’ success has helped the city to become a thriving tourist and business destination.

This article can be accessed and read as printed and published in this month’s Fly Corporate Magazine (October/November 2010 – Page 66) by clicking this link: http://www.fly-corporate.com/extra/index.php?extrapage=49

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