Market Maker

Hugh Courtenay, chief executive of jet charter brokage firm, International Air Charter, says that the Middle East needs more business jets to meet the growing demand.

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By  Neil Denslow Published  June 6, 2004

|~|hugh_m.jpg|~|Hugh Courtenay, chief executive, International Air Charter|~|Business jet charter broker, International Air Charter, is seeking to develop the intra-Gulf business jet market, as it looks to grow its presence in the region. However, the charter company’s drive may be undermined by a shortage of aircraft in the region and by operators’ ‘short-term’ approach to pricing. The business jet charter market is developing quickly in the Middle East, but International Air Charter believes that the intra-Gulf sector has room for much more growth. This is because while long-haul routes into Europe and beyond will always be out of the reach of most companies — because of the need to use expensive larger aircraft — shorter hops around the region are more affordable and so could be more widely used. “Most people would want to do [a long-haul trip] directly, and to do that you have got to use an aircraft that has that range, and that means it is going to cost somewhere in the region of US $4500-$5000 per hour,” explains Hugh Courtenay, chief executive, International Air Charter. “A round trip from Dubai to London, for instance, takes 14 hours, which therefore means that it will cost a minimum of $60,000 before landing charges, overnights and crew accommodation,” he adds. By contrast, a short-haul trip can be done with an aircraft costing $3000 per hour, which means that a round trip from Dubai to Bahrain would only cost $6000-7000. “If you take six passengers then you are looking at around $1000 per person, which is more comparable with first class. And, when you start to look at the flexibility — being able to go when you want to go, come back when you want to come back, have the aircraft waiting on the ground if the meeting overruns — then it becomes a very appealing option.” The growth of Dubai, and the increasing awareness among businesses of the advantages of using private aircraft chartering is also driving up demand. International Air Charter therefore reports a growing number of requests from the region, but it is struggling to fill them all because of a lack of available jets in the local market. “2004 has been very good [for us]. In fact I would say our business has picked up substantially… We have the demand, the problem is the supply,” says Courtenay. “The main issue for us is trying to persuade owners to allow us to use aircraft… They [also] have to be on public transport licences in order for us to be able to use them to be able to hire them out,” he explains. “More often than not [because of these problems], we will have situations where there won’t be anything available from Dubai, so we have to bring something in from Kuwait or Bahrain or Doha,” he adds. ‘Positioning’ an aircraft from Kuwait or Europe to Dubai increases the cost of the trip, but it may still work out cheaper than chartering an aircraft based there because the limited supply in the Emirate is allowing operators there to boost their prices. “The big issue in Dubai is that you only have a certain number of owners with aircraft, and — rightly so — they have been making a lot of money out of clients,” says Courtenay. “[They are] not so much over-charging clients, but making hay while the sun shines,” he adds. Such an approach may help drive up revenues now, but Courtney believes that operators would be better off taking a more long-term view. “[Operators] know [the customers] have got no alternative… so they can turn around and say ‘sorry, this is the price we want for an hourly rate.’… However, I think it is a bit of negative attitude to have, as they are overlooking the potential business they could have,” he says. Instead, Courtney advises operators to be more flexible and to listen to their clients and suggest alternatives. For instance, the operator could recommend flying only four or five passengers rather than eight, which could cut the costs to a level that the customer is prepared to pay. “We try and look at the whole picture for the client, and we try and look at it for the long term,” says Courtenay. “If a client uses a small-sized aircraft this year, he might go to a mid-sized aircraft next year. He might go to a much bigger aircraft the year after that; it’s generally how the trend goes. But if you start off with a big aircraft at major money per hour, it puts [customers] off straight away,” he adds. To try and boost the supply of aircraft in the region, International Air Charter is talking to a number of individual operators, and trying to persuade them to allow their aircraft to be chartered. The company is also working with businesses based overseas that are looking to start operations from the UAE. “Companies from outside of the region are seeing potential; whether it’s hyped potential within the region, I’m not sure, but they are seeing potential,” says Courtenay. Howver, starting operations in Dubai is not straightforward for foreign operators, as their aircraft need to be re-registered, with an Air Operating Certificate (AOC) from the UAE’s GCAA as well as an A6 registration. This is also slowing the growth of the supply of business jets in the region, because of the extra regulations, although Courtenay concedes that this may help to ensure the standard of aircraft operating from Dubai. “They [operators] can’t take an aircraft that is on an AOC in Germany, for instance, and base it here [in Dubai], because the GCAA won’t allow them to do it,” he says. “They [the GCAA] are trying to restrict it a little bit, which a shame, but I guess they are trying to standardise it, so you don’t have everybody turning up with aircraft and 100s of executive jets here, and everybody fighting for business.”||**||

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