Turbulent times

In 2008 Airbus Middle East was flooded with orders for new aircraft from regional carriers. Today it faces an uncertain future as the economic downturn in the GCC worsens.
Diana Milne meets Airbus ME President Habib Fekih to find out his forecast for the year ahead.

“Air travel is a cyclical business. If the slowdown of the real economy continues and the recession proves to be more severe than expected then we will have to review our plans”
-Habib Fekih

2009 is not a good year to be an aircraft manufacturer as Airbus Middle East President Habib Fekih is all too painfully aware. When BMME met him at his offices in Dubai in November he was optimistic on the outlook for his business, claiming the firm was prepared for the anticipated drop in demand and that “the orders will come but at a later stage”. He described the situation in 2009 as “manageable” and said the firm expected to produce around the same amount of aircraft as in 2008.

Two months on with the full force of the global economic downturn having hit home even to businesses in the GCC, Fekih has been forced to admit that Airbus Middle East is likely to suffer a major slump in sales in 2009.At a recent news conference in Dubai he told reporters that he expects the firm to sell 50% less aircraft in 2009 than in 2008 – 100 compared to 239.  Speaking at the event he said: “We don’t expect to do the same number this year. If we do around 100 sales we will be more than happy and that’s enough.”

Success story
If Fekih sounds relatively upbeat about the situation it's because the slump follows two years of spectacular growth for the company fuelled by a surge in demand for air travel to and from the Middle East region and multimillion dollar orders from the region's carriers.  According to Fekih, Airbus catered to 60 to 70% of the demand for additional aircraft in the region in 2008. He says: “The air traffic in the Middle East region has grown very rapidly in the past few years. This is faster than international norms. We have in the region the world's most dynamic economies and air travel in 2008 was fuelled by high levels of infrastructure development, investment, double digit growth rates and rising levels of consumer spending.”

To meet this demand the company opened a new materials and logistics centre in the Dubai Airport Free Zone last April and which covers over 3,700 square metres of space and stocks over 5000 parts and 43,000 items available for distribution at any time.

The company experienced particular success last year with sales of the Airbus A380 – the double-deck wide-body four engine plane that is currently the largest passenger airline in the world. It provides seating for 525 people in a three-class configuration which was first operated by Emirates Airline, Qantas and Singapore Airlines. To date, in the Middle East 58 have been ordered by Emirates Airline, ten by Etihad and five by Qatar.

“The introduction of the A380 in the region has been very successful,” says Fekih. “Our passengers are happy with the maintenance, performance and fuel burn of the aircraft which is greener, cleaner, quieter and smarter. Passengers can really feel the difference and even those on the ground. We've been amazed by some of the comments we've received from people living close to airports who described the aircraft as very quiet.”

Growing pains
The explosion in air travel to and from the Middle East and the aircraft shopping sprees by the region's carriers has created a new challenge for that aviation industry – a shortage of qualified pilots to actually fly the planes.  A report by A.T Kearney last year claimed that the growth in passenger traffic – up 18.1% at the time when the report was published – was placing a huge strain on airlines who were not able to recruit pilots fast enough to meet demand.  The report went on to claim that by 2020 the amount of pilots needed in the region would increase by 75%.

Airbus has resolved to tackle the problem – which could ultimately affect its own sales – by setting up pilot training facility in the GCC with a particular focus on training GCC nationals as pilots.

“The region has been growing at a double digit growth in terms of traffic so the requirement for aircraft capacity is so huge that you have to hire hundreds of pilots every year. And hundreds of pilots don't exist in the region and that's why companies are hiring expats from all over the world. We need to develop the ability of the region to cope with this demand by hiring nationals from the region and that's why we need to develop this training facility.”

Demand for pilots is also fuelled by the growth in the corporate and private jet business in the GCC which is currently growing by 18 percent annually and which is expected to be worth around US$800 million by 2012. In 2008 aircraft manufacturers were expected to sell over 1,250 private jets compared to 1138 in 2007.

This has led Airbus Middle East to locate its worldwide corporate jets manufacturing facility in Dubai.” We believe Dubai is well positioned to cover our business worldwide and it's a good place for connections and for maintenance and operations facilities,” said Fekih of the move.

He says he is aware of the pitfalls of working in an industry that is as cyclical as aviation, with success very much dependent on the strength of the global economy: “Air travel is a cyclical business. If the slowdown of the real economy continues and the recession proves to be more severe than expected then we will have to review our plans.  Likewise it could be that the recession is mild there will be some sort of rebound in the real economy. In which case we’ll have to adapt and maybe increase our production again.” But, having experienced a surge in demand in the Middle East in 2008, he hopes the cycle will come full circle once again.

About Airbus Middle East
The Airbus Middle East subsidiary is headquartered in the Dubai Airport Free Zone, and supports the Airbus presence in Bahrain, Kuwait, Qatar, Oman, Saudi Arabia, and the United Arab Emirates, as well as Yemen, Egypt, Palestine, Jordan, Syria, Lebanon, Iraq, Iran, Afghanistan, Pakistan, Bangladesh, Sri Lanka and the Maldives.

This facility is in charge of all commercial activities for the region – including marketing, sales, contracts and customer relations – as well as all customer service activities from spare parts to technical support and training.

A training centre operated jointly with CAE offers one multi-function training device (MTFD) and full-flight simulators for the A330/A340 and A320. Flight crew courses are offered by a team of eight training captains.

Airbus has enjoyed a long-standing relationship with airlines of the Middle East and is proud of the role its jetliner product line has played in the development of these fast-growing carriers. In many cases, Airbus aircraft are the cornerstone of these airlines’ fleet expansion and modernisation.

To support the growing Airbus presence the Middle East, a material and logistics centre was opened in Dubai in April 2008. Located on a 5,100 sq. metre site in the Dubai Airport Free Zone, this facility stocks parts made by Airbus and major equipment suppliers. The centre has direct access to the airport apron for maximum shipping speed and efficiency.