Contributor - Middle East

Peter Shaw-Smith

A slower regional growth scenario had made this year a good time to continue geographical expansion, said Empire Aviation Group (EAG) executive director Paras Dhamecha, speaking with AIN a few weeks before MEBAA 2016.
The overall market has struggled of late, he said: “The regional business has been tough, but fortunately the UAE is better off than some of the other countries in the region. The price of oil has affected a lot of businesses here and the general economy is connected to this industry in some shape or form. There is no real growth in private aviation, and this reflects slower growth in the business sector [generally].” 
EAG’s business has remained relatively stable, however. “What has worked well for us is that we looked at certain [opportunities] outside the Middle East market in a timely manner, and this geographical expansion and diversification has helped.”
Despite the gradual migration of business aviation to Dubai World Central (DWC) Airport, Dhamecha said Empire still operates two aircraft from Dubai International (DXB). “Quite noticeably, there is a slot issue, but having said that, I believe DXB—which is a very busy airport—handles this much better than trying to get into Hong Kong, where obtaining slots is almost impossible. [At DXB] we’ve never had to cancel a flight because of a slot.”
Empire’s UAE-based managed fleet is at 20-plus aircraft, a decrease from two years ago. An additional Gulfstream G650 was scheduled to join before the opening of MEBAA. The roster already included three G650s, two XRSs, a Gulfstream G450 and three Falcon 7Xs. Eight of the aircraft in the managed fleet are available for charter.
“In [this] market, stability means you are in good shape. The fleet mix is very interesting. From around 2009 to 2012, we were a predominantly mid-size to super mid-size [aircraft] operator. That has now changed to predominantly larger, inter-continental, ultra-long-range jets. We’ve only got one Hawker 900 left in the fleet. We’ve got a couple of super mid-size aircraft in Challenger 300s. And then it’s really Legacy or bigger,” he said.
Utilization Up
“The number of hours has gone up because all our owners have got bigger aircraft and fly a lot longer hours. People tend to fly longer trips, because they have bigger, longer-range aircraft.”
In dollar terms, the value of its assets under management is higher than two years ago, said Dhamecha. “Aircraft size and types have grown over the years, with more large jets [now] on the fleet,” he said.
He also threw some light on the opaque private-jet market in Oman. “Three of the five business jets based in Muscat, Oman, are managed by us. The other two, we understand, are privately managed by the owners’ teams,” he said.
What of further growth? “The new flavor today is the G650. We have a number of clients who are discussing moving to bigger aircraft. In terms of growing beyond the current fleet, I think in today’s conditions, it’s going to be slow. Quite honestly, this is a worldwide challenge right now. We see a lot of aircraft trading in the U.S. market, but prices are [very] low. When we look at business-jet valuations, we never expected them to reach these levels.”
He said a 2010 Global XRS model today would fetch somewhere in the region of the low $20 millions. Such airplanes were bought new for anything between $46-$52 million. The same applies to the Falcon 7X, he added; Empire has a 2011 model for sale, which is likely to sell in the mid-$20 millions. “We know the customer paid about $52 million new. The values have depressed tremendously,” he said.
“Even at those values, it’s difficult to close sales. The industry looked at Russia in hope, but [it] has also slowed down. China and Asia are not absorbing as many aircraft as people thought they would, either. That leaves the largest markets of the U.S. and Europe. And with the type of deals, and the aircraft choices that are out there, it takes a long time to move aircraft [specifically in the Gulf region] that are not already there in their back yard,” he said.
“Today, there are OEMs that have more customer demand than others. If we had this discussion about a year ago, then I would say the higher end was holding its prices—the Globals, the Falcon 7Xs—all these markets were relatively strong. Today, you are seeing a freefall in their values. It’s a challenge when today you can buy a Global for $20 million, which no one could have predicted. It’s very confusing. I don’t think even a BBJ would hold its value.”
Indian Owners
EAG was acquired by India’s Air Works India Eng. Pvt. Ltd. in 2012 to help replicate its management model on the sub-continent. Outside the GCC, India is a major hub for Empire, and Dhamecha said it is ready for a management-type operation. Empire is involved in four aircraft there.
“We are some way towards the end of our AOC [Aircraft Operator Certificate] process [referred to in India as a Non-Scheduled Operator Certificate], which we are hoping will be awarded by the end of [this year]. We are hoping that will [give us] more opportunities,” he said.
“The focus there is much more on monetizing the asset rather than just keeping it private. While we are involved in a few private aircraft, we do operational support and management. Apart from that, an AOC was lacking. If that changes, we’ll see a lot more activity.”
He doesn’t perceive India as a “difficult” jurisdiction. “People don’t really understand the geography of India. It takes four hours to fly from south to north. You can have customers all over the country. I don’t think it makes any sense for someone to say you are going to keep your aircraft in Florida just because the weather is nice; when you live in New York!”
He said the India market is four times the size of that in the UAE, with about 400 business aircraft in the country, ranging from Beechcraft King Airs to Global XRSs, as well as several helicopters.
“It’s a very good market because, first, you have a lot of airplanes that are managed in an unstructured manner—but mostly in-house—and, secondly, the infrastructure of the country is such that there are only so many Tier 1 airports,” he said.
Mumbai and New Delhi are the biggest centers for business aviation, but Dhamecha said Bangalore made for a good base of operations because the cost of living is marginally cheaper. 
“There’s [good] activity outside of the airports that people know; there are still [several] Tier 2, Tier 3 cities that have fully operating airports. There is a good deal of industry in the country, so people need to fly to many of the smaller airports where the airlines cannot go, anyway. They have a Part 91-style private operator’s permit, and of course the AOC, equivalent to Part 135.”
Hong Kong, Africa
Empire is also studying a joint-venture operation in Hong Kong. “We are the aviation partner in the joint venture, which is with a corporate group. We manage two aircraft for them,” he said. 
“We are looking at this to widen our Asian hub. The idea has been to create centers of excellence east of Europe reaching out towards Asia, in places that don’t necessarily have good aviation travel connections. The idea is to do something jointly and leverage our superior contacts and experience in the Middle East.”
Dhamecha said Empire is “down to” five aircraft in Nigeria, including management of a Falcon 900, due to the pressures on the economy there. A further aircraft left the fleet in mid-October. 
Empire’s U.S. office remains engaged, and was hoping to see more activity after the U.S. elections. 
The UAE was granted Empire its first AOC in 2007. India is to be the next one. It is approved for private aircraft operation in the Isle of Man and the Cayman Islands; adding a San Marino AOC in 2015 has given Empire the flexibility to base aircraft all over the world, he said.
“They are happy to have aircraft outside their jurisdiction. San Marino doesn’t even have an airport, apart from small private aircraft. I can have a San Marino aircraft based in Hong Kong. Most of the other [onshore] AOCs need the aircraft within their borders. San Marino is a very highly rated and regulated AOC. It’s a misconception that it is a flag of convenience. The standards we have to maintain are very high.”

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