In the Middle East’s market for executive travel, business jets have a well-established presence. Another segment of privileged transportation, one with underused potential, is the market for helicopters.
Demand drivers for helicopters in the region have traditionally been oil, royals and defense—three components of a flourishing helicopter market that many Arab countries have no shortage of. Additionally, the region has been engulfed by the increased security concerns in the post-9/11 world that have pushed global helicopter sales upwards.
“Helicopter sales are not only increasing in the Middle East but really worldwide, the primary reasons being increased oil prices and the need for security post 9/11,” Dan Pranke, Middle East sales director for American helicopter manufacturer Bell, told Executive.
Nonetheless, sales of helicopters between Dubai and Cairo have been less than they could be, especially in the corporate and VIP markets. Sales managers for some of the industry’s major manufacturers blame restrictive regulations and reluctance of governments to license operators.
Oil boom boosting chopper market
In Arab oil-producing countries, the rise in oil prices from $15 a barrel five years ago to levels of $60 or more has induced oil companies to enhance their exploration and exploitation efforts onshore and offshore, meaning more helicopters needed to transport crews and supplies to digging sites.
The mid-sized workhorse helicopters used in the international oil industry constitute a substantial investment, as illustrated last month by delivery of three 19-passenger Sikorsky helicopters to Brunei Shell Petroleum for its oil service operations. The choppers were said to cost $18.5 million apiece.
GCC countries naturally have a strong role in this market. Companies like Saudi Aramco, the world’s largest oil producing company, operate veritable helicopter fleets to support oil field exploration, drilling and production. In Qatar, Gulf Helicopters, a firm established in 1970 by Qatar Petroleum, has a fleet of 24 helicopters consisting mostly of Bell’s model 412.
Military and security forces worldwide and in the Middle East are prime customers for helicopter manufacturers, accounting for around half of global sales for leading producers. The other half of the market is the civilian sector, including uses in offshore, corporate transportation, medical and emergency services, sightseeing and media, which are served by manufacturers such as Eurocopter, a daughter of Airbus maker EADS, and American firm AgustaWestland, in addition to Bell and Sikorsky.
Although most helicopter sales in the Arab world are military and police-related, industry experts say that there is a rise in commercial and civil helicopter use in recent years and the market is tipped to become more lucrative.
“I see a great deal of potential in the market because unlike Europe, this market is still in its infancy. There will be a couple of drivers for it in the next five years, especially Dubai with the World Islands and Palm Islands projects,” said Pranke, adding that sales in the Europe, Middle East, and Africa region represent about a quarter of Bell’s global sales.
A worldwide demand survey by turbine manufacturer Honeywell and others projected in its latest (2005) edition that the Middle East, Oceania, Asia and Africa will account for 16% of global deliveries of new civilian helicopters between 2006 and 2010.
The United States is the world’s leading market for helicopter sales, followed by Europe. The survey said more than 2,600 civilian helicopter deliveries are expected in the five years from 2006 to 2010. Total deliveries of both civilian and military helicopters are estimated to reach in the neighborhood of 12,000 units during the period from 2006 to 2016, and analysts forecast substantial growth rates that will hike the value of the global helicopter market to $15 billion in 2011, up by about 50% when compared with 2005.
Well over 500 sold civilian units per year is not bad for an industry where a manufacturer like Sikorsky reported 2006 revenues of $3.2 billion from all its activities (they delivered 110 helicopters last year) and Bell last month peddled some 10-year old “pre-owned” units at prices of up to $5.5 million on its web site. They don’t publish retail prices for new machines.
No wonder that new trade fairs for the helicopter buyer are in the Middle East. The Dubai Helishow is a biennial industry show which debuted in 2004. It reported 30% exhibitor growth to 104 participating companies in its December 2006 show.
For Bell, the Dubai Helishow in December was good in terms of contacts and future leads, said a manager for the company while refusing to give any information on unit sales in the Gulf region.
“While we did not sign any deals in the Dubai Helishow, there were numerous conversations and meetings with very senior people in the region that opened or furthered negotiations that will lead to conclusion of deals,” said Mike Cox, vice president of communications at Bell Helicopter.
Another helicopter conference, Heli Mideast 2007, is scheduled to be held in May to address the growing needs for helicopters for emergency and rescue services, firefighting, industrial and private ownership.
Loosening their grip on airspaces
Organizers of the event, the UK-based aviation publisher Shephard’s, say the event will also tackle the issue of governments relaxing their grip of the airspace.
That’s where the issue of the royals comes in. While persons of royal blood in the various countries of the region are excellent customers for expensive flying gear, helicopter manufacturers bemoan the fact that many countries of the region lack regulations that authorize commercial operators.
In Saudi Arabia, people other than the royal family are not allowed to own helicopters. “It’s a security issue because helicopters can land anywhere, so the Saudi government limits the ownership of helicopters to special government agencies,” Pranke said.
“It really comes down to how senior the royal person is and how much clout they have with the relevant police force,” said Andrew Drwiega, publishing director of the Shephard’s Defence Helicopter magazine.
“Rolls-Royce has a 42% share of the civil engine market in the region," said Martin Brodie, communications director at Rolls Royce, adding that the main engines are for civil airlines like Emirates and Etihad.
Abu Dhabi Aviation, which has a paid-up capital of $110 million and is 30% owned by the emirate’s government, operates a fleet of 38 helicopters and fixed wing aircraft to the private and public sectors, signed a deal in December with AgustaWestland to become its regional spare parts and repairs center. The value of the deal remained under wraps.
AgustaWestland have also sold choppers to the Libyan Red Crescent and the Abu Dhabi police. AgustaWestland said in December its Middle East sales in 2006 increased by 15%. It said sales from the region will contribute around $260 million, or 11.8%, of its $2.2 billion global sales, according to Gulf press.
Helicopters will continue to claim a growing role in corporate transportation in the Middle East. It is entirely predictable that the rapid growth of population centers and the high-speed commercial development of office cities, industrial cities, special trade zones and super-luxury residential towers in emerging regional centers will create demand and outright need for wider VIP and executive travel options by helicopter, given the security, prestige, and time benefits accorded by these super-convenient transportation machines.
Additionally, helicopters can be expected to even start playing a new role in short aerial commutes in association with commercial air travel in an age where the drive to the airport and security check in the terminal sometimes take as long as a flight to a nearby country. Last year, a member company of Korea’s Tongil Group launched a manufacturing project to develop helicopters that will be used in the framework of mass transport.
The Middle Eastern helicopter market may still require some time to develop into a civilian market but manufacturers will not want to miss it. “I think in today’s market any potential market is important for any manufacturer, even if it’s a small number. They are all in competition for the ones out there and also if there are rulers and royals who want to have extras on their rotors,” said Drwiega.
Industry representatives and observers agree that states like Abu Dhabi and Dubai will lead the market opening for commercial operators and private ownership of helicopters in the Middle East. If you have your million-dollar abode on the Palm, the Pearl or the World islands, where will the fun be if you and your neighbors can’t drop in on each other in a stylish chopper.