Bizav exodus to DWC stalls over cost concerns

Negotiations for the transfer of business aviation traffic from Dubai International Airport (DXB) to Dubai World Central (DWC) have intensified over the past 12 months and it is clear that DWC representatives will have to overcome a number of obstacles before they secure the full buy-in of leading operators and service providers. Several FBOs have expressed concern to AIN that the next phase of growth at DWC, which is now home to the MEBA show, does not lead to sharp cost increases, especially over land-lease costs for maintenance, repair and overhaul (MRO) facilities.

The closure between May and July 2014 of DXB runways for resurfacing helped speed up the move of business aviation away from the downtown airport, where slots are becoming harder to obtain and congestion is becoming a real issue.

Crucial to the success of the process has been the entry of the established FBO players into agreement for the creation of common-user FBO in DWC’s general aviation district, construction on which is to begin shortly, and which is expected to be completed by November 2015. However MEBAA founding chairman Ali Al Naqbi told AIN that the Association has concerns about the common-user concept, given the privacy demanded by VIP clients.

In addition to DC Aviation Al Futtaim’s long-planned facility, DWC’s FBO market is today serviced by Jetex Flight Support, Jet Aviation and ExecuJet Aviation, operating out of a shared temporary FBO at DWC’s main passenger terminal. XJet is poised to enter as the planned common-user terminal’s fourth occupant in November 2015. Only ExecuJet has yet to sign up the shared use of a planned permanent executive terminal.

The entry of additional actors, once certain DWC-imposed traffic milestones are reached, could make the business even more competitive. Insiders said the movements market was "not that big," with 5,500 a year at DXB, and a total of 12,000 in Dubai as a whole, last year.

At the heart of concerns about the potential adoption of DWC as Dubai’s main business aviation airport is what leading global players see as the danger of high operating costs at a time when excessive competition could make their business models unworkable. Negotiations between aviation authorities and the players who are likely to set up significant presences there are coming to a head as the pressure on space at DXB grows.

“DWC says a lot of people want to build a hangar for parking, but the market is only so big. There is a danger of a price war. We are not really running a lucrative business. We are careful in making decisions on parking hangars with MRO. DWC also has quite high expectations on rent and concession fees,” said one FBO group’s representative speaking to AIN on condition of anonymity.

“Quality comes at a price. The big question is whether DWC is too expensive to do something [to invest in new MRO and handling facilities]. You need to see MRO and completions from a global perspective. And people still really prefer to go to DXB,” he added, expressing the concern that DWC’s expectations on rents might be excessive. “All in all, we are moving forward, but the economics are the critical thing. If at DWC, the playing field is good for everyone, then we don’t mind competition. But the margins are thin. This is not a multimillion dollar business,” he said.

Jetex Flight Support CEO Adel Mardini is happy to take up the subject of DWC. “We already signed an agreement with DWC to be part of the general aviation terminal. We will have the biggest lounge in the general aviation terminal, of around 1,000 sq m [10,764 sq ft],” he said. “After the runways reopened [at DXB] following the closures there, some customers preferred to stay at DWC because they could land and fly any time. Emirates are adding almost two aircraft per month, or 20 per year, at DXB. Slots are becoming more and more difficult. We believe DWC will be the major destination for private jets in the future.”

Mardini underlined his belief that the DWC authorities would not sanction stand-alone FBO facilities. “Their preference is to have everyone in one terminal: one customs, one immigration, one security. They will insist on one general aviation terminal for everyone,” he explained. In his view, the transfer of bizav operations to DWC will take until 2017 to complete.

ExecuJet has yet to sign up for either the common-user FBO terminal or any kind of permanent MRO facilities, and Mike Berry, vice president Middle East, continues to express bemusement that the company’s preference for a standalone FBO facility seems to be falling on deaf ears. He is also saying that costs are an issue that cannot be ignored.

“We understand that the DWC or the Dubai Aviation City model is very different to what existed at DXB. What we do see is obviously the rates being very different to the rates that are available on DXB and we foresee that general-service pricing is going to have to go up to cover the cost increases that operators are going to be paying,” said Berry.

“Generally you will find that DWC is going to be a more costly solution longer term than what DXB is at the moment. That’s understandable because the business models are different. The ground rents are higher than we are now paying. Automatically, the cost impact of everything is going to increase our costs,” he said.

“To be honest, we’ve been negotiating for this move for a long time. We are happy to move. We would be happy to be there already if we could have unlocked what we think is a viable commercial deal on the land. We are still negotiating. We are still in discussion on the land.”

Jet Aviation’s stance regarding MRO is still unclear, and a company official would only confirm that negotiations between it and DWC were still ongoing. “We are in discussions with both airports to prepare our transit and define our future footprint,” she said.