Royal Jet slows expansion, sees rebound

DUBAI (Reuters) - Abu Dhabi Aviation Co ADAV.AD affiliate Royal Jet said on Wednesday it had slowed its expansion as the global financial crisis had hit the corporate sector, but saw recovery signs ahead of the busy summer period.

President Shane O'Hare told the Reuters Global Luxury Summit in Dubai the executive aircraft charter company had delayed by a year plans to increase its fleet to 20 from 12, but was still aiming to operate 50 aircraft by 2020-21.

"This customer base will not tend to trade down ... they will continue to fly by private jet and that is good for us," said O'Hare, whose firm wants to become one of the world's largest corporate jet operators.

Governments and affluent costumers were offsetting a fall in corporate business, although Royal Jet sees profit growth flat in 2009 after a 17 percent rise in 2008.

A growing population in the Gulf Arab region, rising per capita income and global reliance on the world's biggest oil-exporting region has raised the its profile as global investors seek funding sources to weather the financial crisis.

The group, jointly owned by Abu Dhabi Aviation Co and the government of the emirate, has a fleet that includes Boeing Business Jets (BA.N), mid-range Gulfstream 300s, a long-range Gulfstream IVSP and a Learjet 60.

It services corporations, governments, jet-set individuals, royalty, and heads of state globally.

"We've been pleasantly surprised that the high net worth individuals market has been extremely resilient," said O'Hare.

"It's the same as governments ... in these times face-to-face (meetings) are extremely important for them to continue to do business and probably become more hands on."

The firm's corporate business was down around 25 percent this year compared with 2008. In contrast, the overall global market for corporates declined between 30 and 50 percent as the financial crisis forced executives in the car industry to dump private jet travel as thousands began to lose their jobs.

"The jet market was ousted as being extremely extravagant and a selfish way to travel," O'Hare said.

BOTTOMING OUT, AGGRESIVE EXPANSION

O'Hare said he saw signs of bottoming out in the last month with forward bookings from regional corporate clients up.

Royal Jet, in which flights can cost as much as $18,000 an hour, will look to add six Boeing aircraft as part of its five-year business plan, O'Hare said.

"We were looking at around 20 jets, but the economic downturn pushed back the plan by 12 months to 2013 ... it's the same plan in place, just rate of growth has slowed."

Prior to the downturn acquiring Boeing planes before 2012 had proved "very difficult" with an aircraft costing as much as $75 million, but prices had now fallen to about $50 million.

"The difference is finance, whereas I could buy new aircraft with 10 percent deposit, now the minimum is 40-50 percent equity for finance," O'Hare said.

Royal Jet is eyeing immediate growth opportunities in Iraq and the world's largest oil exporter Saudi Arabia, and more long-term opportunities in China, India and the CIS countries.

"In Iraq there are still problems there, but the country is becoming more stable and multinationals are starting to come in," said O'Hare.

The company plans to commence its flights to Baghdad in the "foreseeable future" and has been flying into Northern Iraq regularly, and recently started trips to Basra.

The United Arab Emirates, the second-largest Arab economy, is the charter's biggest market followed by Saudi Arabia, the richest Arab nation, where it sees "huge potential", he said.

The company is looking at setting up a base in Riyadh or Jeddah this year as the regulatory environment eases.

The company, whose other main shareholder is the Presidential Flight Authority, is also open to acquisitions and alliances as opportunities arise from the financial crisis.

"There are particularly in Europe and Middle East, opportunities for consolidation -- certainly a lot of very small operations have gone out of business in last six to eight months," O'Hare said.

"So there are opportunities for strong players to look at equity swaps, mergers, or commercial alliances," he said.

(Additional reporting by Jason Benham; Editing by Inal Ersan and Rupert Winchester)

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