Abu Dhabi Aviation recently announced H1 2011 financial results that showed profits up 150%, turnover up 20% and operating profit up 69%. What were the key drivers leading to these increases? What is the outlook for the second half of the year?
HAMMADI: The results that were announced recently have been the result of a strategy that was built over the last 3 years. Basically, it started with Abu Dhabi Aviation being challenged in Abu Dhabi in the oil sector. For the last 30 years, we had a monopoly over the oil sector here. This created a secure business with sustainability but at the same time it also created complacency throughout the system. The only way to expand the business and grow the business is to look for international opportunities. WhatÂ we'veÂ tried to do is to leverage what weâ€™ve learned over the years in Abu Dhabi to other areas and regions where our services are required. The strategy was to diversify the business and to look for opportunities elsewhere. We have a lot of assets which have been accumulated over the years. I think what we are realizing now is the efforts of putting all those assets to work. Hopefully we will continue to show good results.Â We are in different contracts but we do have a part of the business which is unpredictable; you gain a contract here, you lose a contract there, work will finish in one part of the world and be required in another area. So itâ€™s very hard to predict what the future will look like. But looking at the recent history, I think itâ€™s going to be positive.
How much of the companies activities are still in oil services? What are the fastest growing business units?
HAMMADI: Oil services make up the core of the business. Itâ€™s what we leverage to do other parts of the business because of our experience, we have logged over 1,000,000 hours in the helicopter side, the chopper side. This is a great deal of hours when it comes to the helicopter business. So we are leveraging all this experience to move forward. But still, a big chunk of our business is in the oil sector; I would say up to 50%. The demand for helicopters in general is still strong worldwide. However, the type of helicopter in demand is changing, moving from short and medium range to longer range helicopters, which carry different capacities. If we take Brazil as an example, the drilling has moved from onshore to deep water. In order to be able to provide the logistics to those platforms, you need a different type of helicopter. Itâ€™s still within the helicopter business but there are different requirements.
Abu Dhabi Aviation is active throughout the region and as far as Brazil and Australia. How much of the business is now coming from outside the UAE? How much of a priority for the company is further international expansion?
HAMMADI: Around 40% of our business is coming from outside the UAE. We are in different parts of the world, from Australia to Papua New Guinea. It provides a good opportunity but also presents a lot of challenges because of the logistics that come with it. This is the part of the portfolio that we are trying to build in order to have a mixed portfolio where we donâ€™t count on just one business or one region. What we are trying to do is complement our core business, helicopters, with fixed-wing operations and investment in different sectors. For example, we are seeking a JV with AgustaWestland in the region and we are working on a simulator center. All of this is with the goal to end up with a mixed portfolio. As long as we can secure investment, we will keep pursuing those opportunities inside and outside the UAE. We have 30 years of experience in the oil industry and we have logged over 1,000,000 hours flying helicopters; all of this could be leveraged to do any kind of JVs, investments and partnerships. So I think the opportunity is there.
What have been the most significant trends in cargo over the last two years? What advantages does Abu Dhabi have for cargo operations?
HAMMADI: The cargo business has shown tremendous growth, in the UAE and worldwide. To my knowledge, growth exceeds 10%. As far as Abu Dhabi Aviation is concerned, we own Maximus Air Cargo which is a cargo operator. What they are trying to do is break into this market, establish themselves as a reliable cargo operator and create partnerships with the big airlines in the region. Hopefully, this strategy will pay off in the long run. If you look at all the traffic from the Far East towards the West, the Middle East is a focal point in linking the East with the West and to provide a good transition for aircraft. Creating a hub in Abu Dhabi which will support the rest of the region is an opportunity that most of the cargo operators will try to take advantage of. Having Abu Dhabi airport, having Dubai, with all the major transition to different parts of the world provides a good distribution for the cargo network. I think Abu Dhabi will see great growth when it comes to cargo operations and also on the passenger side.
How did the global economic downturn affect aviation in Abu Dhabi?
HAMMADI: I think everybody was affected; it is something that nobody was able to escape. The approach that we have followed for the entities which we are managing is to try to be as conservative as we could be. As long as you are covering your liabilities, you are able to sustain a downturn in the market. I think anybody who had built those strategies and risk management into the overall strategies of their companies has managed to escape. As far as we are concerned, we operate on a contractual basis and most of our contracts are 2 years, so at Abu Dhabi Aviation we were okay. I have seen difficulty within the executive jet market, the charter business. They have suffered the most. But from what I have seen recently,Â they'veÂ recovered. I would say 90% recovery has been achieved.
What are the long-term growth prospects for aviation in Abu Dhabi?
HAMMADI: When it comes to the aviation business, there is the long haul sector which has been dominated by the big airlines, the national carriers. I think this business will remain as a national carrier business. It is a hard business to get into and it requires huge investment. So within the current operators and industries, you will see different growth among the airlines depending on each airlineâ€™s strategy. As far as corporate jets, corporate jets have not limits. They are asked to fly anywhere in the world at any time. Basically, it just depends on how good the economy is doing around the world. This is the driving factor when it comes to what they can achieve. When it comes to the rest of the industry, smaller aircraft and helicopters for example, they are in separate industries, which are driven by oil exploration or the different requirements for search and rescue. A lot of people are paying attention to the helicopter as a fast machine that can be used for search and rescue and medical evacuation. We have experience with this in Saudi Arabia, whereÂ we'veÂ had a contract for the last year where we were helping the Red Crescent with such activities. I think this is what will follow in the rest of the world, maybe not in Europe, but at least the Far East and Middle East. So there are growth opportunities in almost all the sectors but they are being dominated by their own respective factors.
A lot of people have seen it as a risk, having so many operators in the region, but it has another commercial advantage. It provides the passenger with an opportunity to get a connection to go anywhere in the world...between Dubai, Qatar and Abu Dhabi, there is this triangle of aviation which will provide new opportunities for the whole world.
How well positioned is Abu Dhabi to take advantage of the changing landscape in global aviation?
HAMMADI: I think itâ€™s very well positioned. When we look at what drives those changes, it is technology. If we look 10 years back, the maximum flight you could have was around 8-10 hours. Now with all the modern aircraft this has been extended to 14, 15, even 17 hours. The new technology will provide Abu Dhabi with an opportunity. Flying from Japan or Malaysia or China, coming this way to connect to Europe or the US puts Abu Dhabi in an excellent geographic position. I think this success has been demonstrated by Dubai as well, as far as the location is concerned. A lot of people have seen it as a risk, having so many operators in the region, but it has another commercial advantage. It provides the passenger with an opportunity to get a connection to go anywhere in the world within a few miles or a 30 minute flight. I cannot recall anywhere in the world where you can get this advantage, even in Europe. So between Dubai, Qatar and Abu Dhabi, there is this triangle of aviation which will provide new opportunities for the whole world.
Abu Dhabi provides a secure environment for investments. Most of the businesses in Abu Dhabi have an outreach to different countries within the region and anyone who is interested in investing in Abu Dhabi will have this opportunity, this is especially true when we talk about business which requires moving people or cargo in and out. One of the main advantages of Abu Dhabi is the great support for the aviation business. There is a very supportive leadership trying to work with and support investors, trying to put in place a long term strategy for the next 30 years, and working hard to establish the infrastructure required to achieve this growth. Dealing with Abu Dhabi entities and clear and transparent and all the government entities are being prepared and re-engineered in a way to cater to all those additional investments that might come. All of this will contribute to having a secure investment.