Analysis of the industry challenges for the Civil Aerospace, Airport & Airline segments in the Middle East with a focus on the UAE. Presentation of the consulting requirements expressed by major actors, related consulting offering and market penetration strategic options. For more information, contact Pierre Bontems: pierrebontems@yahoo.fr

1. The development of Consulting services in the
Middle East for the Aviation & Aerospace
Industries
HEC EMBA EM 2012 - Final Individual Project
Pierre Bontems
pierrebontems@yahoo.fr
Document History
Version Date Description
V0.1 21st of May 2012 Initial version
14th of September
VF Final version
2012
Copyright © 2012 Pierre Bontems - All Rights Reserved.

2. HEC EMBA EM 2012 - Final Individual Project
Pierre Bontems
pierrebontems@yahoo.fr
Table of Content (available only in complete version of the study)
Document History ..............................................................................................................................................................1
Table of Content..................................................................................................................................................................3
1 Executive Summary .................................................................................................................................................5
2 Introduction ................................................................................................................................................................6
2.1 Context & objective ......................................................................................................................................6
2.2 Scope of the document ................................................................................................................................6
2.3 Structure of the document ........................................................................................................................6
3 The Middle East: general information .............................................................................................................7
3.1 Overview...........................................................................................................................................................7
3.1.1 Geographical location ............................................................................................................................7
3.1.2 Macroeconomic environment.............................................................................................................8
3.1.3 Demographic conditions .......................................................................................................................8
3.2 Overview of the Middle East Aviation & Aerospace Market .......................................................9
3.2.1 Market structure and overview .........................................................................................................9
3.2.2 Airline Market ........................................................................................................................................ 10
3.2.3 Airport Market ....................................................................................................................................... 11
3.2.4 Civil Aerospace Market....................................................................................................................... 12
3.3 Middle East segmentation: why focusing on the UAE?............................................................... 13
3.3.1 Middle East countries: possible segmentation ......................................................................... 13
3.3.2 Focus on the United Arab Emirates, the rational..................................................................... 14
4 Aviation & Aerospace industry in the UAE: objectives & challenges ............................................... 17
4.1 Demand Side: Aerospace & Aviation industry analysis ............................................................. 17
4.1.1 Main UAE actors .................................................................................................................................... 17
4.1.2 Focus on Aerospace Industrials ...................................................................................................... 17
4.1.3 Focus on Airline ..................................................................................................................................... 20
4.1.4 Focus on Airport.................................................................................................................................... 23
4.2 Supply Side: consulting market analysis .......................................................................................... 26
4.2.1 Market definition .................................................................................................................................. 26
4.2.2 Analysis of Consutling Industry in the UAE: Porter’s five forces ...................................... 27
4.2.3 Potential offering .................................................................................................................................. 29
4.2.4 Market size & trend.............................................................................................................................. 29
4.2.5 Competitive landscape ....................................................................................................................... 30
5 Strategic options: assessment, recommendation and action plan .................................................... 32
5.1 Available Strategic Options .................................................................................................................... 32
5.2 Recommendation: choosing the niche .............................................................................................. 33
5.3 Action Plan .................................................................................................................................................... 34
5.3.1 Overview .................................................................................................................................................. 34
5.3.2 Detailed action plan ............................................................................................................................. 34
5.3.3 High level roadmap .............................................................................................................................. 36
6 Conclusion ................................................................................................................................................................ 37
7 Appendix ................................................................................................................................................................... 38
7.1 List of interviews (not exhaustive) ..................................................................................................... 38
7.2 List of referenced documents ............................................................................................................... 38
7.3 List of referenced articles ....................................................................................................................... 39
7.4 From challenges to offering: complete mapping .......................................................................... 41
7.5 Strategic options assessment ................................................................................................................ 45
Copyright © 2012 Pierre Bontems - All Rights Reserved.

3. HEC EMBA EM 2012 - Final Individual Project
Pierre Bontems
pierrebontems@yahoo.fr
List of Figures within complete document (available only in complete version of the study)
Figure 1 – Middle East countries (source: Wikipedia) .......................................................................................7
Figure 2 – Middle East geographical situation (source: Air France) ............................................................7
Figure 3 – Middle East macroeconomic diversity (source: World Bank) ...................................................8
Figure 4 – Trade as a % of GDP (source: World Bank) .......................................................................................8
Figure 5 – Median age in the Middle East (source: CIA World Fact Book) .................................................9
Figure 6 – Aviation & Aerospace Market Structure (source: personal research) ...................................9
Figure 7 – Middle East Commercial Aircraft Fleet Structure (source: Boeing) ..................................... 10
Figure 8 – Middle East MRO Spend 2012 in USD billions (source: ICF SH&E) ...................................... 13
Figure 9 – Middle East possible segmentation (source: The World Bank, personal research) ...... 14
Figure 10 – Demand side: main UAE actors ......................................................................................................... 17
Figure 11 – Aerospace Industrials Operating Model (source: personal research) .............................. 19
Figure 12 – Airline Operating Model (source: personal research) ............................................................. 22
Figure 13 – Airport Operating Model (source: personal research)............................................................ 25
Figure 14 – A&A Market Definition Overview..................................................................................................... 26
Figure 15 – Porter’s five forces for A&A consulting services market ........................................................ 27
Figure 16 – Consulting offering definition approach ....................................................................................... 29
Figure 17 – Potential consulting offering for the Aviation & Aerospace market in the UAE ........... 29
Figure 18 – Strategic option assessment (source: personal research) ..................................................... 33
Figure 19 – Strategic options comparison (source: personal research) .................................................. 33
Figure 20 – Main work streams of action plan (source: personal research).......................................... 34
Figure 21 – High level roadmap ................................................................................................................................ 36
List of Tables (available only in complete version of the study)
Table 1 – Global and Regional Scheduled Passenger Traffic - 2001 to 2014 (source: ICAO) .......... 10
Table 2 – Segmentation criteria applied to Middle East countries (source: The World Bank, CIA
World Fact Book, and The Heritage Foundation) .............................................................................................. 14
Table 3 – Key projects in the UAE for Airport infrastructure (source: BMI).......................................... 15
Table 4 – A&A Consulting Competitive landscape in the UAE (source: personal research,
company websites)......................................................................................................................................................... 31
Table 5 – Strategic option assessment criteria (source: personal research) ......................................... 33
Table 6 – “Confirm business opportunity” detailed action plan .................................................................. 35
Table 7 – “Identify business partners” detailed action plan.......................................................................... 35
Table 8 – List of interviewed Executives ............................................................................................................... 38
Table 9 – Referenced documents.............................................................................................................................. 39
Table 10 – Referenced press articles ...................................................................................................................... 41
Table 11 – Mapping between challenges and offering .................................................................................... 44
Table 12 – Strategic options assessment .............................................................................................................. 45
Copyright © 2012 Pierre Bontems - All Rights Reserved.

4. HEC EMBA EM 2012 - Final Individual Project
Pierre Bontems
pierrebontems@yahoo.fr
Executive Summary
The Middle East (ME), as an emerging region, offers major business opportunities. Naturally
benefiting from its strategic geographic position at a global crossroad, it also performs better in
terms of development than Western countries with an average of 5% GDP growth. Moreover, with a
population aged 26.86 years on average, the ME is one of the youngest regions in the world.
In terms of Aviation and Aerospace (A&A) industries, the ME is an attractive market: passengers
traffic has increased by an average of 14.4% year-on-year since 2001 whereas the forecast for the
coming years is still high (around 10%, corresponding to almost twice the world average).
Commercial aircraft fleet purchases will keep increasing in the future (around 2,370 new deliveries
are scheduled by 2031); the business jet market is also growing with the number of HNWI expanding
in the region; major airport infrastructure programs are on-going and further developments are in
the pipeline ($79 billion are scheduled to be spent across the 12 ME major airports over the 2008-
2015 period); additional airside services are needed to meet the surge in demand; and the aircraft
component manufacturing sector is also developing (linked to offset clauses) while MRO activities
are booming (MRO spend is forecasted to grow by a 9.4% CAGR, above the global average, to reach a
volume of $6.8 Bn by 2021).
However, not all countries of the Middle East are developing at the same pace. When segmenting the
region according to criteria such as economic health, availability of budget surplus, and level of social
and political openness, the UAE appear to stand amongst the leading countries in the region, with a
GDP growth of 3.3% in 2011, a GDP per capita of $67 008, budget surplus of 5% and a level of
economic freedom of 69.3/100.
The A&A industries have been identified as one of the key levers to meet the diversification targets
defined by the UAE's authorities. With two major airlines (Etihad and Emirates, both part of the
global Top 10 airlines in 2012) covering most of the world, two LCCs (Air Arabia & Fly Dubai),
several international airports serving as major hubs between the West and the East (Al-Maktoum
airport will have a capability of 120 million passengers yearly, making it the biggest airport in the
world), and growing MRO and manufacturing activities (supported by Mubadala and Tawazun), the
UAE are on their way to meet their objectives: to become a real and recognized player in these
industries.
However, the UAE's A&A industries are facing major challenges jeopardizing their ability to meet
development targets, namely the ability to access the required expertise in order to optimize and
increase business and operational performances in a highly competitive environment, while meeting
time-to-market requirements, keeping costs down and quality high.
This state of play opens the door for actors willing to support the UAE in their development.
The analysis of the consulting industry for the A&A industries in the UAE (estimated to a minimum of
$0.17 Bn in 2011) finds that the key driver for the industry's future development resides in its ability
to access talents, meet Emiratisation policy's requirements, offer differentiated services (so to avoid
perception of consulting services as a commodity), and to leverage on strong business relationships.
Competitive analysis shows that major consulting players are already in place, offering standard
consulting activities, but are not meeting the UAE authorities' expectations regarding industry
expertise, mainly for the Aerospace Industrials segment (MRO and Manufacturing). Therefore, a
niche is available for an actor being able to bridge the gap between supply and demand on this
specific segment.
Strategic options analysis demonstrates the need to team up with a major industry player in order to
access industry expertise on the one hand, and with a local player to leverage on existing business
relationship and meet Emiratisation policy expectations in the other.
Based on this conclusion, a refinement of the analysis must be performed to confirm business
opportunities, identify business partners, and set up the business. This action plan will be
implemented in the coming months, aiming for the second half of 2013 for the launch of activities.
Copyright © 2012 Pierre Bontems - All Rights Reserved.