Arabasco: Saudi Aircraft MRO, Management and Charters Company Growing by 6.7%

Interview with Eng. Hashem R. Jamalallail, General Manager of Arabasco

What is your overall assessment of the MRO (Maintenance, Repair and Operations) sector? How would you describe the dynamics of the sector?

The annual growth of the MRO sector in the Middle East is 6.7%. This is the highest growth rate in this sector anywhere in the world. The growth of the aviation sector in Saudi Arabia is slower, this is because of the lack of MRO facilities. The growth in the MRO sector is due to the growth in the airline sector and their acquisition of big aircraft. It is a tough sector because of the high degree of investment needed to make it succeed.

How do you compete with other players in the market? What is your competitive edge?

Arabasco’s edge consists of 3 elements. We are successful because of our diversity, reliability, and experience. First, there is the diversity of our services. We are a one-stop service provider for our customers, in several international airports in Saudi Arabia. As for reliability, we service customer request 24 hours a day. Thirdly, Arabasco have about 3 decades of experience in the sector.

How has your company performed in the first few months of 2015?

Arabasco has been very lucky to have been certified as a service provider by Bombardier for their Challenger aircraft series. This has excited our customer base. Now they have a local alternative for repairs. Additionally, we have 5 other authorizations from Hawker Beechcraft, Honeywell, Rockwell Collins and others.

What is the outlook for the next year?

We are excited to look forward towards the next year and anticipate growth in the coming year. Our customers are happy with our services. We foresee further growth in the sector.

Do you anticipate growing beyond the 6.7% current growth rate?

We hope to at the least match that rate of growth.

You have won some big contracts this year. Can you tell us something about that?

I cannot elaborate on that. Arabasco has a confidentiality agreement with our clients. We cannot disclose any names. However, I can say, with the new authorization, we will try to increase our growth over the next year.

Do you have plans to build more hangars and facilities for future business opportunities? What are your investment plans?

We are working on that with the authorities. We have applied for new land to build a bigger hangar where we can service aircrafts such as the BBJs and the Airbus 320.

What is the outlook for private aviation services in Saudi Arabia? Do you envision a bright future?

Arabasco is very optimistic in that regard. We see that aircraft manufacturers are doing good business selling their aircraft here in the kingdom. We are working with the Civil Aviation authorities on ways to attract more manufacturers to come here. It gives us the opportunity to maintain more types of aircraft.

What would you say are the major challenges in your industry?

The MRO sector in Saudi Arabia is a tough market. Our main challenge is always to keep up with the changing aircraft types and meeting customer preferences. We must do this while still maintaining a reasonable or healthy return on our investment.

What makes ARABASCO the leader in the market?

Arabasco is the leader in the sector because we serve as a one-stop service. Customers can rely on us for many requirements. We offer ground handling, charters, aircraft management and MRO services. We also offer fueling services through our sister company. This makes us different from the other companies in the sector. Our longevity tells us our story. We have been in the market since 1984. It’s a case of survival of the fittest.

Which area of business is most important for your future development?

Right now, our focus is on MRO. Our core business is ground handling. We feel that MRO is a growth sector. It will fuel our growth and revenues.

How do you target your clients?

Arabasco keeps a comprehensive database on our clients, and are always looking for new clients. That is why we are building the bigger hangar, to accommodate BBJs and Airbus 320s, as I mentioned earlier.

How does your company come by its expertise in technology and certifications?

Regulatory standards in the country and industry require us to have a certain minimum of equipment, tools and manpower. We have to maintain the required standards to get our certification from each manufacturer and each regulatory body.

What is the main challenge in ground handling in Saudi Arabia?

The main challenge is the tough competition in the sector.

Is there much competition?

Yes, there is stiff competition. Our competitors are both local and foreign companies. However, most foreign companies work with local entities.

Is ARABASCO a purely Saudi company?

ARABASCO is a 100% Saudi company.

What is the long term vision of your company? Would you like to focus on Saudi Arabia? Do you have any expansion plans?

At the moment, our focus is entirely on Saudi Arabia. We do have representatives in other countries around the world.

What is your opinion on all the infrastructure development in Saudi Arabia? New airports are being built in Riyadh and Jeddah. What do you think of this?

Infrastructure development is definitely a good thing for the country. It is needed. It will increase the flow of traffic in and out of our airports and facilitate ease of use. This is especially true in Jeddah.

Do you foresee much of an increase in traffic between the cities?

It is increasing right now. We have a shortage. We have a need for greater capacity in moving passengers.

This development is beneficial to your company.

Most definitely, yes. It is good for everybody.

Is there anything you would like to highlight or stress?

I would like to stress on our uniqueness in the MRO sector. Arabasco is a very diverse MRO company. We currently service about 24 aircraft models. We want to further capitalize on that expertise. We plan to invest more in that area, to increase our volumes and revenues. We are the only MRO in the country, other than Saudia and Alsalam. Those companies serve only their own aircraft, we service multiple clients. Saudia serves their own fleet and Alsalam mainly serves the military aircraft.

Clients have other options in the region. Jordan has well-established MRO companies.

Exactly. That’s why we serve an important role here. For local operators and owners, it is an advantage to have a local MRO company to provide maintenance. We help them reduce their costs. Going to another country for maintenance is expensive. There are ferry costs and travel expenses involved when they use foreign MROs.

Can you tell us a little about the history of ARABASCO? Whose vision was it?

Arabasco was established by a group of aircraft owners in Saudi Arabia. They were servicing their aircrafts in different places. They realized it was better to have a local company that could serve all of them. That’s how Arabasco started.

How long has the company been in existence and what are its major milestones?

Arabasco has served the Saudi market for 3 decades. One of the key milestones is that we were the only company providing calibration to GACA (General Authority of Civil Aviation) in Saudi Arabia, as a Saudi company. We have had that contract for about 18 years.

Many high net worth individuals in the country maintain their own aircraft. Is this a trend you foresee continuing in the future?

Yes, many people have their own aircraft. We notice that it is a growing trend each year. A lot more aircraft will be bought by private owners in the country in the near future.

Why do companies or private individuals see owning their own aircraft as an advantage?

Big corporations see owning an aircraft as an advantage. They can use it for their business. It makes travel easier, whether around the country or in the region.

In the 3 decades the company has been in business, has there been a big increase in the number of individuals owning jets?

Certainly. Since the establishment of Arabasco, there has been a tremendous increase in the private ownership of aircraft. Saudi Arabia has one of the biggest fleet of private jets in the world, second only to the United States. The Saudi private fleet has more of the bigger aircraft, in comparison to the US private fleet. Saudi Arabia has more wide bodied aircraft in the private fleet than the United States. I mean such aircraft as the (Boeing) 737s, 747s and even 777s.

Your company is in a high value added industry. What is your approach to localization?

The major part of our manpower is labor. We abide by the Saudi labor laws. We are in the green zone in localization requirements. We have many Saudi employees. We also have our own training program to bring our labor force up to industry standards.

How many employees does your company currently employ? How many are engineers and how many labor?

At Arabasco, we don’t call them engineers, we call them Inspectors. We have a total of about 37 Inspectors and mechanics.

Do you have a CSR program?

It is something Arabasco is considering, but we don’t have it running as of yet. I cannot elaborate on it at the moment.