LONDON, 14 December 2002 — Jeddah-based BMG Financial Advisors (BMG) has completed its latest advisory for Air Touring Management (ATM), a UK-based private aviation leasing management company, which on Thursday launched the first air taxi service out of the UK. The service is based on fractional leasing and aimed at middle-level executives traveling to short-haul destinations of up to three hours away.
Basil Al-Ghalayini, president of BMG, in London for the launch, confirmed to Arab News that ATM plans to launch a similar air taxi service out of Bahrain, Dubai, and Jeddah at a later stage, “where there would be a huge demand for such services given the relatively short distances between the various emirates”.
Air taxi services are projected to attract high demand given the increasing difficulty and delays in flying on certain scheduled commercial flights, and because of the long queues at check-in facilities post 9/11 at certain destinations because of increased security and other measures.
According to ATM, there is a strong upward trend of private jet traveling in the US and Europe. In fact, Netjets owned by that doyen of fund managers, Warren Buffet, has pioneered airline fractional ownership and leasing in the US.
The reasons are mainly for convenience, practicality, safety (especially after Sept. 11), and even cost in some cases. Figures from aviation industry statistics show a steep increase in the number of companies operating in this sector, with fractional leasing (time-share of an aircraft) being the most spectacular performer. Future plans of ATM will seek “to take advantage of this trend and their London experience to expand their operations geographically, starting in Europe and eventually applying the same model in the Arabian Gulf/Middle East area.”
This is a cost effective way for executives to travel, explained Al-Ghalayini. “The cost structure makes it cheaper to fly a four-man team this way than by first class on a scheduled flight. A company or client can buy a block share of 60 days at $15,000 per month plus $500 per flying hour. This averages out at $1,500 per hour,” he added. BMG, incorporated in Saudi Arabia in May 2002, is a structured finance investment banking advisory firm, which advises mainly Saudi and Gulf merchant families and high net worth individuals. Its focus is on mergers and acquisitions (M&As), cross-border financing, and the establishment of new companies.
Al-Ghalayini, who until last year headed the London office of the Kuwait-based Islamic investment bank, The International Investor (TII), revealed that the firm is currently advising on a number of major deals in the Kingdom. These include:
* Restructuring of a privately-owned water treatment company in Saudi Arabia. The company is in the process of placing a limited portion of the equity to investors and customers.
* Assisting a newly-established Saudi petrochemical company in accessing an Islamic finance facility totaling SR40 million from local banks.
* Establishing a cooperative insurance joint venture between a top Middle East insurance group and a leading Saudi investment group, to take advantage of the new Saudi insurance laws and requirements, especially relating to compulsory medical insurance and motor car insurance.
* Advising a local IT company to restructure and finding a strategic buyer for the company.
“In anticipation of the new capital markets law in Saudi Arabia,” explained Al-Ghalayini, “we are also in the process of starting an equity research and IPO (initial public offering) placement business by taking leading merchant families public.” To do this, BMG has signed a strategic alliance agreement with leading Egyptian advisory firm, Saba Investment Advisors, which has extensive experience in IPO and the placement business in Egypt. Alla Saba will lead the BMG initiative in Saudi Arabia in this respect.
For the ATM executive travel service deal, BMG, acted as the sole financial advisor, and structured and arranged a $10 million 5-year loan facility from a Kuwaiti financial institution to finance the purchase of an operating fleet of four TBM 700 aircraft, manufactured by SOCATA, a wholly owned subsidiary of Aerospatiale of France.
The company has a reputation of the highest safety in the world for turbo-prop airplanes, which are one level below jet airplanes. The TBM 700 has a maximum range of 3 hours flying time, as such, it will be active only on the UK-Europe route stretching as far as Italy and Eastern Europe. The first two TBM 700s were delivered yesterday for the launch, and ATM is already negotiating proposals from prospective corporate clients for block bookings. The remaining two aircraft will be delivered in first quarter of 2003.
ATM Chief Executive Officer Aly El-Tahry said ATM plans to operate the aircraft on a fractional lease basis, from its hub in Biggin Hill Airport, 12 miles south of London. The services of ATM are intended for Europe-based customers, mainly business executives, who want to fly from small airfields at any hour. The options include 1,500 airports in Europe with the typical flight lasting one and a half to two hours, and carrying up to four passengers. Target sectors include financial services, consultancy firms, top football and sports clubs and small high net worth families.
