The Japan Maritime Self-Defense Force Kawasaki P-1 aircraft. Eric Piermont/AFP
The Japan Maritime Self-Defense Force Kawasaki P-1 aircraft. Eric Piermont/AFP

Demand for maritime aircraft in Asia forecast at Singapore Airshow



When Boeing's P-8A Poseidon first arrived at the Singapore Airshow two years ago, it caused a stir.

Defence buyers around the region were intrigued by the new aircraft, which was touted as reliable, capable and absolutely necessary in a region abundant with naval tension, both above and below the water.

"There is a requirement need out here in the Asian region for P-8s," Matt Carreon of Boeing said at this years airshow on Tuesday. He cited the large volume of shipping traffic, the amount of piracy and the "current political climate" as reasons why maritime patrol would be important to Asian militaries.

China has spent the past few years building up military installations around the South China Sea and its submarines are prowling farther afield, stoking Asian interest in planes that can sweep large swathes of ocean.

The number of offerings on the market has grown, too, but the cost of such specialised aircraft has kept the purchases relatively small for now.

Special-mission aircraft are a strategic asset, which goes some way to explaining why sales of such planes have remained elusive - the procurement process is very lengthy.

Among those joining Boeing in trying to address the market are Saab's Swordfish Maritime Patrol Aircraft, based on the Bombardier Global 6000 business jet; the Kawasaki P-1; the Airbus C295 MPA and proposed maritime patrol variant of its A320neo; Leonardo's ATR 72MP; and IAI's ELI-3360 Maritime Patrol Aircraft, based on the Bombardier Global 5000 business jet.

The Swordfish is not yet in production, however, and the Japanese Self-Defence Force is the sole customer for the P-1. India and Australia are so far the only Asia-region buyers of the $175 million P-8.

No big sales of maritime patrol aircraft were announced at the Singapore Airshow, which ends today (Sunday), the biggest regional aerospace and defence event.

Still, plane makers at the airshow said that Asia remained a promising market.

Two P-8s were on display at the event, one flown by the US navy - the aircraft's biggest customer by far, with 98 ordered and 64 delivered - and the other by the royal Australian air force, which has ordered 12. Britain and Norway are the only other two announced buyers.

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Gene Cunningham, Boeing's vice president of global sales for defence, space and security, said the company was in advanced discussions with South Korea over a P-8 sale. There might be a decision by the end of 2018, he added.

On Thursday, South Korea's defence procurement agency confirmed it would buy a maritime patrol aircraft from a foreign company. The Yonhap news agency, citing an unnamed military source, said the decision would be between the P-8 and Saab's Swordfish for a deal expected to be worth about $1.75 billion.

The moneymaking potential for sales in the Asia-Pacific region is clear. The US State Department gave permission last year for a nearly $1.5bn P-8 sale to New Zealand, although no deal has been announced.

Malaysia, Indonesia, Vietnam and South Korea are among others in the region shopping for maritime patrol aircraft, several plane makers said.

"If they are concerned about the proliferation of submarines, we are talking to them," said Robert Hewson, Saab's head of communications for Asia Pacific.

Mr Hewson suggested the Swordfish would be as little as half the cost of the P-8 over its lifetime.

Like Saab and others, Boeing designed its aircraft around the bones of a civilian plane, in this case the ubiquitous 737 passenger jet. Mr Carreon said the aircraft's familiarity, plus the ability add in third-party or local systems, made it attractive to even smaller customers.

"They are shocked at the value they're getting," he said.

Boeing is marketing its jet as a natural upgrade of the older, propeller-driven Lockheed P-3 Orion, which performs the same mission. Only one buyer, India, had not flown P-3s before purchasing P-8s.

Kawasaki was displaying a model of its four-engine P-1 jet, which replaced Japanese P-3s, but Hideki Yamaoka, associate officer and project manager of the company's Advanced Aircraft Export Project, said it was generally "too high-end for the requirements" of Asian customers.

Unmanned drones are another option. Joseph Song, vice president for international strategic development at General Atomics Aeronautical, which makes the MQ-9 Reaper, said he saw potential for growth in Asia.

"I think the maritime mission is going to be as big as the land mission in the future, driven by Asian customers like Australia, India, Japan, Korea, and I think Singapore and other countries will certainly play a role," he said.

After a meeting of Southeast Asian defence ministers this week, Singapore Defence Minister Ng Eng Hen said the country was spending more all around, including on ways to keep an eye on the seas around the island city-state.

"Defence spending on the whole, not only maritime surveillance, has gone up," he said. "That's a fact."

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When: The one-off Test starts on Friday, May 11
What time: Each day’s play is scheduled to start at 2pm UAE time.
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”