Fears that the market for aviation lubricants and greases in the Middle East is unravelling as a result of the Covid-19 pandemic are exaggerated, analysts say.
Despite the global downturn, markets in the Middle East Gulf are evolving as mega-carriers – including Dubai-based Emirates Airline, Abu Dhabi’s Etihad and Qatar Airways – move to mothball rather than dispose of surplus fleet capacity. According to Shell, a Boeing 737 aircraft has 359 grease application points, which suggests lubes and greases will be used on grounded aircraft held ready for future service, even if change intervals lengthen from when they were in service.
The shift is also likely to bolster the region’s burgeoning maintenance, repair and overhaul sector as the market transitions from one centered on daily fleet operating demands to a preventive maintenance-led strategy. Although aviation lubes and greases comprised a small part of last year’s global lubricant demand – estimated at 38 million metric tons – the Middle East has become an outsize consumer of jet engine oils, hydraulic fluids and greases as fleets have ballooned.
Heady air travel growth prospects and the region’s unparalleled location have attracted major international lubricant companies to the Gulf. Prior to the pandemic, ExxonMobil, which has a division dedicated to the sector, forecasted that global demand for aviation lubricants would increase by as much as 55 percent by 2040. The Middle East has also spawned low-cost carriers such as Flydubai, Air Arabia in the United Arab Emirates, Flynas in Saudi Arabia and Kuwait’s Jazeera Airways, further extending the region’s demand for aviation lubricants.
Led by Emirates, the world’s largest operator of the Airbus A380 and Boeing 777 aircraft, Gulf carriers entered international aviation markets with major aircraft orders that dramatically boosted lube and grease demand. With local summer temperatures reaching 50 degrees C, the rapid ramp-up in fleet sizes and dusty operating conditions led to the development of customized maintenance programs and specific lube and multi-purpose lithium complex grease formulations to minimize friction.
Higher temperatures found in the Gulf can cause coking and lead to expensive, as well as time consuming engine overhauls. Shell developed AeroShell Turbine Oil 560, a 5 centiStoke synthetic ester lubricating oil designed with thermal stability and oxidative resistance in mind. Meanwhile, Flydubai has opted for French company Nyco’s Turbonycoil 600, a synthetic turbine oil compliant with SAE AS 5780 SPC, for use on its fleet of Boeing 737 aircraft.
Still, the emphasis is now clearly on preserving fleets in anticipation of a return to some form of normality. Next year’s postponed Expo 2020 in Dubai is touted as the trigger for recovery, although original estimates of 20 million visitors could be revised down depending on public sentiment and the virus’ continued prevalence.
Eastman, Shell, Phillips 66, Total Lubricants, BP, Chevron and ExxonMobil all have a foot in a regional market, which troubled plane maker Boeing previously estimated may be worth U.S. $725 billion by 2038. The Gulf’s erstwhile thriving aviation sector also supports an ecosystem of ancillary industries that are major consumers of lubricants, including ground handling equipment, support vehicles and emergency services.
But for all the bullish talk from Gulf aviation executives about retaining current fleet sizes, concerns remain in the market that the fallout from Covid-19 will lay bare latent overcapacity in the Middle East.
Rumors abound that Emirates may be about to cut its mammoth, 115-strong A380 fleet amid job losses as demand has withered. Both Etihad and Qatar Airways suffered heavy losses before the pandemic and taken together, these scenarios are potentially bearish for the aviation lubricants business.
Yet amid lower oil prices and large pending future orders for twin-engine aircraft, lubricant suppliers are hoping when it comes to the Middle East, that every cloud has a silver lining.