Face-to-face: Murali S., Al-Futtaim Engineering
The MD reveals his company's plans to target airport projects
S.S. Murali, acting managing director of Al-Futtaim Engineering, reveals his company’s plans to target the raft of upcoming airport projects around the region
Murali S., managing director of Al-Futtaim Engineering, has some news he wants to share with the industry. After eight months of deliberation, planning and preparation, the company’s MEP division is ready to declare to the world that it is entering the airport projects market.
The move is a timely one, coming just as the regional aviation industry is attempting to build on its recent success and firmly establish itself as a global leader.
In the last month alone, Dubai has announced a $32bn (AED 8.7bn) expansion of Al Maktoum International Airport, while Bahrain and Kuwait airports have both made moves on expansion work. Further projects in Saudi Arabia and Qatar are also in the pipeline, and Murali says it is time for his company’s MEP arm to get involved.
“The Middle Eastern airlines are perhaps the biggest growth story within the [global] aviation business,” Murali says.
“The regional airlines operating out of the Gulf have clearly grown exponentially. On the back of this, large infrastructure has been built and is getting built as we speak – and there will be more in the future. We as an engineering contracting company have the ability to contribute, help our customers and be part of that growth. That is [our] motivation.”
While Al-Futtaim MEP has yet to undertake airport terminal work, it is not coming to the market completely blind. The division completed work on a hangar at Dubai World Central around six months ago, while the wider group has also done scaffolding work on airport projects previously.
Murali says that this has given the company a taste for airport projects and a desire to tackle the more intricate challenges involved in airport MEP work.
“[Those jobs] gave us a better understanding of the complexities that we’ll get into when we go and work inside airports,” he explains. “For a period of time we have delivered complex projects, and airport projects are complex. We now have a good amount of competency and can contribute, so this is part of the reason why we have decided to expand into this.”
Murali says the company is aiming to secure around AED 1bn ($270m) worth of work from the aviation sector in the next five years through a combination of smaller projects in the region of AED 50m and larger single project packages between AED 300m and AED 500m.
As to where these contract wins might come from, he is reluctant to specify, but insists that Al-Futtaim’s focus will initially be on the markets with which it is most familiar.
“In this business, as an international company, we will go after other opportunities around the region, but that’s something that I think won’t happen for three to four years for this particular sector. The initial target markets will be in the UAE and Saudi,” he says.
In both markets, Al-Futtaim has already set plans in motion, Murali adds, and it expects these to bear fruit by early next year.
“We are in talks with contractors for some small and large works in Dubai, and the Saudi team is now getting into some discussions,” he says.
“We are keen to start. I think the way it will go will see us get some reasonably small, reasonably sized opportunity; we’ll start with that and build the team. If there is a larger opportunity we will build the team for that. I’m sure within the next two quarters we will have an opportunity to start work.”
While Murali is clear that Al-Futtaim’s MEP division is more than capable of securing airport work on its own merits, neither requiring the assistance of the group’s civil division or other parties, he is willing to entertain other avenues if its means the company can get a start in the sector.
“The other way to go about [securing projects] would be by alliances and partnerships. Today I think the contracting fraternity is far more open to partnering with others in delivering their work,” he says.
With this apparent softening of attitudes in the industry, this could well mean working with one of the MEP contractor’s direct rivals, he adds.
“I wouldn’t rule out alliances and partnerships with other major subcontractors. We have relationships with almost all major [MEP] contractors. When I say relationships, [I mean] we know each other well; we know what they are and they know what we are. At the right time and opportunity we’ll see with whom we join hands.”
This collaborative approach may well serve Al-Futtaim best as it is entering a sector where there is already a handful of MEP contractors who can claim to be airport specialists. Notwithstanding this fact, Murali says that there are much more important factors than previous airport experience to take into consideration when assessing Al-Futtaim’s suitability to take on such projects alone.
“I think we should look at the broader picture,” he says. “A narrow focus on airport projects is only one thing. But if you look at the market in terms of what has happened since 2008, a lot has changed ... Pricing and chasing of work by contractors, main as well as MEP, has led to problems for everyone. There are many companies whose balance sheets are in the red, so there is a greater realisation that you can’t continue to deliver work at a loss.
“Businesses have to be sustainable and that’s the way Al-Futtaim has always run its business – in a sustainable, continuous manner. In the airport sector, we have something to contribute. We are a serious company, we deliver on what we say, so we would have our place [among those considered as candidates for these projects]. Al-Futtaim as a group and Al-Futtaim Engineering as a company are financially sound and I think that adds to our prequalification.”
Nevertheless, there are other MEP contractors in the industry that can boast both a healthy balance sheet and airport references. With these two boxes ticked, would Al-Futtaim perhaps have to adopt an aggressive pricing strategy in order to win some of the upcoming airport work ahead of such competition?
“No, I think any employer will look at three things: cost, quality and time,” Murali replies. “He wants it done at a particular cost, within budget, done to a certain quality and done within the time scheduled. Our hope and ambition is to go and deliver on those. I’m sure that whichever airport employer it is, he will be able to see the value in our proposal. It’s not just going to be work won on the basis of price.”
Evidently, the issue of pricing is one which incites a strong response from Murali who (while acknowledging that margins have improved from the market nadir of 2010 to 2011) is adamant that no matter how great the desire to secure airport work, his company’s MEP division will never get drawn into a race to the bottom.
“If it is not commercially sensible we won’t do it,” he asserts. “I’m not saying that we won’t quote at high margins [for airport projects], but equally we won’t take a job at a loss or hope to make money through changes. That’s not how we work.”
He adds that, in his opinion, making airport work profitable is no different to any other project.
“[As on other projects], we’ll want to get the engineering and procurement done on time. If [this] is done on time, then the installation is something that you can really manage,” he says.
This may sound simpler than it actually is, however. MEP engineering in airport projects is considered quite technical and specialised, and unlike the fairly standard work required on most residential or commercial projects. Murali accepts that this will pose a different kind of challenge for the company.
“There are a lot of services in an airport compared to any other job,” he says. “The specialist airport systems themselves would be about 20 in number. Integrating and coordinating the MEP systems along with those is a challenge. That and the whole coordination and engineering of these works is a key thing to get it delivered.
These works are best managed from the initial award in the first 15 to 20% of the contract’s time, with work going into getting the engineering and coordination of the various systems integrated. Once that’s done the rest of the execution would focus on getting it done to the right quality and safety standards.”
To ensure that Al-Futtaim stands the best chance of delivering on time in the event of securing airport contracts, Murali says the company has already begun recruiting the expertise and experience required – and now has everything in place for the company to launch into the sector.
“We now have airport experienced staff onboard,” he reveals. “We have to display our expertise and competencies and that will be done by having trained managers and engineers with previous experience in these kinds of jobs. In terms of our workforce and its competency and supervision, and health, quality and safety standards to which they work, I think we’re already there.”
- $270m Value of airport contracts targeted in the next five years
- $32bn Value of Al Maktoum Airport expansion