DAE hangs for-sale sign on its StandardAero

 - December 29, 2010, 4:46 AM

Dubai Aerospace Enterprise (DAE) is accepting offers “for part or all of StandardAero,” according to a Reuters report released last month, raising questions about the Middle East enterprise’s future in the business aviation market.

A spokesman for Standard­Aero told AIN he didn’t think the report was noteworthy and said, “DAE is an investment company that commonly looks at its strategic options for its investments. StandardAero will continue to focus on what it does best, providing world-class maintenance, repair and overhaul services to operators around the world.”

When DAE, less than a year after it had been established, bought StandardAero from private equity firm Carlyle Group in 2007, it touted the acquisition as the opening move by a new, major player in the international maintenance industry.

Initially DAE entered the aerospace industry with a partnership among a consortium of Emirates businesses, including Emaar, a major Middle East real estate company; Dnata, Mercator and Emirates National Oil Company (all ground handling and airline fueling operators); Amlak Finance; and the Dubai Airports Free Zone Authority.

The partnership targeted an estimated $400 billion airport development and operations market primarily in the Middle East, India and China. The partnership agreement was to develop new airports in regional emerging markets with what was described as “build, own, operate, transfer” deals.

In early 2007 DAE was “seeking to command a global presence in a number of aviation sectors” and by August 2 it had finalized a $1.9 billion acquisition of Landmark Aviation and StandardAero Holdings from the Carlyle Group. According to DAE, StandardAero was to be the core of a plan to become a “global MRO provider.” DAE acknowledged it intended to sell off Landmark’s network of 33 FBOs while keeping Landmark’s Associated Air Center, which would fit into a separate division under the control of DAE’s engineering sector.

Part of DAE’s plan included expanding its service capability to larger turbine engines, prompting StandardAero to acquire turbine engine component overhauler TSS Aviation of Cincinnati for $65 million. Acquiring TSS Aviation helped Standard­Aero by adding more in-house component repair and overhaul capability. The acquisition was also seen as a preliminary move aimed at boosting DAE Engineering’s capability to service larger engines.

At about the same time, DAE invested in a $5.5 million expansion of StandardAero’s Maryville, Tenn. facility to provide MRO services for the PW600-series engines slated for use on very light jets. Pratt & Whitney Canada had awarded PW600 designated overhaul facility status to StandardAero earlier that year.

Eyes on Mx Market
In November 2007, further underscoring its intention to focus on maintenance, DAE signed a deal with Encore FBO and private-equity firm GTCR Golder Rauner to sell off Landmark Aviation’s FBOs for $436 million.

In October 2009, a spokesman for StandardAero said the MRO was refocusing its attention on the business aviation segment.

“While the company’s roots are intertwined with business aviation as far back as the early days of the Garrett [now Honeywell] TFE731 engine, StandardAero hasn’t done a lot of marketing to the business aviation community during the past few years,” he said. “That’s changed and in just a few months we have signed several million dollars’ worth of projects.”  

At the time, Scott Taylor, StandardAero’s senior v-p of business aviation, told AIN, “We are the only business aviation MRO that can do everything in-house: engines, airframe, avionics, interiors, refurbishing and paint. We work on better than 60 percent of the engines flying in business aviation today.” Taylor’s message was clear: DAE’s marching orders were to dominate the business aviation maintenance market.

As the economy in Dubai sank there were widespread rumblings that DAE was in financial straits. In May last year, Boeing received cancellations for 25 widebodies, including ten 777s and fifteen 787s. Observers noted that a DAE order had vanished from Boeing’s orders and deliveries Web site. Boeing declined to comment. DAE’s order consisted of 10 Boeing 777-300ERs and fifteen 787-8s ordered in 2007.

The for-sale sign on Standard­Aero suggests that while DAE may be an investment company that commonly looks at its strategic options for its investments, being a major force in the global aircraft maintenance market no longer appears to be a strategic option. DAE did not respond to AIN’s requests for an interview.o