AIN Blog: What Remains of Dubai’s Aerospace Dream as Airbus Orders Are Cancelled?
What does the future hold for Dubai Aerospace Enterprise in the wake of this month’s news that its leasing arm, DAE Capital, has cancelled all remaining airliner orders with Airbus?
On July 14, Boeing reported that DAE had scrapped an order for fifteen 737 narrowbodies, leaving it holding orders for 15 of the new 747-8 freighter and half a dozen 777s. Meanwhile, DAE is trying to renegotiate the terms of an $800 million bank loan that falls due for payment on July 23. Just two weeks earlier on June 29, DAE Capital CEO Robert Genise left the company, with minimal explanation and no clear indication as to whether or how he might be replaced.
DAE was formed in February 2006 on the foundation of a Dubai government-backed pledge of up to $15 billion in working capital. The lofty goal was to put Dubai well and truly on the global aerospace map, not just as a consumer of aerospace products but also as a hub for manufacturing and multifaceted services. Former Honeywell Aerospace boss Bob Johnson was appointed as CEO to lead a mission intended to result in the creation of 14 separate divisions and a 10-year plan to employ 30,000 people directly and support at least 5,000 more jobs indirectly in Dubai.
So what’s left of this dream? Not much, it would seem. Apart from DAE Capital, the group also includes DAE Engineering, which owns U.S.-based StandardAero, which does maintenance, repair and overhaul (MRO) of business aircraft, and a 30-percent stake in SR Technics, the Switzerland-based airliner MRO. Gone from the DAE organizational chart, according to the company website (www.dubaiaerospace.com), are DAE’s university subsidiary (which was to focus on flight training and aerospace education) and the airports division (aiming for an international role in airport management).
DAE Capital was always intended to be the group’s flagship company, and at one point its order backlog with Airbus and Boeing combined was valued at just less than $40 billion. The company also did a number of purchase and leaseback deals with airlines, including Emirates, Air New Zealand, Garuda and Turkish Airlines. However, the DAE website records only a handful of the aircraft actually being delivered to operators.
On May 23 this year, in the first DAE press release to be issued since Nov. 19, 2009, the company reported consolidated revenues of AED5.9 billion ($1.6 billion) and consolidated net income (excluding $4.8 million in non-recurring items) of AED142.6 million ($38.8 million). Actual consolidated net profits were just AED37.8 million ($10.3 million). It was the first time the group has ever published financial results, so it is hard to have any sense of whether this represents progress. Nor does the company indicate how many employees it has, but StandardAero employs approximately 3,700.
“From our base in Dubai, one of the world’s fastest growing cities, we intend to build a multibillion-dollar aerospace, manufacturing and services’ corporation that will help shape our industry of tomorrow,” said Johnson in July 2006, two years before he retired. “We aim to establish DAE as one of the most innovative and successful businesses in the global aerospace industry inside the next 10 years. That is a bold statement, but Dubai has a ‘can do’ attitude, setting out to break boundaries and deliver ground-breaking initiatives that have a track record of succeeding on a world stage.”
In late 2009, the global financial crisis caught up with Dubai’s “can do” attitude, reining in its ambitions, as it became all too apparent that all that glitters is not gold and that key parts of the emirate’s business plan just didn’t add up. It remains to be seen whether DAE’s business plan still adds up and the outside world has very little hard information from which to form a clear view of this.
Over the past couple of years, AIN writers and editors have found it very hard to get any response to questions put to DAE. Most recently, the company refused to comment on Airbus-confirmed reports that DAE Capital’s Airbus orders had been cancelled.
DAE managing director Khalifa Al Daboos, in a written statement, said, “DAE enjoys an excellent working relationship with Airbus and Boeing and engages in a continuous dialogue with each about the company’s current and future needs. DAE does not comment on the specific nature of its discussions.”
The company’s press office would not answer my more detailed questions and said that Al Daboos himself would not be available for further comment until at least the first week in August.
So what exactly does the future hold for DAE? Who knows?