Bob Johnson doesn’t just enjoy the game of golf, he’s a golf fanatic who has played in pro-am tournaments alongside the likes of Tiger Woods and other top players. So when he retired from his job as president and CEO of Honeywell Aerospace a little over a year ago, friends and former colleagues figured they knew where they could find him if they ever needed to–on the links of Phoenix’s toughest courses, sharpening his game.
But Sheikh Ahmed bin Saeed Al-Maktoum, the chairman of Dubai Aerospace Enterprise (DAE) and head of the UAE’s civil aviation department, had other ideas for the longtime Honeywell and GE executive. Luring Johnson out of retirement to run DAE as its first CEO, the company offered him the chance to share time spent under the Phoenix sun with time in Dubai’s desert oasis–as well as on trips around the world assembling the pieces for a $15 billion global aerospace empire.
Among the group’s biggest deals to date was the purchase of Landmark Aviation and Standard Aero Holdings from The Carlyle Group for $1.9 billion. The companies will serve as the core of DAE’s global MRO operation. As a result, DAE plans to sell off Landmark’s 33-piece FBO network by the end of the year. In addition to the MRO operation, DAE is also establishing an aircraft leasing company to challenge industry giants GE Capital Aviation Services and International Lease Finance Corp. (ILFC) and creating a leading aerospace university in Dubai. Additional divisions are involved with airport acquisition, engineering and manufacturing.
Johnson spoke with NBAA Convention News about the rapid ascension of his new company and its plans for the immediate future.
For anybody who thought you would be spending your retirement playing golf, they understand now that that’s certainly not the case. What was behind your decision to join DAE?
I was retired, finishing a new house–and trying to play golf–when a search firm called and said there were these people who were going to fly in from Dubai to talk with me about an offer I couldn’t refuse. They said they’ve decided they wanted me to do this job. I visited with them more for curiosity’s sake because I hadn’t ever been to Dubai. To make a long story short, I really wasn’t planning to work again, but I liked the people, and I liked the idea they had. I liked their strategy, and I liked their character. There are a lot of people at the top levels of governments who have money, but they don’t always necessarily direct their energy at the future of their country and all of their citizens. What they were planning to do was for the future of Dubai and the UAE. And why shouldn’t a center of service for aerospace be based in that region? It’s a wonderful city, a wonderful country, and what they have done to build the city into what it is now is a story all by itself. So, I thought, they like to do things right, it needs to be done, so I went to visit Dubai right after that and decided it was a place I could attract a great team to help me get this done. And I couldn’t be happier. I haven’t played golf, but I’m having fun.
In less than two years, DAE has really become an aerospace juggernaut. Has the pace of growth surprised even you?
It has, actually. And while they announced the formation of DAE two years ago, the first year was just marketing. There weren’t any employees. It was just a consulting firm. I started last August and was the first employee. So it is in just one year that we’ve done this, and what we’ve done in a year they originally thought would take four years. I don’t think it’s all that surprising, though, because in Dubai when they decide to do something they do it pretty quickly. I thought it could be done fast, too. A lot of it depends on the market, but I would put the leadership team that we have assembled up against anyone. Together, we have 364 years of aerospace experience.
The team is accomplished–and very fun to work with. We cover the whole of the aerospace industry, with the exception of being an airline. We don’t want to fly the airplanes; we want to service them. So this is the first time in a company–a family of companies–that we’ve had that kind of breadth across the industry. We’ve made some high-quality acquisitions, and the timing for the industry is great. All the foundations that we started this with are continuing to prove true.
How far along are you in the process of divesting Landmark Aviation’s Airport Services Group?
We’ve had the first set of interested bidders provide their bids. It’s down to the next cut of bidders, a reasonable number, who are competitive in terms of their bidding prices with each other, and we suspect the process will be finished by the end of the year.
Do you expect the sale will involve splitting the FBOs among multiple buyers?
I don’t think so. But I wouldn’t say that it couldn’t be an outcome. A lot of people have expressed interest in terms of buying the entire network. I’m not going to say it couldn’t take that turn, but I wouldn’t want to speculate.
Is most of DAE’s initial investment in aerospace finished now?
Not quite. I think we could be finished by the end of the year. The leasing company will have an initial fleet in place before the end of the year, with existing aircraft on leases in the range of 20 to 30 aircraft. We hope to place some orders for new aircraft before the end of the year with Boeing and Airbus. We’re in the leasing business and recognize there’s the Dubai Air Show in November, so a lot of what we’ve got planned would be announced at that time.
As far as the MRO business with Landmark and Standard Aero, we’re working to finish that this year. We’re also working on acquisitions of some manufacturing businesses by the end of the year, which we’ll perhaps be able to announce by the Dubai Air Show. We have several airport activities we’re involved with, such as in the UAE with the new airport in Dubai. We have opportunities to build, design and operate airports in different parts of the Middle East, China, India and Russia, so we have tons of opportunities we’re trying to sort out and determine in what sequence we’ll be involved.
From a service standpoint, we have said we share a technology with Arizona State University, what they call a “Decision Theater,” which we’ll use across our business for managing supply chains, for operating airports, for communicating with passengers around airports and for interior remodeling of airplanes. We have the technology in place and will display it at the Dubai Air Show. We also have a couple of other technology companies that we have an interest in acquiring by the end of the year. We hope to have all six of our businesses up and running by then.
What is DAE’s goal for the next decade and what level of investment will it involve?
I think we have to be flexible. I would say the goals are shaped around each of those six entities. For starters, we would like to be the premier aerospace university–the Harvard of aerospace, if you will. We want to attract students from all over the world, as well as a great global faculty, and we think we are on our way to doing that.
For the DAE leasing and capital business, I think it’s realistic to think that we could be the third-largest leasing company if I look out five to 10 years, but then recognizing that we usually go faster than we say. Certainly, behind GE Capital and ILFC we’d like to see if we can be the third biggest. From an MRO standpoint, we’d like to be a global service provider, so that wherever you fly you can get service done with best practices and integrated supply chains.
On the manufacturing side, we see new technologies such as composites and integration of suppliers as areas where we can provide value and help the progress of the industry. How big we can be depends upon how quickly we can move. Our intent is not to participate in these businesses by picking them up and moving them all to Dubai. The university and financing company are there, but the service company needs to be global, certainly with a presence in Dubai. The manufacturing company needs to be where it is and grow through investment. If some of that can be done in Dubai, then that’s a goal. The airports are going to be wherever the airports are, and the service and technology business is about investment and putting it into our airports and airplanes in terms of R&D with our university. It’s a global business and we want to be the control tower, with a place of emphasis in the Middle East.
Dubai World Ports obviously ran into problems with politicians and the media last year. Do you think a similar backlash might eventually be directed at DAE?
I don’t think so, and I’ll say why. I think the process for these kinds of transactions with the United States was just forming then. I think it’s more mature now. Dubai, understanding the process, the requirements, and how to respect it and participate in the investigation–to be more helpful, be invisible, be transparent–we’re more mature with that. We had the experience with the case of Landmark and Standard Aero and I thought it was a very positive process that looked at the data and looked at the facts. I wouldn’t know why that wouldn’t be our same expectations going forward.
Now, we’re sensitive about the kinds of businesses that we would acquire or partner with, because we understand the requirements. Part of the responsibility for us is to be careful not to take something to [the regulatory authorities] that doesn’t fit the rules. But I think the rules, requirements and processes are examples this year that there is a better benchmark than the process with the ports a year earlier.