Dubai Air Show

Mubadala enlists giants to foster UAE aerospace

 - November 6, 2007, 6:27 AM

Abu Dhabi government investment vehicle Mubadala Development Co. (Stand W300) has enlisted the aid of some of aerospace’s biggest names in pursuit of the United Arab Emirates’ aim to become a producer and investor in the industry as well as a major customer. The company says its entry into aerospace will be “organized in carefully planned stages and is likely to involve significant investment in the first few years.”

The objective is to decrease the UAE’s reliance on oil and energy and develop a more sustainable and broadly based economy. To that end, the Mubadala signed memoranda of understanding on cooperative development with both Boeing and Lockheed Martin at the Paris Air Show in June. Two years ago it inked a similar agreement with Rolls-Royce.

Founded in 2002, Mubadala already has a substantial aerospace portfolio, including locally based Gulf Aircraft Maintenance (GAMCO, Stand A30) and Horizon International Flight Academy (Stand E828a), plus a 35-percent stake in Italy’s Piaggio Aero Industries (Stand W300) and 40 percent of Zurich-headquartered maintenance provider SR Technics (Stand E500). The underlying strategy, it said, is to negotiate investment and technology-sharing partnerships with leading international businesses that complement these holdings.

Human resource development is a key focus. A planned aerostructures joint venture will enhance UAE technician and design engineering capability, while a proposed research-and-development facility is intended to provide an avenue by which academics and chemical engineers in the UAE can apply their expertise to advanced materials.

The Boeing MoU, signed by Jim Albaugh and Scott Carson, presidents and CEOs, respectively, of the U.S. company’s Integrated Defense Systems and Commercial Airplanes divisions, reflects the firms’ shared concern to “identify, evaluate, research and define potential future projects in Abu Dhabi across a number of aerospace segments,” according to Mubadala chief operating officer Waleed Al Mokarrab Al Muhairi. “We view this partnership as a significant step forward in our strategy to develop a cluster dedicated to advanced materials and composites,” he said.

A primary aim of the Boeing agreement is to identify potential partners and suppliers to become directly involved in the production of advanced material aerospace components and raw materials in Abu Dhabi. It also enlists Boeing’s help in the development of an Abu Dhabi-based aerospace research-and-development center.

Meanwhile, the Lockheed Martin agreement is aimed at opportunities for military aircraft sustainment in the UAE, according to the U.S. firm. Al Muhairi said it covers collaboration on “sustainment, maintenance, repair and overhaul, engineering and technical support of military aircraft” both in the Gulf and throughout the Middle East and North Africa region.

“We see an opportunity in creating sustainment programs across several platforms, such as the F-16 Block 60 Desert Falcon, C-130 Hercules, Mirage 2000, Hawk and PC7. Jointly we would like to develop and align our activities to attract other strategic partners to provide best value, full-service, end-to-end military aircraft support,” Al Muhairi explained.

The November 2005 agreement between Rolls-Royce and Mubadala concerned commercial opportunities in the aerospace, marine, industrial and renewable energy sectors. The two companies said at the time that they were in the process of establishing a joint venture company to develop in-country capability to serve Rolls-Royce customers across the Middle East and North Africa.

Rolls-Royce was already working with several other Mubadala companies, supplying Trent industrial gas turbines for Dolphin Energy’s 250-mile-plus sub-sea pipeline between Qatar and the UAE, and water jets for the Baynunah-class corvettes built by Abu Dhabi Shipbuilding, as well as Trent 500, 700 and 900 aircraft engines for government-owned Etihad Airways’ Airbus A340s, A330s and A380s. The UK engine maker also has a wide range of service agreements with GAMCO, and a 2004 MoU led to GAMCO becoming the approved center for maintenance of R-R gas turbines for the Middle East and North Africa.

Mubadala’s existing aerospace investments are an intriguing mix of local and global. Horizon International was founded early in 2002 to offer flight training for both military and civilian customers in the Middle East. It offers private, commercial, air transport and instructor training on helicopters and fixed-wing aircraft and is a Cessna-authorized service center and pilot training center.

GAMCO was established in 1987 and until last year was the maintenance provider for Gulf Air. After Abu Dhabi pulled out of the airline to form Etihad in 2005, Gulf Air returned its 40-percent stake in the MRO to the Abu Dhabi government. It then signed a $750 million five-year deal with SR Technics under which A-checks on its aircraft would be carried out at its base in Bahrain and heavier checks at SR Technics’ facilities in Dublin and Switzerland. It also envisioned a new joint venture maintenance facility at Muscat. Oman and Bahrain are the remaining owners of Gulf Air.

Barely six months later, SRT was acquired by a consortium in which Mubadala holds 40 percent, with the remaining 60 percent split evenly between Dubai Aerospace Enterprise and another Dubai-based investment company, Istithmar. The consortium said it planned no redundancies or job losses and Al Muhairi said the investment was “all about building SR Technics’ business.” Before the deal, SRT’s private equity owners had been planning to float the company’s shares.

Italy’s Piaggio Aero is best known for its 400-knot turboprop business aircraft, the P180 Avanti. When Mubadala’s acquisition of a stake in the company was announced in April 2006, the manufacturer’s chairman, Piero Ferrari, said the capital infusion would help it grow sales in the Middle East, Far East and South America. Mubadala’s CEO, HE Khaldoon Khalifa Al Mubarak, said the investment made commercial sense both as a straight investment opportunity and for the potential synergies it offered.

Piaggio Aero claims to be the only company in the business that makes and maintains aircraft, engines and aerostructures. Its products include the vertical fin and baggage door for the Dassault Falcon 2000EX, the wing center box for the C-27J Spartan military and structural parts for the Lockheed Martin F-35 Joint Strike Fighter. Engine activities include manufacturing of a significant share of the Rolls-Royce Turbomeca RTM322 turboshaft and the low-pressure turbine case and bearing compartment housings for the JSF’s Pratt & Whitney F135 engine.