The real story behind the Dubai Airshow

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It was dubbed the “fifteen minutes of jet order hysteria” by the newswires, and the Gulf carriers certainly lived up to their promises to spend big last week. The orders from the ‘big three’ of Emirates, Etihad and Qatar Airways, came to almost $150bn, and just over 502 new planes will be basing themselves at an airport near you in the next ten years or so. To put that figure into context, that’s 30 percent more jets than the current fleets of all three carriers combined.

The sums being bandied around are colossal, but will eventually come in significantly lower than the list prices announced at the show.

Block packages of this nature tend to result in major discounts, especially given the fact that some carriers are single-handedly propping up specific jet production lines (Emirates is by far the biggest buyer of Airbus’ A380, for example).

And the cash for those planes will be paid over the span of a more than a decade, via piecemeal bank and trade financing, bonds and leasing arrangements with the likes of the Doric Nimrod funds.

The block orders even boosted Boeing’s stock so much that the Dow Jones Industrial Average broke through the 16,000 point mark for the first time ever. Not bad for a quarter of an hour’s work.

But the real story of last week’s Dubai Airshow came in the form of the sideline deals that will see some of the ‘big three’ money recycled back into the local economy. In the same way that the Gulf’s oil wealth is often funnelled back into US government bonds, and massive American defence equipment orders from the UAE and Saudi Arabia are packaged together with offset schemes that build up indigenous expertise here in the region, Airbus and Boeing are also putting their faith in the UAE’s fast-growing aerospace industry.

The beneficiary of this process has undoubtedly been Mubadala Aerospace, which oversees a slew of subsidiaries that either manufacture parts for aircraft, provide training, or offer technical solutions or repair and overhaul services. Last week was a good one for the company; it signed off orders worth $5bn from Airbus and Boeing to sell aircraft parts, as well as inking a deal with Rolls-Royce to service the latter’s latest engines.

One of those Mubadala Aerospace firms, Strata, already makes standard and carbon-fibre composite parts for most of the jets you travel on today, including the A330s, A340s and the A380, as well as Boeing’s 777s and 787s.

Based in a $250m facility in Al Ain, the company’s strategy is to become the world’s top producer of wings and empennage (the tail section). Those new deals from Airbus and Boeing will see Strata building another plant to meet the demand.

Mubadala Aerospace’s chief executive, Homaid Al Shemmari, also said that it would now seek to acquire other aerospace firms in the US to complement its growth. It all means more jobs for locals, and another plank in Abu Dhabi’s strategy to diversify its economy away from oil.

Given that Strata’s first completed parts were only shipped out of Al Ain in the last quarter of 2010, the firm has certainly come a long way.

Can the UAE become a manufacturing centre for entire aircraft? Mubadala certainly isn’t denying the prospect, and if Boeing’s union travails in the US are anything to go by, then a full-scale operation, perhaps in the next couple of decades, cannot be ruled out.

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Posted by: khalid

i agree with you other governments in the region need to take the same steps as Mubadala

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