DAE may change its order book; number of cancellations may be similar to those made this year
Dubai Aerospace Enterprise, the state-owned aviation services and leasing company, may cancel more aircraft orders with Airbus and Boeing next year as the emirate battles the impact of the global credit crisis, two people with knowledge of the matter said.
DAE plans to make adjustments to its order book with the manufacturers and the number of cancellations may be similar to those made this year, said one of the people, who asked not to be identified because the discussions are private.
The company, set up in 2006 with the aim of becoming one of the world’s biggest airplane lessors, in July dropped orders for seven Airbus wide-body planes and 18 narrow-body jets, according to figures released by Airbus. A contract for 15 787 Dreamliners was removed August 5 from Boeing’s online backlog listing.
DAE, which has 45 aircraft on its books according to its website, entered the leasing market during what was the peak of an air-travel boom, and has since been hit by a slump in demand.
The Dubai-based company placed an order in 2007 for 70 Airbus A320 single-aisle planes and 30 A350 jets valued at about $13 billion at list prices. DAE also ordered 70 Boeing 737s, 15 787s, 10 777-300ERs and five 747-8 freighters that year, valued at $13.7 billion. As of last month, DAE has 81 Boeing planes on order, according to data supplied by the manufacturer on Wednesday.
Bob Johnson, then chief executive officer, said at the time that the orders had made DAE into an aircraft-leasing and finance provider that would “make the world sit up and take note”.
“We never comment on contracts with our customers,” said Stefan Schaffrath, a spokesman for Airbus in Toulouse, France. A spokesman for Chicago-based Boeing said the company doesn’t comment on its discussions with customers. A DAE spokesman didn’t return phone calls and an e-mail seeking comment.
DAE is close to selling a minority stake in aviation- services company StandardAero as it seeks to raise funds, one of the people said. DAE is in talks with two interested bidders over a stake that’s less than 50 percent, with a view to selling the remainder in four to five years, the person said.
Deutsche Bank is advising on the sale, the person said. A Deutsche Bank spokesman said the bank doesn’t comment on market speculation.
DAE bought US-based aircraft-maintenance groups Standard Aero and Landmark in July 2007 for $1.9bn and later merged the two companies.
DAE was founded by the Dubai government in 2006 with a $15bn capital base. The company originally had six divisions - DAE Capital, DAE Services, DAE Manufacturing, DAE Airports, DAE Engineering and DAE University. It has since shut all units except for leasing division DAE Capital and DAE Manufacturing.
DAE shareholders include Istithmar World, a subsidiary of Dubai World, the government-owned company that is seeking to restructure $24.9bn of debt, and Dubai International Capital, which has also has asked lenders for an extension on some debt.
This is so typical of Dubai. Grandiose plans fizzle away to nothing. Near term high return on investment is all they think about but with high return, comes high risk. Albeit DAE and Mubadala Aerospace started off about the same time, DAE should have done what no one else in the region is doing, and that is to invest in the pursuit of advanced concepts; what's referred to as disruptive aerospace technologies. DAE should have and still has the chance to focus on the investment of empowerment, capacity building and infrastructure development with an aspiration to produce breakthrough technologies always delivers a higher return on investment - even with a less than 5% success rate.