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Tue 25 Sep 2007 01:22 AM

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Dubai nears $1.5bn aircraft deal

Dubai Aerospace Enterprise to kick-start its plane leasing business with purchase of $1.5bn of aircraft.

Dubai Aerospace Enterprise (DAE) is close to agreeing the purchase of $1.5 billion of aircraft, kick-starting its plane leasing business to compete with global players such as GE, a top executive said.

DAE, which this month dropped its $1.8 billion bid to take over New Zealand's Auckland International Airport, is in talks with Boeing and Airbus about buying as many as 125 aircraft for delivery from 2010, Bob Genise, chief executive of DAE's aircraft leasing unit, said in an interview.

The unit, DAE Capital, may order some of the aircraft next year, Genise told Reuters on Monday.

Family-ruled Dubai is capitalising on its experience in developing state-owned Emirates into the world's seventh-largest international carrier in 22 years, seeking to start an aircraft leasing business to tap passenger travel and freighter demand from Asia to the Americas.

"The global needs for aircraft are staggering," Genise said. "We will be doing business globally."

Rivals in the business include GE Commercial Aviation Services and International Lease Finance Corp.

DAE's first step will be agreeing during the next two months to buy 21 second-hand passenger planes - including Boeing 737s and Airbus A320s - from an "aerospace investor" which will keep the aircraft in its fleet, Genise said.

DAE, which Dubai set up last year, is also close to agreeing the purchase of eight aircraft on a leaseback basis, where it rents them to the company from which it bought them, Genise said. He declined to identify the firms. DAE will finance the acquisitions by borrowing about $1.2 billion, Genise said, declining to identify banks. In all, DAE may borrow about $4 billion to finance about $5 billion of aircraft acquisitions during the next five years, he said.

The company aims to have a fleet that is about 70 percent composed of single-aisle aircraft - Airbus A320s and A319s and Boeing 737s - and the remainder wide-body, such as Airbus A330s and A350s and Boeing 777s and 787s, Genise said.

DAE is also interested in Boeing's 747-8 freighter.

"Our aim is to have about 30 aircraft on the books by the end of the year," Genise said. "Then, we will have an order book from the manufacturers for long-term growth."

The smallest aircraft, the A319, costs about $60 million, and the most expensive, the 747-8 freighter, almost $300 million, according to list prices.

DAE expects leasing companies' 25% share of global aircraft ownership to grow as airlines and carriers look for alternative ways to finance fleet expansion and replacement.

The company's biggest customers are likely to be in Europe, followed by Asia-Pacific and the Middle East, Genise said. The Americas may account for between 10% and 15% of the aircraft it rents out.

Middle East carriers such as Emirates, Qatar Airways and Abu Dhabi-based Etihad Airways have driven global aircraft orders in the last few years.

Arab carriers have ordered $80 billion of planes during the last three years, of which $32 billion was announced at the Paris air show in June, according to the International Air Travel Association of 240 airlines.

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