After leaving the US for the Middle East last year, DAE chief executive Bob Johnson has already made an impression on the region's aviation sector. WORDS: Rob Morris
Tracking down Bob Johnson is never easy. As CEO of Dubai Aerospace Enterprise, Johnson spends most of his time jetting round the world to oversee the aviation holding company's various projects. The middle-aged American admits it's a demanding role with extremely long hours and little respite.
"I have to make a travel schedule for almost the next 18 months to ensure I get to the right places," he says. "We work 24/7 in some form simply because it's a global business." But despite the gruelling schedule, Johnson relishes the challenge of developing an established aviation group. "People operate at their best when the pressure is higher," he says. "If there wasn't any pressure the job would be boring."
Having helped launch the operation in February 2006, Johnson has had more than a year to adjust to the role. His main responsibility is to oversee the group's six subsidiaries, which cover the manufacturing, aircraft leasing, airport development and engineering industries. Through DAE University, the company also offers aviation-related education to local and international students, and technology products via its services division. According to Johnson, DAE was formed to capitalise on the Middle East's developing aviation industry.
"The most significant growth in the sector, whether it be airports, plane deliveries, takeoffs and landings, passenger travelling or number of aircrafts leased, is in this area. It is a global industry that travels and transcends all regions, so there's no reason it shouldn't be here."
While Johnson oversees the whole operation, he has managing directors for all other subsidiaries that regularly report to him. Like Johnson, most of them came out of retirement to help establish DAE and experience new cultures in the Middle East following extensive careers in the industry. "I like living here - it's an exciting place to be and a learning experience for all of us," Johnson says. "There are six new business and shareholders that have never worked together. For many of us it's a new country with new food and cultures, which adds spice and excitement to the pressure." With the government and Emirates Group bankrolling the operation, Johnson was keen to get DAE up and running as quickly as possible. To that end, he and his team wasted little time getting investors on board and developing their respective divisions.
"The strategy was like anything in Dubai: Let's get it done quickly," Johnson says. "Rather than start Greenfield projects and learn along the way we started out with a recognised team that has almost 400 years collective experience. Because it was a good idea and market, we were able to attract investors who have helped make Dubai a success in this short period." Since its inception, DAE has expanded through acquisition. In August, the group bought aviation service providers Standard Aero and Landmark Aviation from the Carlyle Group for $1.9 billion. When announcing the deal, Johnson said the maintenance, repair and overhaul companies would enable DAE to take advantage of continued growth across the industry.
The first objective following the deal is to integrate Standard Aero and Landmark Aviation into DAE's engineering subsidiary. Once achieved, Johnson and his colleagues will have control of a global aviation services network comprising 12 MRO operations across the US, Canada, Europe, Singapore and Australia. They will also be responsible for 14 service and support facilities. Elsewhere, the group offered $2.08 billion for a majority stake in Auckland International Airport three months ago, although recent developments suggest the deal has since been scrapped.
In a joint statement, the Dubai-based group and hub owner Auckland International Airport Ltd said: "In light of recent developments, DAE regrets that, notwithstanding the best efforts of the board of AIAL, the transaction could not proceed in the form proposed".
The airport's board had approved the deal, but it's understood DAE was deterred following the target's failure to publicly back its bid. Shortly after announcing the deal, mayoral candidates for Manukau City Council in New Zealand, which holds a 10% stake in the hub, opposed DAE's takeover plans.
Auckland City Council also refused to offload its 12.8% interest last month after shareholders voted against selling to an outside investor. It's believed airport bosses are trying to revive the deal despite interest from Canada Pension Plan Investment Board, which plans to bid for 49% of shares. Whether DAE is willing to listen is unknown, but Johnson admitted political issues were stalling negotiations before the deal broke down. "The issue of foreign investment is an interesting one because somewhere between 35-40% of the existing shareholders are international. This is a global industry and there are investments in many airports around the world that are foreign, so this is not an unusual transaction. It's actually, bringing extra investment to a public entity that needs to have capital infusion."
Johnson added that mayoral candidates in Manukau opposed the deal to win votes. "Clearly, there are politically timed interest statements from parties that have not been part of the governing board. They are from local cities in New Zealand that, for various reasons, are lobbying for different positions.
"There are clauses in the agreement to protect the local interests, give them [shareholders] adequate numbers of votes and control of the airport. They have the control they want, get to successfully grow the airport and provide returns to shareholders based on using international capital." Despite seemingly ditching the Auckland airport bid, Johnson and his colleagues are still keen to expand through acquisition. The group expects to be involved in the development of Dubai World Central International Airport in Jebel Ali, while the search for new interests is ongoing.
We are not actively involved in a conversation or bidding process and we haven’t given Gatwick any more consideration than we would when looking for a viable airport.
Indeed, DAE is looking at several airports across the Middle East, India, China, Russia and Turkey. Unsurprisingly, Johnson refuses to give names but admits the board is assessing various airports' growth potential. "We have a lot in the pipeline, with at least 15 airport opportunities and there are a number in process." While securing interests in hubs is a priority, Johnson insists Gatwick Airport is not on the radar. In recent months, the group was linked to the UK's largest hub - a rumour that was quickly denied by Johnson.
"We are not actively involved in a conversation or bidding process and we haven't given Gatwick any more consideration than we would when looking for a viable airport," he says. "We have done nothing specific and are not involved in a transaction with Gatwick."
Nevertheless, despite denying any link to Gatwick, Johnson admits he would consider bidding - providing it satisfied the board's investment criteria. "If it met the criteria, we would look at it, but we haven't done any analysis, we haven't been invited to bid and no conversation has taken place with Gatwick. I don't have any information that tells me whether it would be of interest. The only thing I know is it's an airport."
Aside from airport acquisitions, Johnson and his colleagues are keen to expand the other divisions. The aircraft and leasing division's management is set to buy 125 planes for $4 billion in the next five years. To finance the deal, DAE may launch an initial public offering. According to reports, the group is considering sale and leaseback deals with aircraft manufacturers Airbus and Boeing before completing direct purchases in 2012. If the deal goes ahead, DAE will receive single-aisle planes, including Boeing 737-700s, 737-800s and Airbus A320s and A319s. It will also bring in wide-body aircraft such as A320-200s, A350s, 777-200-LRs and 777-300-ERs.
Johnson and his colleagues are also looking at other acquisition opportunities across the group's subsidiaries. "We have some manufacturing acquisitions in process and deals for technology and information businesses underway," Johnson says. "Services businesses are being acquired and integrated and we will continue working on the airports."
When he arrived in Dubai, Johnson was given four years to develop DAE into an established aviation operation. During the past 12 months, Johnson insists the board has already achieved most of its original objectives. It now plans to continue searching for acquisition opportunities while developing the individual subsidiaries.
Johnson also wants to extend his stay in the Middle East beyond 2010. "What we thought we could do in four years can be achieved in a year to 18 months, but we have to be here to make sure it all works. I'm sure at the end of four years I won't want to leave."