Aviation nation

Dubai's government has ploughed vast sums into many different sectors over the past decade, with the tourism, construction and ICT industries among the main beneficiaries.

However, the emirate's aviation sector has also seen its fair share of investment, and this looks set to continue with the creation of Dubai Aerospace Enterprise (DAE).

With the city prospering like never before as a result of soaring oil prices and an unprecedented tourism boom, Dubai's government recently decided to invest upwards of $15 billion to create its own regional aviation services behemoth DAE.

The company will develop airports, make and sell aircraft components and lease planes to the growing number of Middle Eastern carriers, and will go head-to-head with a number of global aviation giants for regional business.

DAE's airport development arm will compete with established European players such as Fraport AG, BAA and Aéroports de Paris. The new company's aircraft leasing unit will aim to topple US big boys International Lease Finance Corporation, which is owned by the huge American International Group (AIG) and General Electric's GE Commercial Aviation Services.

It is certainly a bold move to try and take the regional business away from the global firms and keep it at home, but is it worth the risk?

"Looking at the growing demand for air travel in the Middle East and Asia, it's not surprising that Dubai has moved into the aviation and aircraft services area," says Nick Whelan, a London-based aviation commentator.

"When you consider that Airbus has decided to set up a specialist Middle East unit in Dubai, it's obvious that aircraft leasing and spare parts production is going to get even bigger over there [in the Gulf] and what DAE will do is to try to take some of that business for itself. I think it has every chance of doing just that."

Given the fact that the Middle East and North Africa will take 58 per cent of wide bodied aircraft deliveries over the next 16 years, and that over half of recent aircraft orders have come from the region, it's easy to see why DAE was established.

The company, which is backed by Istithmar, Emaar Properties, Dubai International Capital, Dubai International Financial Centre, Amlak and Dubai Airport Free Zone, will also benefit a great deal from Emirates Airline's position as a major buyer of aircraft.

Clear intention

"Emirates is up there with the fastest growing airlines in the world, and will presumably do most of its business with DAE from now on, which is already a massive boost for the new company," explains Whelan. "Other major airlines in the region such as Qatar Airways, Etihad and Gulf Air are also big customers for new planes and will surely appreciate having a localised hub for aviation services so close to home."

Rashid Al Malek, DAE's project director claims that Dubai's International Airport alone registered 15 per cent growth last year, handling over 25 million passengers and 1.5 million tonnes of cargo.

Meanwhile, airline passenger traffic in the Middle East is expected to grow as much as 9 per cent annually for the next 10 years, reaching 1.7 billion passengers by 2015, while air freight will grow 6 per cent annually.

Add the fact that most regional carriers are in the process of doubling their fleets as a result of this growth and you have what appears to be a win-win situation for DAE and the Gulf's aviation industry.

"Within 10 years, DAE will become an integral part of the global aerospace industry and a leading player," said Shaikh Ahmad bin Saeed Al Maktoum, president of Dubai Civil Aviation, chairman and chief executive of Emirates Group and chairman of DAE, at the company launch.

"We're putting down a marker for the future and this signals our clear intention to become one of the driving forces of the global economy and reflects confidence in our ability to achieve this."

The emirate's air leasing and finance business will focus on Airbus A380s and A350s as well as Boeing 777s and 787s the most widely used commercial planes in the region and is expected to purchase around 50 wide-body aircraft from Airbus and Boeing over the next four years.

Furthermore, DAE's leasing arm is also expected to offer funding options in the Islamic financial sector to provide regional carriers with increased flexibility.

In addition to its planned greenfield developments, DAE's airport development and operations business aims to extend existing airport infrastructure both regionally and globally, and will look to target the rapidly emerging markets of China and India where air travel is growing at a phenomenal rate. Both countries plan to undertake around 150 separate airport projects over the next decade. As air traffic rises in India Asia's fourth largest economy the country is looking to expand its existing airports and build several more.

According to the Indian Airports Authority, air traffic in the country climbed 22 per cent to just over 60 million in 2005. This staggering growth has led to a number of bids for two of the country's busiest airports in Mumbai and New Delhi, most recently by France's Aéroports de Paris.

As well as focusing on aircraft maintenance, parts making and services DAE will also look to expand into space services, aircraft brokerage, aviation media and events as well as aviation IT systems.

Breeding ground of talent

DAE calculated its market potential through a feasibility study carried out by the Dubai Airports Free Zone Authority (Dafza) and A.T. Kearney, a leading management consultancy which claims that the Middle East and Asia will account for three out of every five wide body aircraft delivered in the next five years.

The group also plans to build an aerospace university and research and development facility in the upcoming Jebel Ali Airport City, offering aviation degrees and apprenticeships. The city will form part of a new airport now being built in Jebel Ali expected to be the biggest in the world.

These aviation-related ventures are expected to provide a further boost for the emirate with government estimates suggesting that around 30,000 new jobs will be created through DAE's activities.

With 8,000 students due to pass through the new university each year, Dubai could well become a breeding ground of aviation and aerospace talent.

As Emirates airline and Qatar Airways give the more established carriers such as Singapore Airways and Cathay Pacific a serious run for their money, as well as the steady growth of other carriers in the region, DAE's creation could well cement the Gulf's position as the aviation industry's global hotspot.

The writer is a Paris-based freelance journalist