Nov. 24 (Bloomberg) -- The United Arab Emirates plans to manufacture its own business jets before the end of the decade and become a main supplier to Boeing Co. and Airbus SAS, as the oil-rich region transforms itself into a global aviation hub.
Mubadala Aerospace, the Abu Dhabi state-owned maker of aircraft parts is looking to team up with companies such as Dassault Aviation SA, Gulfstream Aerospace Corp. and Cessna for their manufacturing and marketing capabilities, Executive Director Hommaid al-Shemmari said in an interview in Dubai. The business jet would seat eight to 14 passengers, he said.
Abu Dhabi, home to about 7 percent of the world’s proven oil reserves, is branching out into aerospace as the country’s biggest carriers, Emirates and Etihad, beef up their fleets to funnel travelers through the Middle East. Emirates has transformed itself into the world’s largest airline by international traffic, and the company announce the largest deal at the Dubai Air show last week.
“You have to have a global ambition and that’s what we have for Abu Dhabi,” Shemmari said in the interview. “By 2030, we want to be one of top five aerostructure manufacturers in the world,” and among the biggest maintenance and repair centers besides Deutsche Lufthansa AG and Air France-KLM, he said.
The Middle East has expanded on its status as an omni- directional hub for long-haul travelers. Emirates is already the largest buyer of Airbus SAS A380 superjumbos and Boeing Co. 777 wide-body aircraft, of which the carrier agreed to buy an additional 50 units for $18 billion at the air show.
Discussions are ongoing to build the business jet, Shemmari said. Mubadala already runs partnerships with Finmeccanica SpA and General Electric Co., and it plans to build a $200 million maintenance facility to service engines of Airbus A380 and Boeing 787 planes.
Any jet developed by Mubadala would face competition from the likes of Gulfstream, a unit of General Dynamics Corp. Textron Inc.’s Cessna, Dassault Aviation’s Falcon, Embraer SA, and Bombardier Inc., maker of the Global Express and Learjet aircraft.
Business aircraft run in size from the four-passenger Learjet 45XR to Gulfstream G650, a long-range luxury aircraft with 7,000-nautical mile range that debuts in 2012, to the Boeing Co. and Airbus single-aisle 737 and A320 models that can be outfitted for 50 business passengers or more.
Mubadala also wants a partner for Strata, which makes composite parts for Airbus 330 and 340 planes at its factory in Al Ain and aims to start making Boeing plane parts. Strata’s order book stands at $2.7 billion, Shemmari said.
Strata’s composite manufacturing plant is an example of Mubadala’s strategy, said Shemmari. Abu Dhabi has the cash to invest, the cheap energy needed to power manufacturing projects, is tax-free and is pegged to the dollar, he said.
In two years, Strata is set to produce flap track fairings for A380 and A350 aircraft, and spoilers for the long-range aircraft. Strata offers “very competitive pricing” and “equivalent if not better” quality than previous suppliers, said Lee London, vice president of strategy and marketing at Airbus parent European Aeronautic, Defence & Space Co.
“Because they’ve made such good progress we are in a position where we can discuss more interesting, high-end, complicated, critical parts,” London said.
In the long-run, Mubadala would split composite parts manufacturing to 35 percent for Boeing and Airbus each with the remaining 30 percent for other companies, including military.
“When you look at the supply chain that Airbus and Boeing have today, they are changing their models, they don’t want to make everything themselves,” said Shemmari. “They want to bring more reliability into the supply chain.”
Flush with oil money and faced with depleting resources, Abu Dhabi aspires to diversify its economy by investing in industries including aerospace. Mubadala Aerospace’s parent company generated 20 percent of its revenue from aerospace in the first half. Mubadala Development Co.’s revenue in the period grew 70 percent to 13.6 billion dirhams ($3.7 billion).
“I’m a lucky guy,” Shemmari said. “I don’t have to worry about that. I build a business case. I go to my bosses and say ‘invest.’”
Abu Dhabi has outlined a plan to invest $500 billion in industry, tourism and culture by 2030 and to increase non-oil revenue to 64 percent of the economy from 41 percent in 2007.
To be sure, not all of the region’s aerospace ambitions have turned out as planned. Dubai Aerospace Enterprise had aimed to compete in the global aircraft leasing industry in 2007. It ordered 100 planes from Boeing and another 100 from Airbus within a single week at the Dubai Air Show in 2007, only to end up canceling every Airbus order and most of Boeing’s.
Financing may not be as problematic as finding skilled labor in a region that is known for minimal spending on research and development and importing foreign workers.
By 2030, Abu Dhabi’s population is forecast to grow to about three million from almost one million today. By then, GDP could double, with oil and gas contributing 36 percent while aerospace participates with 2 percent and 10,000 jobs, half of them filled by U.A.E. nationals, said Shemmari.
“I want to prove that I can bring work, that I can train U.A.E. nationals, bring expatriates, create a team that can deliver on time, on price, on quality,” he said.
--With assistance from Andrea Rothman in Paris. Editors: Benedikt Kammel, Andrew Noel
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