Dubai Aerospace Enterprise (DAE) cancelled US$2.8 billion (Dh10.29bn) worth of aircraft orders at Boeing as the company continued dramatically scaling down its leasing business.
According to estimates from the aircraft valuation company Avitas, the true value of the planes would be about $1.6bn after standard industry discounts.
The cancellations of 35 single-aisle 737 jets comes on the heels of similar order cancellations with the European plane maker Airbus as well as the departure of Robert Genise, the executive who created DAE's leasing business.
"Boeing and Dubai Aerospace Enterprise have reached an agreement to cancel the remaining … 737s on order," Boeing said. "The cancellation is reflected on Boeing's orders and deliveries website. DAE has now 21 Boeing unfilled orders."
The remaining orders are for 15 747-8Fs and six 777s.
DAE, which took on large amounts of debt to finance its operations and aircraft purchases, began scaling back this year, cancelling $4.7bn of aircraft orders at Airbus and Boeing. The company's total publicly disclosed debt is about $2.7bn, according to Bloomberg News figures. $500 million term loan and a $225m revolving credit facility come due on July 23, the figures show.
Jens Flottau, an aviation journalist as well as a commentator at The Window Seat blog, speculated that DAE's troubles were exacerbated by the global downturn.
"Its shareholders no longer have the money to invest into aerospace," he said. "It is unlikely that DAE's fortunes will change soon."
DAE made a splash in 2006 when it was introduced as a $15bn aircraft leasing and services company to complement Dubai's airport development boom. It placed a blockbuster aircraft order at the 2007 Dubai Airshow, committing to buying 200 new aircraft from Boeing and Airbus for tens of billions of dollars.
But as the downturn forced airlines to cut back their growth plans, conditions became increasingly difficult in the aircraft leasing business. Today, DAE's leasing customers include Virgin Blue, Emirates, Easyjet and Kingfisher.
DAE initially opened for business with six divisions focusing on various aviation fields.
It briefly operated an aviation education unit in Dubai, while in 2007 its airport investment division made an unsuccessful bid to acquire a majority stake in Auckland Airport.
DAE's shareholders include the Investment Corporation of Dubai, Dubai International Capital, DIFC Investments, Emaar, Istithmar World and Dubai Silicon Oasis.
