DAE cuts Airbus and Boeing plane orders by $8bn

Dubai Aerospace Enterprise has cancelled orders for 50 aircraft from Airbus and Boeing, the two manufacturers' orders websites show.

Fifteen Boeing Dreamliners were included in the cuts.

Dubai Aerospace Enterprise (DAE) has cancelled orders for 50 aircraft from Airbus and Boeing worth an estimated US$8 billion (Dh29.4bn), the two manufacturers' orders websites show. The leasing company last month cut orders for 25 long-range, high-density commercial jets, Boeing's orders website revealed. Those orders comprised 15 Boeing 787 Dreamliners and 10 777-300 extended-range aircraft.

In addition, DAE has cut 18 orders for narrow-body A320 planes and orders for seven A350-900 mid-size jets from Airbus, the European plane maker's figures for last month show. "I have no comment on that," said Mohammed al Zarooni, the chairman of the state-owned DAE. Airbus and Boeing declined to comment on the cancellations. A bullish DAE ordered a total of 200 aircraft from the two makers at the height of the aviation order boom in 2007. The company was in an expansion phase and was said to have $15bn of backing.

The company, which also has engineering and IT products divisions, still has 91 planes on order at Boeing and 75 at Airbus. Those orders are worth an estimated $19bn at list prices, although major customers such as DAE traditionally receive discounts. Some of the aircraft on order were due to be delivered this year, but these are believed to have been delayed. DAE already has about 35 aircraft, which it has leased out to 15 airlines worldwide.

The Dubai company has been at the centre of speculation all summer about its plans to reschedule its orders and possibly divert orders to Emirates Airline. Emirates is already the largest purchaser of long-range jets and this summer it committed itself to another $25bn worth of aircraft including 30 Boeing 777-300ERs, 32 Airbus A380 superjumbos and engines from Engine Alliance. Saj Ahmad, an aerospace analyst based in London, said DAE probably escaped the standard cancellation fees as a result of Emirates's recent purchases.

"It's highly likely the recent A380 and 777-300ER orders from [Emirates] are in part a substitute for DAE's cancellations," Mr Ahmad said. "Emirates is too important a customer for Airbus or Boeing to ignore and they will have worked hard to minimise the cancellations but give Emirates aeroplanes that they want. "Cancellation fees are usually confidential but it is clear that losing just 50 orders out of 200 will have been mitigated by trading over deposits to Emirates's A380 and 777-300ER orders."

DAE's buying spree at the Dubai Airshow in November 2007 took place at the height of the global aviation boom. Since then, credit has tightened dramatically and many airlines have become cautious about growth. DAE Capital, DAE's leasing division, in the past 18 months announced two new customers, Turkish Airlines and Garuda Indonesia. It also announced financing from Citibank and the Export-Import Bank of the US.

When DAE was launched in 2006, it outlined investments in six aviation-related sectors but its business plans have come under review during the global financial crisis. Its academic wing has been shut and its airport investment division was also wound down after an unsuccessful bid in 2007 to buy Auckland Airport, New Zealand's busiest air centre, after experiencing unexpected resistance from the New Zealand public. It no longer lists manufacturing as one of its target areas.

DAE's engineering division was launched in 2007, the year the company acquired the aviation service providers StandardAero and Landmark Aviation from the Carlyle Group for $1.9bn. DAE's shareholders are all state-backed Dubai companies: Istithmar World; Emaar Properties; Dubai International Capital; Dubai International Financial Centre; Amlak; and the Dubai Airport Free Zone. * with Reuters [e-mail]