Dubai Aerospace Enterprise flying high

Acquisition of Dublin-based company Awas makes DAE one of the world's largest aircraft lessors

Moody's changed its outlook of plane lessor Dubai Aerospace Enterprise to stable from 'rating under review'. Courtesy of DAE

At the Dubai Airshow this week representatives of the aircraft leasing company Dubai Aerospace Enterprise (DAE) will be in attendance.

DAE is one of the most compelling examples of the UAE's ability to develop top global firms in a short space of time. The firm's ambitions were to establish a presence in the broader aerospace sector and to further develop and promote Dubai as a global aviation hub when it was founded in 2006 and started doing business in 2007.

Much has changed since then although those core values remain and, in terms of its presence, it has easily achieved its aim.

"DAE today is widely regarded as a success story," Sheikh Ahmed Bin Saeed Al Maktoum, the firm's chairman, tells The National. "Within just 10 years, DAE has established a global brand in the aviation industry and is developing strategies and mandates to build further upon its past successes."

The company was founded by the Investment Corporation of Dubai and other shareholders "with an objective to further develop the aviation sector in Dubai after the long-term success of Emirates Airline, dnata, Dubai Airports and Dubai Duty Free", says Sheikh Ahmed.

Khalifa Al Daboos, the managing director of DAE, adds: "The initial investment of over US$1 billion came from the initial shareholders. It was used to acquire some divisions and organically grow other divisions. Investment today is provided by the current shareholders."

Following the takeover of Dublin-based Awas in August, the company is now one of the biggest aircraft lessors in the world. "The acquisition of Awas has allowed DAE to triple the size of its leasing business and has propelled it into the top tier of competitors," says Mr Al Daboos. "This scale allows DAE to present more effective solutions to clients and to better partner with aircraft manufacturers and other suppliers to provide meaningful solutions to our airline customers."

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With the general consensus being that the focus of the aviation industry is moving eastward, the purchase of Awas was a strategically smart move, even if it did seem contradictory.

With the acquisition, DAE has grown its owned, managed and committed fleet to approximately 400 aircraft with a value of more than US$14 billion, with offices in Dubai, Dublin, Singapore, Miami, Bellevue and New York, and 117 airline customers in 57 countries.

The shift in global economic power has placed the Middle East, rather than Europe or the US, at the centre of many of the world’s fastest-growing markets, most important of which are India and China, according to a recent PwC report. The Dubai company has not been slow in moving into such markets.

In May, DAE signed long-term lease agreements for 10 ATR 72-600 aircraft with Alliance Air, a wholly owned subsidiary of Air India and the first airline to start operations under the Indian government's Regional Connectivity Scheme (RCS)

The aircraft are scheduled for delivery throughout the rest of this year and will be used to grow Alliance’s network and serve underutilised or unserved Indian airports as part of the RCS focus on improving regional air access. Alliance Air is one of five airlines selected to serve routes under the RCS.

DAE sees much potential in the development of the subcontinent market and plans further expansion in that region.

"The subcontinent represents one of the largest economic opportunities for aviation," says Firoz Tarapore, the chief executive of DAE. "With a large population base, significant population and economic growth, expansion of the middle class, growth in discretionary income and affordable travel options, we see significant growth and we will pursue growth opportunities, as appropriate."

“The ATR 72-600 aircraft was the most suitable choice for Alliance, noting that the planes were supplied directly from DAE’s order book with the manufacturer,” adds Mr Tarapore.

The ATR 72-600 is a unique, cost-effective aircraft for serving shorter, thinner routes and for linking secondary and tertiary cities to larger hubs, DAE says. Alliance Air is planning to use the ATR72-600 as part of the Indian government’s RCS initiative. The RCS is designed to widen access to the expanding domestic air traffic network in India.

"We expect more carriers in the subcontinent to avail themselves of the RCS initiative, linking more secondary and tertiary cities to make travel even more accessible to and affordable for the general public," Mr Tarapore says.

As this handing over of the torch from advanced to emerging economies continues, how does buying Awas, a major aviation company based in the EU, fit in — and what might the repercussions be when the UK leaves the bloc? Mr Tarapore is relaxed about the issue.

"We see no material effect on DAE. After potential initial dislocation to certain airlines depending on how aviation is handled in Brexit negotiations, DAE sees no permanent discernible impact to lessors over time.

"[We] have a global customer base and can generally compensate for dislocations in one area by expanding efforts in other markets," he points out.

Asked when DAE expected to see a return on that AWAS investment, Mr Tarapore is succinct: "On day one".

Despite the firm moving into the global top 10 of aircraft lessors, he says that even with bigger rivals such as GE Capital (Gecas), the largest, AerCap in second and Avalon + CIT Aerospace in third (DAE is currently in 7th spot, according to AirFinance Journal), the global market is big enough for all.

"Each of our competitors — big and small — offer a unique perspective when providing solutions to airline customers," Mr Tarapore says.

"DAE is uniquely positioned to provide comprehensive solutions that resonate well with current and prospective clients."

The company, he says, "aims to stay relevant as the leasing industry grows and likely consolidates even further".

"This will mean sizing the business to a level that is consistent with our stated goals of being a provider of comprehensive solutions to our airline clients."

In response to widespread conjecture in the aviation industry that the long-haul, low-cost carrier (LCC) model recently established by airlines such as Norwegian will lead to the decline of superjumbo, long-distance passenger travel, Mr Tarapore says the firm is in a holding pattern for the moment regarding its outlook.

"The long-haul LCC model has yet to be proven and DAE needs to see further development and progress to decide on specific next steps.

"We do note, however, that technological advances in aircraft have increased the ability of LCCs to target longer sectors with the same aircraft they use on their traditionally shorter routes and it is reasonable to expect a number of LCCs will try to target longer haul routes between secondary markets or routes linking their primary bases to secondary markets," he says.

"DAE invests in a number of aircraft types that are being used by LCCs for longer haul routes so we would expect to benefit from any successful expansion of the LCC model to a broader range of routes."

Meanwhile, the company’s expansion plans in the UAE, GCC and wider Middle East are being kept close to the CEO's chest: "We will announce those as appropriate," is all he will say.

But he adds: "All of Asia represents an incredible opportunity.

"Many Asian countries are seeing strong economic growth and growing middle classes, which will accelerate growth in the airline sector.

"In addition, many countries in Asia are deregulating their airline industries, which will further support growth. We will be increasing our efforts and investments in the region."