Mubadala extends its range with latest financing accord

Mubadala Development, the investment arm of the Abu Dhabi Government, has entered the aviation components financing sector with a US$100 million deal with Air Berlin.

Mubadala Development, the investment arm of the Abu Dhabi Government, has entered the aviation components financing sector with a US$100 million (Dh367m) deal with Air Berlin. Mubadala will provide financing for the purchase of 12 spare engines for the German carrier, it confirmed yesterday. The arrangement was tied to a 10-year engine-servicing contract between Air Berlin and SR Technics, an aircraft maintenance, repair and overhaul (MRO) firm based in Switzerland that is controlled by Mubadala.

Homaid al Shemmari, the associate director of Mubadala Aerospace, said the transaction illustrated the progress on the firm's MRO strategy, which calls for developing SR Technics and another Mubadala affiliate, Abu Dhabi Aircraft Technologies, into leading players in the maintenance business even as the industry is dragged down by the economic downturn. "This innovative new financing service is a timely response to the market's need for liquidity and will serve as a strong enabler to the growth of our expanding global MRO network," he said.

The deal provides SR Technics with the ability to arrange financing on behalf of its customers and bring in more maintenance deals. Ulf Huttmeyer, the chief financial officer of Air Berlin, said the off-balance-sheet financing agreement with Mubadala "makes us one of the first airlines in Europe to directly access this source of funding and opens the opportunity to grow this relationship". The transaction will allow the carrier to reduce its net debt and capital employed on its engines, he said. "Over the contracted period, double-digit million dollar savings can be generated."

The long-term maintenance deal between SR Technics and Air Berlin covers engine care for more than 120 Air Berlin aircraft and "demonstrates we are able to provide true added value to our customers with new, industry-leading solution packages offered through close collaboration between SR Technics and Mubadala as our parent company", said Bernd Kessler, the chief executive of SR Technics. SR Technics concluded an active year in which it announced a plan to build maintenance hangars in Malta, signed long term contracts with easyJet and Etihad Airways and closed its Dublin facilities following the lose of two major contracts there.

Mubadala is also a major shareholder in an Italian aircraft manufacturer and recently created a company to make composites aerostructures in Al Ain that includes Airbus as a major client. @Email:[e-mail]