Firm pulls out of Dubai airport project

South African firm Murray & Roberts withdraws from Dh1.9bn project to build Dubai International Airport Concourse 3.

Plans to build the third concourse of the Dubai International Airport will continue to move forward despite a group of builders pulling out of the project.

A consortium of builders including Murray and Roberts of South Africa and Leighton of Australia have pulled out of a Dh4.9 billion (US$1.33bn) contract to build a third concourse at Dubai International Airport.
It represents the third major project loss for Murray and Roberts in the UAE since December as clients seek to renegotiate contracts to take advantage of declining construction costs and a continuing project finance crunch. The joint venture, to provide facilities for the new Airbus A380 aircraft, also included Al Habtoor Engineering and Takenaka. It fell apart after four months of negotiations, following the award of the contract in December.
The consortium and the Dubai Department of Civil Aviation (DCA) concluded "a mutually acceptable contract is not currently possible", said Murray and Roberts.
The DCA confirmed the news and said Concourse 3, a vital piece of infrastructure to serve Emirates Airline's growing fleet of Airbus A380 superjumbos, would still be delivered on time in 2011.
It did not explain whether new contractors had been appointed or what steps it planned to take going forward. At present the airport has facilities at Concourse 2 to handle the planes.
"HMRT is one of a number of contractors involved in the construction of Concourse 3 at Dubai International and this development will not impact the completion date, scheduled for the end of 2011," the DCA said.
This is the latest setback for several contractors in the consortium, and mirrors other examples in the construction industry where contracts have been renegotiated or cancelled.
Al Habtoor Leighton Group, a joint venture between Leighton International and Al Habtoor Engineering, stopped work in December on a Dh2.9bn deal to build the Trump International Hotel and Tower - also in partnership with Murray and Roberts - after Nakheel decided to suspend the project.
In January, Murray and Roberts said a contract had been terminated with Nass Corp of Bahrain to build the Salam resort in Bahrain. Two months later, the firm also lost its $525.5m contract for the construction of Tameer Towers in Reem Island. Concourse 3 is being built for the near-exclusive use of the Airbus A380, which requires special facilities, including two contact gates for boarding.
At the new concourse, 18 of 20 aircraft stands will accommodate the giant aircraft, of which Emirates Airline has four in operation and another 54 on order.
An Emirates official said the carrier had full faith the facility would still be ready on time. "Concourse 3, with dedicated contact gates for A380 aircraft, is important for our future operations," she said. "We keep in close dialogue with Dubai Airports on its development, and are confident it will be completed as planned." Al Habtoor Engineering, a Dubai company, and Murray and Roberts each have a 40 per cent stake in the joint venture, while Japan's Takenaka has 20 per cent.
This latest contract loss comes as international construction and engineering companies struggle to fund their day-to-day operations while trying to overcome continuing late payment problems.
On Wednesday, W?S Atkins, the UK's largest engineering and design company, announced that delays in payments on its Middle-Eastern projects had forced the company to use £25 million (Dh136.9m) of its own cash to keep operations running during the past three months.
The firm, which designed Dubai's Burj Al Arab and the delayed Trump International Hotel and Tower, recently made 170 of its Dubai staff redundant and laid off 1,200 workers worldwide as a result of the global crisis
"The UAE has some very significant contractors. They will be able to withstand difficult conditions. But there are some contractors who are hurting immensely," said Sachin Kerur, the head of the Dubai office for Pinsent Masons, a law firm.
While some projects have been slowed to allow clients to find funding, several real estate developers and contractors are being forced to lengthen payment periods.
"We have to manage the business, try to keep it afloat. If that means requesting our supply chain to extend further credit or longer credit terms to help us manage it, then that's what we have to do," said Robert Goldie, the commercial director of Al Jaber Engineering and Contracting.
"We are stuck in the middle, between developers and the supply chain." Riad Kamal, the chief executive of Arabtec Construction, the largest construction firm in the UAE by market value, said he believed developers were likely to continue to be late on their payments through this year.
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