Mubadala boosts ties with Boeing

Ivan Gale

• Last Updated: November 16. 2009 10:41PM UAE / November 16. 2009 6:41PM GMT

A model of a Boeing plane on display at the airshow highlighted the US company’s important agreement with Mubadala Development. Paulo Vecina / The National

Mubadala Development signed a wide-ranging strategic agreement with Boeing, including aerospace manufacturing, signalling that the US aircraft maker is closer to becoming a customer for the investment firm’s composite materials.

As well as manufacturing, the agreement signed at the Dubai Airshow yesterday covers engineering, research and development, commercial maintenance, repair and overhaul, military maintenance, pilot training and personnel development. It spans civilian and military aerospace fields.

A deal for Mubadala to make composite aircraft parts for Boeing would help cap one of the fastest industrial development plans in the aerospace sector, said Jim McNerney, the chief executive of Boeing.

Mubadala, the Abu Dhabi Government’s strategic investment arm, aims to become a “Tier 1” supplier to aircraft makers. The tier comprises an elite group of between 10 and 12 companies.

“They are moving to become a strong Tier 1 player within a decade, and that is fast compared with how long it took Japan and China and others,” Mr McNerney said.

Boeing plans to help Mubadala manage the risks associated with such a rapid expansion, he said. “We are in the process now of choosing those parts of the aeroplane which we think are less risky on one hand, but on the other hand would transfer a lot of technology as well.”

Mr McNerney said Mubadala would probably be used to produce parts for existing Boeing aircraft, which include the 737, 777, 787 and 747 models.

“It would likely happen on the component level on existing planes and the next step would be to participate in new (aircraft) developments,” he said.

Boeing joins Airbus and other European firms that have signed up Mubadala to make high-end composite aircraft parts from its subsidiary, Strata Manufacturing.

Strata is building a plant next to the Al Ain Airport and expects to deliver its first parts, such as ailerons and flap track fairings, by the end of next year.

Homaid al Shemmari, the associate director of Mubadala Aerospace, said the agreement would present “mutually beneficial opportunities for both parties”, and would also help Abu Dhabi make the transition to a knowledge-based economy as part of its plans to diversify from oil revenues.

European firms have already signed more than US$2 billion (Dh7.34bn) in work orders from Strata, attracted by the UAE’s dollar-pegged cost base and Strata’s long-term growth plans.

Mubadala’s aerospace strategy is also heavily reliant on building up maintenance capabilities, which can account for 70 per cent of an aircraft’s total costs over its life.

Boeing is negotiating with Mubadala on a plan to replicate Boeing’s Saudi aircraft maintenance business, Al Salam Aircraft, in the UAE.

There are indications, however, that Mubadala might prefer something more tailored to the Emirates rather than copying a model designed for another country.

Mubadala is already working on an aircraft maintenance joint venture with another US aerospace company, Sikorsky Aerospace Services, in the Emirates, covering helicopters and aeroplanes.

Yet another part of the Boeing deal revolves around engineering. Mr McNerney said Boeing would be a partner in Mubadala’s efforts to build new centres of excellence in the emirate for aerospace design and development, research and engineering.

Boeing, based in Chicago, is a major supplier of civilian aircraft to the UAE carriers Emirates Airline, Etihad Airways and flydubai. Its military division also has a long history with the UAE Armed Forces, including the sale of Apache attack helicopters and a pending deal for C-17 cargo planes.

Through offset obligations from previous deals in the Gulf, Boeing has helped start up academic institutions, aircraft making firms and a language school in the region.

igale@thenational.ae