Abu Dhabi: Cleared for take-off

Although it is a relatively newcomer to the local economy, Abu Dhabi’s aerospace industry is proving admirably nimble in its development. As part of the emirate’s long-term development plan, Economic Vision 2030, which was released in early 2009, policy experts highlighted aerospace as one of the many areas in which they envisage future growth, with this expected to play a key role in efforts to diversify the economy away from its traditional mainstay, hydrocarbons.

“Abu Dhabi already has the core of infrastructure required to develop a successful aerospace sector. The emirate will concentrate on developing its capabilities in the manufacturing and maintenance of civil and military aerospace equipment and parts, defence electronics and other equipment,” Vision 2030 states. “The emirate intends to build on its existing aircraft maintenance business to become a world-class player in the maintenance, services, repair, overhaul and parts manufacturing segments.”

In early February, Abu Dhabi showed that it has a strategy to turn that vision into reality. Mubadala Aerospace, a unit of government-owned investor Mubadala Development, announced plans to merge its two civil aircraft maintenance companies. The two businesses involved are Abu Dhabi Aircraft Technologies and Switzerland-based SR Technics, and details regarding the new entity are expected to be announced in the coming months.

For Abu Dhabi’s long-term diversification – as well as Mubadala’s medium-term goals – the move could be a very profitable one, as industry trends augur well. With the rapid growth of Gulf carriers, the maintenance, repair and overhaul (MRO) industry is expected to grow by 6% per year in the region until 2020, making Mubadala Aerospace’s goal of becoming the world’s third-largest MRO company – and the largest non-airline-affiliated provider by 2015 – all the more achievable.

Mubadala has set its sights on expansion, firstly in the Asia-Pacific region (due to its impressive growth rates) and then North and South America. Its strategy has still to be finalised as the company is evaluating the correct approach for each region, which could include acquisitions, joint ventures and the creation of new entities.

Meanwhile, another one of Mubadala Aerospace’s businesses, Strata – a components manufacturing business based in Al Ain – is also garnering attention in the international aerospace market. In December 2010, one year after completion of the facility, a new aircraft parts plant dispatched its first Airbus A330 wing parts, called flap track fairings. The contract is part of $2.7bn in orders Strata has secured from Airbus and other companies. Things are looking good for the firm thanks to the 10-year contracts it has signed with industry heavyweights such as Airbus, Alenia Aeronautica of Italy and Austria’s Fischer Advanced Composite Components.

Despite it being early days, the plant is expected to become profitable within five years and deliver high-margin returns from that point on. Strata is targeting the composite parts market, which is estimated to be worth $35bn a year, and industry forecasts point to a bright future given the increasing use of lightweight, durable materials in commercial aeroplanes. It is for this reason that the company has set itself the targets of becoming one of the world’s top 20 composite aerospace parts suppliers within the next five years and of reaching revenues of $1bn a year by 2020. Given the figures involved in these transactions, it is clear why the emirate selected the aerospace sector to play a major part in its future economy.

Of course Abu Dhabi has plenty of hard work ahead before it can rival established aerospace centres like Montreal, Seattle or Toulouse, but the progress to date demonstrates that when Abu Dhabi sets its mind to developing a new sector, it can succeed, thanks to prudent planning and access to financial resources. For other sectors, meanwhile, a blooming aerospace industry is expected to open up further opportunities in areas including technical services, education and aviation-related finance.