Dubai investing $15 billion to be big air-industry player

Prospering from near-record oil prices, Dubai plans to invest $15 billion to create a company that will lease planes, develop airports and make aircraft parts to tap into growing demand for air travel in the Middle East and Asia.

The family-ruled sheikhdom, which owns the largest Arab airline, may buy as many as 50 wide-body aircraft from Boeing and Airbus during the next four years, said Rashid Al Malik, project director for the planned company, Dubai Aerospace Enterprise.

"We want to be a very important player in this region and the world in a short time," Al Malik told reporters Sunday.

Dubai seeks to rival the two largest aircraft lessors, International Lease Finance Corp. and GE Commercial Aviation Services. The airport development unit will compete with BAA, Aéroports de Paris and Fraport for projects in India and China.

"It's not surprising Dubai is moving into these activities, because the whole focus of the aerospace industry has shifted eastward in recent years to the Middle East and Far East," said Doug McVitie, managing director of France-based forecasting firm Arran Aerospace.

Mideast governments including Dubai, Abu Dhabi and Qatar have ordered as many as 300 aircraft for delivery during the next five years, and Dubai Aerospace will order its first aircraft this year, Al Malik said. Dubai owns the airline Emirates.

Government-owned companies such as Dubai International Capital, Istithmar and Dubai Airport Free Zone Authority will help finance the new leasing and development business, Al Malik said.

Dubai has been working to become the region's biggest transport and commercial center and lower its dependence on oil revenue.

"These guys are basically taking oil money and trying to convert it into a long-term value-added business," said Richard Aboulafia, vice president of Fairfax, Virginia-based Teal Group. "That's not dumb."

Dubai International Capital, one of the companies financing Dubai Aerospace, bought Britain's Doncasters Group for $1.2 billion in December. The company makes parts for Airbus' A380 plane.

The new air-leasing and finance business will focus on Airbus A380 and A350 planes, and Boeing 777s and 787s in the Mideast and Asia. Dubai Aerospace will be a holding company with six subsidiaries involved in 14 industry segments, including aircraft maintenance, parts-making and services.

Dubai plans to use the Doncasters purchase to buy other companies in the aerospace and turbine-engineering industry, then sell as much as 40 percent of the shares to the public in 2009, Dubai International Chief Executive Officer Sameer Al Ansari said in December.

Dubai Aerospace is in talks with Airbus, Boeing and other plane makers about building components for aircraft, Al Malik said.