Dubai Aerospace Enterprise (DAE) plans to pursue airport development and management contracts throughout the Middle East and abroad.
DAE was established last year by the Dubai government and private investors with six business units, including aircraft maintenance, manufacturing and leasing. The airport unit began work early this year after hiring Kjeld Binger, formerly the executive vice-president at Copenhagen Airports, as the unit’s chief executive. 
Binger (pictured) says he spent his first 100 days at DAE identifying potential targets and doing due diligence on airport projects and is now ready to start making acquisitions.
“The first thing I won’t do is jump in an airplane and buy an airport. You need to first build up an experienced team,” he says. “It requires a lot of specialist knowledge to do due diligence on existing airports and even green-field sites. We are now at the point where we can look at things. We’re in the process of screening the market and identifying targets.”
Binger says his 10-person team is searching the world for airport development opportunities, but it is hard to say when DAE will make its first move because “acquiring airport operations is in some degree opportunistic”. Judging by what DAE’s maintenance division has already done, however, when DAE Airports is ready to make a transaction it will not be small. DAE’s maintenance team was set up in the third-quarter last year and a few months later acquired one of the world’s largest aircraft maintenance firms in SR Technics.
Acquiring airports
“The nature of this business is different,” Binger says. “Acquiring airports is really a cross-section of the industry. Airports are where passengers, cargo and maintenance meet up.”
DAE is interested in pursuing projects at existing airports as well as green-field sites. Binger says this is unusual in the airport development business because firms generally focus on one or the other. “We have a more diverse view and want to attack the airport market in general. We believe in horizontal and vertical integration.”
Binger’s team is now focused on potential airport development opportunities in the east, where traffic growth is generally in the double digits. “We have an eye on what’s happening in the Middle East, in the Indian subcontinent and what’s happening in China,” Binger says.
In India, DAE is looking at secondary airports because development and privatisation projects at the country’s major metropolitan airports have already started. “There are at least 30 airports in India that will need infrastructure development. That is where we see the market,” Binger says.
He also sees opportunities in China, again mainly in secondary markets: “They really need that infrastructure. It’s a bit like India.”
China focus
Binger adds that major Chinese cities have the funds to upgrade their airports without foreign assistance but rural cities do not have as much money and will need help from overseas firms. There have been very few airport privatisation projects in China so far but Binger expects that will change: “The issue is adequate control. However, I do believe the civil aviation authorities in China are loosening up their control issues. I think there will be opportunities in China. I worked in the China market for five years. I’ve seen developments in the market and how authorities are getting more used to foreigners being involved in the airports and pushing development through.”
While DAE is keen on China and India, it also plans to pursue a big role in developing airports in its home country, the United Arab Emirates, and the rest of the Middle East. In particular DAE is interested in playing a big role in developing Dubai World Central, a new mega-sized airport being constructed in Dubai that will eventually be able to handle 120 million passengers per year.
“We hope the government will take benefit of this new organisation and involve us in this new development,” Binger says. “We’d like to be involved in the design and how we can turn this into a real unique masterpiece not only for 21st century but the 22nd century.”
DAE and Dubai Airports Company (DAC) have already signed a memorandum of understanding to work together on the Dubai World Central project but Binger says the two companies still need to sit down and decide a way forward. So far only preliminary contracts for the new airport have been awarded, including for the first runway and initial small passenger and cargo terminals which are slated to open in early 2009. Binger expects major contracts will be negotiated later this year and hopes DAE will help DAC manage the project and bring in the world’s best designers and architects.
The travel experience
“Our vision is to increase the quality of the travel experience,” Binger says. “The whole experience of handling passengers from arriving at the airport city to getting onto the airplane at the tarmac needs to change. Our vision is to try to change things in a more dramatic way. We feel this airport in Dubai can be a real landmark in this vision. We need to find a new way we process passengers in airports. Unhappy passengers are unhappy customers and unhappy passengers don’t spend money.
“We need to make travelling through airports a seamless experience. We need to break down barriers between airports and airlines and come up with a common goal for our common customer, the passengers.”
DAE will also be based at Dubai World Central, which besides a massive airport will include a business park, a logistics centre, a golf resort, and residential and commercial zones. “The idea is in two to three years time we’ll move to Dubai World,” Binger says. “We’ll have our headquarters and our university there and the businesses we have been acquiring, including maintenance, engineering services, capital and airports. We [airports] will be a small group but I hope we’ll have one of the more valuable portfolios with assets across the world but managed in Dubai.”
Dubai World Central is expected to become the world’s busiest airport by 2020 and will also be the world’s largest “airport city”. Binger says the big advantage of Dubai World Central is the almost unlimited space it has for growth: “We have up to 140km2 for Dubai World. That includes up to six runways. London Heathrow and Copenhagen have only 12km2. Hong Kong had to blow up an island to build its airport. Narita is built on a manmade island. Here we have a piece of desert.”
DAE is also looking at pursuing airport projects in several other Middle Eastern cities including Doha and Bahrain. But while several Middle Eastern countries would like to match Dubai, Binger says there can only be one Dubai World Central. “You see a lot of movement in the region related to airports and airlines. At some point there will be a settlement. The catchment area isn’t so big,” Binger says. “We have the leading edge now in developing Emirates [the airline], Dubai World Central and Dubai International. It will be a hard one to beat in my opinion.”
Source: Airline Business
