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Dubai Aerospace bids for Auckland Airport

There are some things airport and airline investors need to know about the two year old Dubai Aerospace Enterprises (DAE) group of companies which has just put $2.3 billion on the table for at least 51 per cent of Auckland Airport.

  1. DAE represents many tens of billions of dollars in United Arab Emirates state investment funds that would like to call Australia and New Zealand home.
  2. A few months ago it began spending $15 billion seed money on Dubai World Central, which is to become what it calls the heart of a trillion dollar aviation and technology empire.
  3. The New Zealand government is the unwilling long term owner of the 80 per cent of Air New Zealand it had to pick up after the Kiwi flag carrier abandoned Ansett in 2001, and…
  4. The state investments arms of Dubai and Singapore are chasing the same goals in terms of airline, airport and aerospace activities on a world scale, with the Singaporeans so far failing to back any winners.

In the months before DAE was announced Qantas and Air New Zealand had been attempting to persuade competition regulators on either side of the Tasman to allow them to merge, with Qantas citing Emirates Airlines alleged ambitions to create a regional hub at Auckland as one of its concerns.

This might come true one day, even though Emirates denied having any plans then and as recently as last November for either setting up an Auckland hub, or having any interest in investing in a new or existing airline in Australia.

But it has become a global truism that airports can make more money out of aviation than jets.

Dubai World Central at Jebel Ali, some 35 kilometres from the capital, is beside the giant sea port of the same name, has a 140 square kilometre ground plan, includes six runways, and terminals for 120 million passengers a year (four times the traffic at Sydney today) and will be ready in around six years time as Dubai’s second airport.

The intention is to host maintenance, repair and overhaul facilities for as many as 100 jets at a time, provide facilities for the new business of space tourism rocket flights, and induce Airbus or Boeing or both to set up final assembly lines for airliners similar to one Airbus is already building in China.

The Auckland bid is a clear signal that DAE is the second wave of the UAE’s aviation strategy following the nearly geometric expansion of Emirates in the last two decades.

It can’t fail to remind Qantas and Singapore Airlines of the enormous pressure they will come under from Dubai, where enterprises may well make very good profits, but their costs of capital, and tax rate, can be zero.

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