Airbus and Boeing sign Gulf supply deals, after big orders

DUBAI - Reuters

Visitors walk past planes at the Dubai Airshow on November 18, 2013. The biennial Dubai Airshow got off to a bright start, with orders from the big three Gulf carriers, Emirates, Etihad Airways and Qatar Airways - for Boeing and Airbus planes hitting $150 billion. AFP photo

Airbus and Boeing signed deals to buy some $5 billion of parts and materials from Abu Dhabi Nov. 18, in a sign Gulf states are seeking a reciprocal boost to their economies from the huge orders they have placed with the plane makers.

Gulf airlines, led by Dubai’s Emirates and Abu Dhabi’s Etihad, struck plane deals worth almost $150 billion - or more, including options - on the first day of the Dubai Airshow on Sunday.

The buying spree underscored a shift in power in the aviation industry, as oil-rich, fast-growing economies of the Gulf take advantage of their strategic position between East and West to draw more travelers from hubs in Europe and Asia.

While the orders are a big boost to Airbus and Boeing, the world’s dominant civil aircraft manufacturers, suppliers in Europe and the United States are worried they will suffer from the growing globalization of the aircraft supply chain, in which Gulf firms are playing a part. Airbus agreed a new deal on Monday with Abu Dhabi’s state investment fund Mubadala to expand their partnership “for further composite and metallic aero structure production in the United Arab Emirates, in addition to procurement of composite raw materials, worth $2.5 billion,” Mubadala said.

Reuters reported on Nov. 17 that the two parties were close to an agreement.

Boeing’s other deals

Separately, Boeing said it had also signed a new deal with Mubadala for Abu Dhabi to supply as much as $2.5 billion in advanced composites and machine metals to the U.S. plane maker.

In addition, Boeing said it had reached an agreement with Abu Dhabi’s Tawazun Precision Industries, a state-owned manufacturing company, to set up a facility in the United Arab Emirates for producing aerospace parts.

The facility will be up and running by 2016 and will produce parts for other aircraft manufacturers as well as Boeing, the two parties said, without disclosing financial details.

Airbus shares jumped more than 3 percent on Monday following Sunday’s slew of orders, which boost its A380 - the world’s biggest passenger jet, which had been struggling for orders. Boeing’s orders boost its new version of the 777 jet.

The hub cities in the Gulf - Dubai, Abu Dhabi and Doha - are spending billions on infrastructure in a bid to attract travelers and diversify their oil-based revenues, at a time when faltering Western economies are struggling to invest. Mubadala, which has a mandate to develop the emirate’s local economy, has sought to play a major role in the production of composite tail sections for passenger jets.

A group representing U.S. airline pilots warned on Saturday the sale of hundreds of planes to Gulf airlines that compete with U.S. carriers would have “serious consequences for the U.S. economy and U.S. airline workers.”

Both Airbus and Boeing have already established partnerships with Strata, the composites manufacturing unit of Mubadala Aerospace which produces parts at Al-Ain near Oman.