May 17, 2018 / 4:56 PM / 4 months ago

Exclusive: Dubai Aerospace in talks to place huge order for 400 jets

DUBAI (Reuters) - Dubai Aerospace Enterprise (DAE), one of the world’s largest aircraft lessors, is in talks to buy a near-record total of 400 jetliners from Airbus and Boeing, its CEO told Reuters, in a $40 billion blowout that would match the order pipeline of rivals.

The move comes months after a leading U.S. airline investor orchestrated a record deal involving more than 400 planes from Airbus as economists project strong growth for air travel, led by the continued expansion of budget carriers.

Airbus and Boeing have sold thousands of the latest versions of their workhorse single-aisle jets in recent years, but the order cycle is slowing down. However, the boom has left long waiting times for jets for remaining potential buyers like DAE.

The government-controlled Dubai firm is interested in buying single-aisle Airbus A320neo-family and Boeing 737 MAX planes after its acquisition last year of Dublin-based lessor AWAS, Chief Executive Firoz Tarapore said on Thursday.

Any deal would not necessarily be evenly split between the two planemakers, Tarapore said, adding DAE was “nowhere near where we thought we would be” in finalising an order.

“We are not happy with the price,” he said in an interview at DAE’s offices in Dubai’s financial district.

Shares in Airbus closed up 1.7 percent, roughly trebling gains seen before the order comments. Boeing shares rose 0.7 percent in early New York trading, outperforming a flat market.

Both companies declined to comment.

An order for 400 single-aisle jets would be worth more than $40 billion at list prices, though discounts of at least 50 percent are common for large orders, say market sources.

It would also give DAE a long-term pipeline of directly ordered jets on a par with its rivals, though the world’s two largest planemakers say they are mostly sold out until 2024.

ACQUISITION PATH

Tarapore told Reuters last June that DAE was considering a “large order” for more than 23 new aircraft, with deliveries to start from 2019.

DAE would look at other options to acquire new aircraft if it does not reach an agreement with Airbus or Boeing, which Tarapore said could include acquiring a rival to gain access to its order book for aircraft.

DAE was set up in 2006 with the aim of becoming one of the world’s biggest aircraft lessors, but started cancelling orders in 2010 as funds dried up following Dubai’s debt crisis.

It jetted back into the top tier of aircraft lessors last year when it acquired Dublin-based AWAS, the industry’s 10th-biggest firm at the time. The deal tripled DAE’s portfolio to about 400 owned and managed aircraft worth over $14 billion.

DAE is “operating very smoothly”, Tarapore said, adding the integration of AWAS was completed in February.

In the meantime, DAE is considering issuing a $500 million sukuk this year or in 2019 and a conventional dollar bond in the fourth quarter of this year, Tarapore said.

The bond issues are not dependent on finalising an aircraft order, he added.

DAE intends to be a repeat, benchmark issuer in the U.S. debt market, he told Reuters in October 2017. A benchmark issue conventionally means upwards of $500 million.

DAE raised $2.3 billion in the United States through a senior bond issue in 2017 to finance the AWAS deal.

Reporting by Alexander Cornwell; Editing by Mark Potter, Tim Hepher and David Goodman

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