IN FOCUS: Mubadala's aerospace investments begin to pay off

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Thanks to its gleaming new Formula 1 ­circuit and a sack of gold that has turned underachieving English soccer side ­Manchester City into one of Europe's most glamorous clubs, it is inevitable that Abu Dhabi and its royal family are associated with money-no-object sporting projects.

But when it comes to aerospace, the emirate's ambitions - though equally designed to put Abu Dhabi on the map - are grounded in hard business sense. Since the mid-2000s, Mubadala, Abu Dhabi's sovereign investment vehicle, has accumulated a portfolio of ­aerospace interests at home and abroad, alongside those in the property, communications and healthcare sectors. Mubadala's mission has been to diversify and develop the energy-dependent Abu Dhabi economy and create high-skill career paths for its citizens.

It is the majority shareholder in SR ­Technics (SRT), the Swiss maintenance, repair and overhaul (MRO) provider - it also owns local MRO Abu Dhabi Aircraft ­Technologies (ADAT). Along with India's Tata, Mubadala also holds a controlling stake in Italian business aircraft manufacturer Piaggio Aero. And in Abu Dhabi itself, its subsidiaries include aerostructures start-up Strata and military MRO Ammroc, which it owns with minority partners Lockheed ­Martin and Sikorsky.

etihad plane in hangar6, mubadala

 © Mubadala

Mubadala wants to exploit synergies in MRO between ADAT and SRT

"We are continuing to develop the strategic goals we set out when we started in 2006," says Homaid Al Shemmari, executive director of Mubadala Aerospace. This has involved building a company from scratch - as it has done with Strata - or acquiring complementary businesses overseas to create synergies with an existing division, as with SRT and ADAT. With Piaggio, the appeal ran deeper than simply owning part of a glamorous niche European aircraft marque that has links with Ferrari - another high-end brand in which Mubadala has a stake. Al Shemmari says Mubadala is keen to tap into the Genoa airframer's engineering and project-management resources. "This is a company with 1,300 employees that produces an entire plane," he says. The relationship with Tata - a global engineering and automotive giant - is also important. Eventually, Mubadala wants to produce a business jet in the UAE, although whether this will be Piaggio's long-mooted jet development remains to be seen. Of all ­Mubadala's projects, Strata has ­perhaps been the most ambitious, mainly because some doubted Abu Dhabi - despite its deep pockets - could create something as complex as a composites assembly facility in remote Al Ain, with no manufacturing heritage in the region. The desire of Western producers for in-roads in one of the biggest potential aerospace markets certainly helped when it came to awarding deals, but Al Shemmari still insists "Airbus took a huge leap of faith with Strata, awarding a $1 billion contract for 10 years when all we had was a piece of desert".

He adds: "We needed that to get the flow of business and to be able to prove ourselves to others as a credible partner." But Mubadala has no interest in stopping there, believing Strata will have matured sufficiently by the middle to end of the decade to bid for substantial risk-share packages with Airbus and ­possibly other airframers. "We want to have 10-20% of the next Airbus narrowbody and to assemble everything completely in-house. We want to have that credibility in five years," he says.

homaid al-shemmari, mubadala

 © Mubadala

"We are continuing to develop the strategic goals we set out when we started in 2006"

Homaid Al Shemmari

Executive director, Mubadala Aerospace

That will require creating a local supply chain, and Mubadala is working with fellow government-owned agency Abu Dhabi Airports (ADAC) to develop Al Ain airport and create an aerospace cluster there by enticing local and foreign-owned small and medium-sized enterprises to set up shop. "We want to be the Seattle or Toulouse of the Middle East," says Al Shemmari. However, he is realistic about how easy it will be to build the necessary home-grown expertise in such a short period, and says "acquisition in Europe is not out of the question - somewhere we can send our people to learn procedures".

Since acquiring control of SRT in 2009, Mubadala has been slowly integrating it with ADAT - the former Gulf Aircraft Maintenance (Gamco) - although the two businesses have largely run separately and under their own identities. By the end of this year, says Al Shemmari, Mubadala will decide on a new branding strategy, which will be either "the Air France-KLM model" of sister brands, or the "Lufthansa Technik model of a strong ­global brand". Whichever is chosen, sales staff will "pitch a one-stop solution", with airframe maintenance shared largely between Abu Dhabi and SRT's facility in Malta, and component and engine overhauls carried out at ADAT and in Zurich. "We have been spending a lot of time ensuring there are no duplications between the businesses, unless volumes justify it," says Al Shemmari.

Military MRO - once a substantial part of ADAT's business at its facility next to Abu Dhabi International airport - has been "carved out" to the new Ammroc operation, which has a contract with the UAE armed forces to maintain most of its inventory. Ammroc is currently co-sited with ADAT, but will be moved to Al Ain by 2014.

Mubadala is always very sensitive about comparisons with Dubai Aerospace Enterprise - also created five years ago by Abu Dhabi's neighbour to develop an aerospace industry in Dubai.

DAE had a two-year flurry of activity, which saw an aircraft leasing business, aerospace university and MRO division being established - it acquired StandardAero of the USA and was initially a co-owner of SR Technics with Mubadala. However, since the emirate's property crash of 2009, DAE has spent three years hunkering down. Its university folded and many of its aircraft orders have been cancelled.

Without directly referring to DAE, Al Shemmari insists Mubadala's venture into the aerospace sector has "not just been a fad". Instead, he says: "It has been a well thought-out strategic interest. We are developing and ­solidifying our relationships with OEMs even further."