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Struggling DAE Capital cuts $8 billion of orders from backlog

In a much-anticipated move, Dubai lessor DAE Capital has slashed $8 billion worth of Airbus and Boeing orders from its backlog. The leasing company has dropped 50 orders, split equally between Airbus and Boeing, although the latter is the worst affected by value, having shed over $5 billion worth of business at list prices.

The Boeing cancellations include 10 777-300ERs and 15 787s, while Airbus has lost 18 A320s and seven A350s. Despite the move, DAE retains a firm backlog of more than 160 Airbus and Boeing aircraft, which includes up to 16 Boeing widebody freighters already placed with local airline Emirates.

In 2007 DAE ordered 100 aircraft each from Airbus and Boeing. It subsequently added a further 10 747-8Fs and eight 777Fs (two now delivered) through a sale/leaseback of existing Emirates orders.

DAE has completed various sale/lease back deals of in-service aircraft, the biggest of which was a 21-aircraft deal with GECAS in 2007. Flightglobal's ACAS database lists 37 aircraft in DAE's lease portfolio, a mix of Airbus and Boeing single-aisles and A330s and 777Fs in service with operators such as EasyJet, Emirates, Garuda and Kingfisher.

Dubai government-backed DAE, which has not commented about the cancellations, has been the subject of much speculation recently. At July's Farnborough air show, Airbus's chief salesman John Leahy admitted that it was "no secret" that DAE was "in financial difficulty" and that it looked likely to struggle to accept all of the aircraft it had on order.

"DAE is imploding because of Dubai's credit problems and a government that is massively overstretched, not necessarily because there aren't market opportunities for jet lessors," says Teal Group analyst Richard Aboulafia.

Given the company's close ties to Emirates - both are state owned and headed by Sheikh Ahmed bin Saeed Al-Maktoum - there has been speculation that the airline's recent big orders for A380s (32) and 777-300ERs (30) were connected to the expected cancellations. However, the airline says that its only arrangement with DAE is its commitment to lease freighters for its cargo arm.

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