Page last updated at 23:18 GMT, Tuesday, 15 July 2008 00:18 UK

Abu Dhabi emerges as aerospace major

By Jorn Madslien
Business reporter, BBC News, Farnborough

Etihad chief executive James Hogan talks about the airline's expansion plans

Five years after it was founded, Etihad Airways has emerged as the biggest buyer at the Farnborough airshow.

The Abu Dhabi airline announced orders for 100 Airbus and Boeing aircraft in deals valued at some $20bn (10bn), along with option rights for the same again in the future.

However, given the notable lack of orders from other airlines, nobody at the show expects Etihad to be paying the full list price.

It is not known how deep discounts the rival aircraft makers have been forced to offer, though James Hogan, Etihad's chief executive said "the announcement is the result of many months of negotiations".

The deals are part of a growth strategy that will bring Etihad's fleet from 32 planes today to more than 80 by 2016, with continued growth thereafter.

"We are aiming to be one of the leading airlines in the world," says HH Dr Sheikh Ahmed bin Saif Al Nahyan, chairman of the airline, which already flies six million passengers per year.

Regional hub

Etihad's orders are not only set to elevate the airline into the top league. It also points to the emergence of Abu Dhabi, the capital of the United Arab Emirates (UAE), as a major force in the region, both as a travel destination in its own right and as a hub for travellers to other Arab nations.

Etihad chairman Dr Sheikh Ahmed bin Saif Al Nahyan
We are aiming to be one of the leading airlines in the world
HH Dr Sheikh Ahmed bin Saif Al Nahyan, chairman, Etihad Airways

"It's a new hub that's emerging," says Etihad's chief executive, James Hogan.

"There are huge markets on our doorsteps that are currently regulated and that will eventually be deregulated."

Along with the gradual scaling back of regulation, there is tremendous growth in infrastructure, fuelled by the region's petroleum earnings expected to rise close to $1,000bn this year.

This will lead to the emergence of a "diverse customer base", predicts Mr Hogan, consisting of business travellers, people visiting friends and family, and holiday makers.

Tourist destination

Abu Dhabi is gearing up to become a major tourist destination, with a Formula One race track and a Warner Bros theme park, as well as a Guggenheim and a Louvre museum.

Etihad crew
Etihad believes Abu Dhabi will become a major tourist destination

"The aircraft orders reflect the belief we have in the Emirates' plan," says Mr Hogan.

The city expects an annual flow of some three million tourists to the city by 2020, an extraordinary number given that only about one million people live there today.

But that number is also set to soar. Already, expats make up some 80% of Abu Dhabi's population.

Booming region

But the biggest reason for Mr Hogan's optimism lies in the region's incredibly rapid economic growth.

On show at Farnborough 2008

Stock markets in the region clocked up 20-30% returns last year, and during the past five years - before oil prices doubled - the region's economy grew 6% per year.

Growth is set to remain strong, and not only on the back of record oil prices.

Abu Dhabi is eager to diversify away from its dependence on oil, so last year - at the Paris airshow - its investment agency, Mubadala Development, agreed to partner with Boeing as part of efforts to become a major supplier of hi-tech aeroplane components.

This year, at Farnborough, Mubadala can announce that it is investing $161m in the first phase of a $500m factory that will make composite aeroplane parts for Airbus.

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