Abu Dhabi’s infrastructure-oriented sovereign wealth fund ADQ has taken full control of the Etihad Aviation Group (EAG), adding it to an aviation portfolio that also includes Abu Dhabi Airports, Wizz Air Abu Dhabi and ADQ Aviation & Aerospace Services Company.

The emirate is clustering aviation assets in ADQ to bolster vertical integration, support development, improve profitability and potentially for future divestment. Earlier this year, EAG’s ancillary businesses - Etihad Engineering, Etihad Airport Services Cargo, Etihad Airport Services Ground, Etihad Aviation Training, Etihad Secure Logistics and Etihad Technical Training - were transferred to ADQ to create a new integrated aviation support services company.

ADQ CEO Mohamed Hassan Alsuwaidi said, “The aviation sector is critical to Abu Dhabi’s economic growth plans and prosperity. With Etihad joining ADQ’s mobility and logistics cluster, we are well positioned to develop a globally competitive and integrated aviation portfolio to enhance Abu Dhabi’s connectivity and overall value proposition.”

The announcement came a day after ADQ announced it had made an offer to take a controlling stake in Abu Dhabi Aviation (ADA) and merge the helicopter operator with ADQ stakes in Etihad Engineering, Advanced Military Maintenance Repair and Overhaul Center (AMMROC) and aviation services firm GAL to create a "globally competitive aviation business" with AED9.4 billion (US$2.56 billion) in assets. ADA is discussing the offer, which would see the fund own a 59% stake. ADA is 30% owned by another Abu Dhabi sovereign wealth fund, Mubadala, which is working very closely with ADQ in co-investments.

According to Global SWF research, SWF-backed airlines currently operate 2,817 planes, with ADQ’s takeover of EAG likely to bring that number to 3,000. The global fleet is set to grow further. Last month, of Saudi Arabia’s Public Investment Fund (PIF) announced it was launching a new major flag carrier in the aviation industry, RIA, with a US$30 billion capital injection. RIA will be the Kingdom’s second national carrier after Jeddah-based Saudia, which is set up to rival the Gulf region’s other sovereign wealth fund-owned airlines. The new carrier is reportedly targeting more than 150 international routes, putting it on a par with Emirates, which operates 254 planes.

The announcement of RIA’s planned launch was followed by PIF's plans for a third airline, which would serve the planned US$500 billion new metropolis, NEOM, in the northwestern Tabuk province. The third flag carrier will operate exclusive routes to cities in Europe and Asia would make NEOM a prime destination for international travellers. These airlines are part of Saudi Arabia’s drive to increase international transit passengers from under four million in 2021 to 30 million by 2030, and hopefully fuel tourism growth to meet the Kingdom’s Vision 2030 economic diversification efforts.

In July, PIF launched AviLease, an aircraft leasing company, which the fund says will become a “core element” of the Kingdom’s expanding aviation ecosystem. PIF said that the company will “scale through purchase-and-lease-back transactions, secondary portfolio acquisitions, direct orders from aircraft manufacturers, and corporate acquisitions.” The fund has appointed big guns in the sector to run AviLease, including industry veteran Ted O’Byrne, former co-head of aviation at Carlyle Group and previously CIO of Ireland-based AerCap, who was appointed CEO.

Related funds ADQ
Related tags Abu Dhabi Inc. Aviation