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Israel Aerospace, Etihad to Open Aircraft Conversion Site in Abu Dhabi

Visitors watch a demonstration at the Israel Aerospace Industries (IAI) booth in the IMDEX Asia maritime defense exhibition in Singapore May 19, 2015. (Reuters)
Visitors watch a demonstration at the Israel Aerospace Industries (IAI) booth in the IMDEX Asia maritime defense exhibition in Singapore May 19, 2015. (Reuters)
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Israel Aerospace, Etihad to Open Aircraft Conversion Site in Abu Dhabi

Visitors watch a demonstration at the Israel Aerospace Industries (IAI) booth in the IMDEX Asia maritime defense exhibition in Singapore May 19, 2015. (Reuters)
Visitors watch a demonstration at the Israel Aerospace Industries (IAI) booth in the IMDEX Asia maritime defense exhibition in Singapore May 19, 2015. (Reuters)

Israel Aerospace Industries (IAI) said on Wednesday it signed an agreement with Etihad Engineering to establish a facility in Abu Dhabi that will convert Boeing 777-300ER passenger planes into cargo aircraft.

The new facility, which will operate as the company’s maintenance center in Abu Dhabi, aims to meet the growing demand for large cargo jets.

“Not only do we see the demand, but we view it as a greener, more profitable, highly innovative solution for our airline customers, and an excellent way to drive value for our business,” Tony Douglas, chief executive of Etihad Aviation Group, said in a statement.

Demand for cargo plane conversions has been on the rise with the increase in ecommerce and the decline in value of used planes during the COVID-19 pandemic.

State-owned IAI currently converts Boeing 737, 747 and 767 passenger aircraft for cargo use. It has said it is currently developing a conversion method for the Boeing 777 and expects to finish the licensing process in 2023.

The deal comes a year after Israel and the United Arab Emirates agreed to normalize relations under the US-sponsored Abraham Accords.

Over the past year, Israeli firms have forged a number of deals in the UAE.

In March, IAI said it would jointly develop an advanced drone defense system with the UAE’s state-owned weapons maker EDGE.

Yossi Melamed, head of IAI´s Aviation Group, said the latest deal adds a “significant tier to the relations between Israel and the Gulf States” and that “additional agreements with companies in the region will arrive, and they will economically benefit all sides involved.”

IAI already operates cargo conversion sites including an existing line at its headquarters at Ben Gurion International Airport near Tel Aviv.

Etihad Engineering is one of the largest commercial aircraft maintenance, repair and overhaul (MRO) services providers in the Middle East, and the center in Abu Dhabi will be the largest and most advanced in the Middle East, IAI said.

It noted the facility will be certified by the UAE Civil Aviation Authority, the US Federal Aviation Administration, and the European Aviation Safety Agency.

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Trump Goes to War with the Fed

US Federal Reserve Chair Jerome Powell, seen in April 2025, said he considered Fed independence to be a matter of law. Brendan SMIALOWSKI / AFP
US Federal Reserve Chair Jerome Powell, seen in April 2025, said he considered Fed independence to be a matter of law. Brendan SMIALOWSKI / AFP
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Trump Goes to War with the Fed

US Federal Reserve Chair Jerome Powell, seen in April 2025, said he considered Fed independence to be a matter of law. Brendan SMIALOWSKI / AFP
US Federal Reserve Chair Jerome Powell, seen in April 2025, said he considered Fed independence to be a matter of law. Brendan SMIALOWSKI / AFP

Donald Trump's simmering discontent with the US Federal Reserve boiled over this week, with the president threatening to take the unprecedented step of ousting the head of the fiercely independent central bank.

Trump has repeatedly said he wants rate cuts now to help stimulate economic growth as he rolls out his tariff plans, and has threatened to fire Fed Chair Jerome Powell if he does not comply, putting the bank and the White House on a collision course that analysts warn could destabilize US financial markets.

"If I want him out, he'll be out of there real fast, believe me," Trump said Thursday, referring to Powell, whose second four-year stint as Fed chair ends in May 2026.
Powell has said he has no plans to step down early, adding this week that he considers the bank's independence over monetary policy to be a "matter of law."

"Clearly, the fact that the Fed chairman feels that he has to address it means that they are serious," KPMG chief economist Diane Swonk told AFP, referring to the White House.

Stephanie Roth, chief economist at Wolfe Research, said she thinks "they will come into conflict," but does not think "that the Fed is going to succumb to the political pressure."

Most economists agree that the administration's tariff plans -- which include a 10 percent "baseline" rate on imports from most countries -- will put upward pressure on prices and cool economic growth, at least in the short term.

That would keep inflation well away from the Fed's long-term target of two percent, and likely prevent policymakers from cutting rates in the next few months.

"They're not going to react because Trump posted that they should be cutting," Roth said in an interview, adding that doing so would be "a recipe for a disaster" for the US economy.

- Fed independence 'absolutely critical' -
Many legal scholars say the US president does not have the power to fire the Fed chair or any of his colleagues on the bank's 19-person rate-setting committee for any reason but cause.

The Fed system, created more than a century ago, is also designed to insulate the US central bank from political interference.

"Independence is absolutely critical for the Fed," said Roth. "Countries that do not have independent central banks have currencies that are notably weaker and interest rates that are notably higher."

Moody's Analytics chief economist Mark Zandi told AFP that "we've had strong evidence that impairing central bank independence is a really bad idea."

- 'Can't control the bond market' -
One serious threat to the Fed's independence comes from an ongoing case in which the Trump administration has indicated it will seek to challenge a 1935 Supreme Court decision denying the US president the right to fire the heads of independent government agencies.

The case could have serious ramifications for the Fed, given its status as an independent agency whose leadership believes they cannot currently be fired by the president for any reason but cause.

But even if the Trump administration succeeds in court, it may soon run into the ultimate guardrail of Fed independence: The bond markets.

During the recent market turbulence unleashed by Trump's tariff plans, US government bond yields surged and the dollar fell, signaling that investors may not see the United States as the safe haven investment it once was.

Faced with the sharp rise in US Treasury yields, the Trump administration paused its plans for higher tariffs against dozens of countries, a move that helped calm the financial markets.

If investors believed the Fed's independence to tackle inflation was compromised, that would likely push up the yields on long-dated government bonds on the assumption that long-term inflation would be higher, and put pressure on the administration.

"You can't control the bond market. And that's the moral of the story," said Swonk.

"And that's why you want an independent Fed."