Paris Air Show

Flurry of recent export orders bolsters Israel Aerospace sales

 - June 12, 2009, 5:24 AM

Israel Aerospace Industries (IAI) hopes that new export orders, such as a $50 million deal to supply unmanned aerial vehicles (UAVs) to Russia, will bolster sales that dipped by 24 percent during the first quarter of 2009. The contract, which includes a mix of Bird-Eye 400 mini-UAVs, the I-view MK150 tactical UAVs and the Searcher Mk II medium-range UAVs, was finalized in April after Russia agreed to stop the sale of its Mikoyan MiG-31 fighters to Syria.

Deliveries are expected before year-end. Later the deal could be extended to cover the long-range Heron UAV, which will give Russian forces airborne endurance of more than 50 hours at altitudes of 35,000 feet.

The Heron family of UAVs offers a variety of flexible solutions ranging from relatively straightforward tactical versions to the high-performance MALE Heron TP. The aircraft are based on a modular design that can accommodate a wide selection of specialist sensors and payloads. Several Herons are currently in active service in Afghanistan with a number of foreign militaries. 

Late last month, IAI delivered the first of three Phalcon airborne warning and control system (AWACS) aircraft to the Indian air force. The new AWACS platform is based on a Russian Ilyushin Il-76 airframe and the second of these is about to be delivered to IAI to be equipped with its advanced mission systems.

May also brought reassurances from the new administration of President Barack Obama that the U.S. will continue to back the long-running Arrow missile defense system. Development of the upper-tier Arrow-3 part of this program was recently initiated by IAI and its U.S. partners. The main element of this is an exo-atmospheric interceptor missile that is being jointly developed by IAI and Boeing.

The flurry of positive news came in the same month that IAI published mixed first-quarter financial results that reflected tougher trading conditions. Sales of $775 million were down by 24 percent on the same period in 2008, but at the same time, new contracts valued at $2 billion were signed during the first three months of this year to take the group’s order backlog to a record high of just over $8 billion.

Reflecting the economic downturn, sales in the civil sector–including the G150 and G200 business jets that IAI manufactures for Gulfstream–fell from 39 percent of the total to just 26 percent.

Not accounting for early retirement expenses of some $16 million, profits fell by 10 percent from $60 million in the first three months of 2008 to $54 million in the same period of this year. More than three quarters of IAI’s sales are now made to export customers and the company’s overall portfolio is split between about 60 percent of defense activities and 40 percent on the civil side.

“There is no doubt that the civil sector will be affected by the global economic downturn,” acknowledged IAI president and CEO Itzhak Nissan in an interview ahead of this week’s Paris Air Show. “However, this is more than compensated for by our strong performance in the defense sector. We believe that this sector will remain relatively stable during the global economic crisis.”

According to Nissan, IAI’s future lies in maximizing its international profile through new partnerships such as Stark Aerospace in the U.S., the Nova alliance with India’s Tata group and the Synergy joint venture in Brazil. “We believe that the key to expanding our customer base is in the globalization of the company,” he told AIN. “Our strategy includes the acquisition of local companies, or setting up partnerships with local companies in central geographic nodes to serve as focal points for our activity in the area.”

Here at Le Bourget, IAI’s exhibit features UAVs, airborne early warning and COMINT/ELINT aircraft, the Barak-8 anti-aircraft and missile defense system, various advanced radar systems and observation satellites. According to Nissan, the array of technology on display reflects the group’s expertise in complex, large-scale systems integration programs to offer turnkey solutions such as the Phalcon AWACS package.
He indicated that despite tougher trading conditions IAI will be stepping up research-and-development spending in areas such as network-centric warfare and environmentally friendly equipment such as the new Taxibot aircraft towing system.
“With our conformal radar technology and our aircraft platforms we are able to offer customers a high-end performance AEW system at a very competitive price,” added Nissan. “We believe that our system is unique in its cost-effectiveness and in its value to the customer.”

IAI is also active marketing both aerial tanker and freighter conversions of the Boeing 767 airliner through its Bedek division. The company has delivered around 40 cargo versions of the 767-200 and has a backlog of 14 more orders for this configuration. Last year, it launched a larger 767-300 freighter program through a new partnership with Matsui in Japan and it intends to complete the supplementary type certificate for this before the end of this year.

“Over the past two years, IAI has implemented a significant change in its business culture, and as a result, has achieved consistently improved performance,” concluded Nissan. “We intend to continue this trend of continuous improvement, and IAI has set aggressive goals for growth and performance over the next 10 years.