Story ID: 
High-flying Italians on Mideast mission
By: Paolo Valpolini
Caption: A new alliance with the evolving Russian aerospace sector and efforts to break into the Middle East defense market are key to Italian industrial group Finm
Word Count: 1161
A new alliance with the evolving Russian aerospace sector and efforts to break into the Middle East defense market are key to Italian industrial group Finmeccanica’s strategy for boosting its global presence in the industry. Finmeccanica (Stand C310) comes to Dubai fresh from having formed the new Superjet International joint venture between its Alenia Aeronautica subsidiary and Russia’s Sukhoi Civil Aircraft Co.Last year, aerospace and defense interests accounted for about half of all Finmeccanica’s total revenues. “We are devoting a major effort to make this sector more and more productive on the basis of the existing businesses,” Pier Francesco Guarguaglini, Finmeccanica chairman and chief executive officer, told AIN in an interview prior to this week’s show.“Alenia Aeronautica is becoming a full global player, especially thanks to its excellence in the composite technology for aerostructures, which is and will be applied to B787, A350, JSF and Superjet100 programs,” Guarguaglini said. He added that the company is looking to exploit its technological edge through the risk-sharing partnership with Boeing and Vought for the B787 and the new joint venture with Sukhoi to build and market the Superjet 100 narrowbody jetliner.In the military field, Alenia Aeronautica is a major player in tactical transport aircraft with the C-27J Spartan–a program in which it is partnered with Boeing and L-3 Communications in the U.S. Last June the aircraft was selected for the U.S. Joint Cargo Aircraft program, a choice subsequently confirmed by the Government Accountability Office in September.Finmeccanica’s AgustaWestland subsidiary is one of the world’s four main players in the rotorcraft arena. It is now expanding its reach in export markets through deals such as the program to develop the T129 combat helicopter with Turkey and a new strategic partnership agreement signed with the UK Ministry of Defence.As for avionics, Finmeccanica took a major strategic step by concluding its deal with BAE Systems to exercise the option to acquire the remaining 25 percent of the Selex Sensors & Airborne Systems business. “Now we have full control of the company, which will enable us to freely develop our strategies,” said Guarguaglini.European ConsolidationBut surely Europe’s aerospace and defense industry needs to achieve a much greater degree of consolidation if it is ever to mount a serious challenge to U.S. dominance. “It is not easy to say what will happen in the future,” Guarguaglini said. “Airbus is going through a difficult period and much will depend on the approach of the new French administration. As for the military field, there are many cooperation programs going on–for example, the Eurofighter–around which European industry could restructure the defense area, but it is difficult to foresee now which specific scenario will be the right one,” he added.The Finmeccanica boss pointed out that, in fact, there still are several programs that see a strong competition between European companies (for example, the C-27J versus Spain’s C-295 military transports). But he refused to rule out the Italian group being active in further consolidation. “If interesting opportunities will come out, we will be ready to evaluate them and to make our moves,” Guarguaglini concluded tactfully.As for the regional aircraft market, will Alenia Aeronautica’s new joint venture with Sukhoi generate synergies with its existing Avions de Transport Regional joint venture with rival group EADS or will it become a competitor? “For Alenia Aeronautica, joining the Superjet 100 program means a strategic investment in a program with a high-level market potential that also puts the company, already a market leader with its turboprop regional ATRs, in a position to complete its offer in the field of regional aircraft,” Giorgio Zappa, Finmeccanica’s chief operating officer, told AIN.According to the Italians, the Superjet 100 program will give Alenia the opportunity to capitalize on the technical and commercial know-how acquired through the ATR program to enter the growing market for small- and medium-sized jetliners and to start a fruitful collaboration with a leading Russian aerospace company. “Moreover, this move will allow our principal aeronautics company to enter new markets and expand those already controlled thanks to a next-generation product and its possible derivatives, creating value for shareholders, with limited financial risks and burdens,” Zappa claimed.The 95-seat Superjet 100 prototype was rolled out at the end of September. Looking at the future, other versions of the regional airliner are planned, which could include the participation of other Finmeccanica companies.Key Player in the JSFAnother key program for Finmeccanica companies is Lockheed Martin’s F-35 Joint Strike Fighter, and according to the group’s leaders, the program has profound technological, industrial and economic implications for the wider Italian industry. “The JSF allows us to further develop the notable experience acquired with the Eurofighter program, not only in the aeronautical field but also in avionics and electronics,” Zappa said.Finmeccanica subsidiaries such as Galileo Avionica, Selex Sensors & Airborne Systems, Selex Communications, Elsag Datamat and Oto Melara are active in the JSF program working on radars, defense and navigation systems, and systems integration. “Such participation, added to that of Alenia Aeronautica, makes Finmeccanica the key Italian industrial player in the JSF,” Zappa said, “and in the system development and demonstration [SDD] phase, Italy is the second international partner after the UK, with investments worth $1.028 billion [in 2002 dollars].”This spending is spread across the 2002-2012 time frame, with 80 percent of the value covering the aircraft and 20 percent the engines. According to a recent assessment in the SDD and in the low-rate initial production (LRIP) phases, the more than 20 Italian companies involved in the F-35 program should earn more than $800 million, accounting for about 80 percent of the investment.According to the agreements drawn up with Lockheed Martin so far, the forecast future industrial returns for Finmeccanica companies should be about $10 billion. Italy will set up a final assembly line where all Italian air force and navy aircraft will be put together, as well as those for the Dutch air force–a total of more than 200 F-35s.“This result was obtained thanks to a great effort carried out both at industrial and governmental level,” Zappa stressed, “and in this new plant we will install all the equipment needed for assembling and testing the aircraft.” These activities will be conducted by Alenia Aeronautica in close cooperation with the Italian air force, in order to acquire the common experience and skills for carrying out the subsequent maintenance, repair and upgrade activities throughout the entire fleet operational life.As for the market in the United Arab Emirates and in the wider Gulf region, Alenia Aeronautica and Alenia Aermacchi are seeking potential customers here, too. According to Finmeccanica, the C-27J’s operational flexibility has generated considerable interest, while both the M346 and M311 trainers have been down-selected by the UAE and carried out hot-weather tests last August as the country approaches its anticipated final decision for the basic and advanced trainer requirements of its air force.