As a former pilot in the Israeli air force, Yair Shamir is aware at any given moment where the potential targets are. And, the chairman of Israel Aerospace Industries also knows which targets give most bang for his buck, so he has three big ones squarely in his sights: the USA, Brazil and India.
The US market - which banks about $1 billion yearly for Israel's largest aerospace company - will grow by not less than 30%, he believes, so having made a mark there with the establishment in 2006 of unmanned air systems subsidiary Stark Aerospace, which produces the Hunter MQ-5B for the US Army through prime contractor Northrop Grumman, IAI plans to deploy the strategy again.
"We cannot buy American companies because of Israeli law, so we plan to establish another company from scratch," he says.
GROWTH MARKETS
The search for big markets has also led IAI to target Brazil, says Shamir. There, through EAE, a subsidiary owned jointly with local company Synergy, IAI has since 2009 offered UAS, multi-mission radars, inertial navigation systems, maritime platforms and systems and border and coastal defence systems.
"In Brazil also we plan to purchase additional companies. The fact that IAI is developing and manufactures such a variety of systems for air, ground, sea and space gives our operations in Brazil a big advantage," Shamir says.
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In recent years, IAI has also been busy satisfying India's almost unlimited appetite for advanced defence systems. "The potential for us in that country is endless," he says.
Shamir is, however, finely tuned to the hazards of over-reliance on any one client. For IAI, the impact of regional politics was brought into sharp focus a year ago when one of its main clients, Turkey, cut all military ties with Israel in the aftermath of Israel's commando attack on a convoy of aid ships, some flying the Turkish flag, attempting to break Israel's blockade of Gaza. Says Shamir: "Turkey is the regional power - not Iran, as many think. In spite of what happened we have to find a way to keep our relations with Turkey. I'm sure that this understanding is also on the other side."
As for India, he says: "An aerospace company with one major client is in danger, but in spite of the big business that we do in India, it does not comprise more than 12% of our overall sales.
"But the fact is that India is a preferred client and as such gets a preferred treatment."
ISRAELI POLITICS
Shamir's main concern, however, is state-owned IAI's relations with the Israeli government. For years, successive Israeli governments have declared their intention to consolidate the three state-owned companies, IAI, Rafael and IMI, but no concrete action has followed.
The latest talk is of merging IMI and Rafael, and Shamir makes no effort to disguise his disappointment.
"If ministers talk about merging two of the three, why not make a bigger effort and merge all the state-owned companies? Such a move would have changed the league in which these companies operate.
"This business [aerospace] is the game of the big guys and here is a chance to become big and more capable to compete. There is no sense in keeping the situation as it is now."
What Shamir really wants, however, is for the government to privatise IAI, which as a state-owned company operates with politicians having the power to make business decisions; for example, today IAI needs government approval to make an acquisition with a value of more than $50 million.
A joint venture formed recently with private-sector rival Elbit Systems to buy either Alenia Aermacchi M-346 or Korea Aerospace Industries/Lockheed Martin T-50 jet trainers and lease them to the Israeli air force is at best a small step, says Shamir. The Israeli anti-trust authorities placed severe restrictions on the venture, Tor, so it cannot be seen as a model for IAI growth.
Shamir points to the failure of an effort to enter the small satellite market through a joint venture with Rafael that, like so many such ventures, fell foul of the tendency for parent companies pursue their own interests over those of the joint venture.
"History taught us that joint ventures with two big parents very quickly become orphans."
Source: Flight International
