Manufacturer was a success story long before it joined EADS, so any negative impact from the merger will be closely scrutinised
Espana gana con EADS" proclaims a poster at Madrid's Barajas international airport. The fact that EADS Casa - the Spanish arm of the aerospace giant - feels it necessary to argue that "Spain wins with EADS" underlines the misgivings that many here felt until recently about Casa's merger with France's Aerospatiale Matra and Germany's Dasa to create EADS in mid-2000.
Casa had been doing well enough by itself. As an independent state-owned company, it produced a well-regarded range of light transport and maritime surveillance aircraft, supplied composite parts to Airbus and assembled Eurofighter Typhoons. It had already been nominated to perform final assembly of the Airbus Military A400M airlifter. To many, the upheaval of a trans-European merger was not being offset by many obvious benefits. Press speculation in Spain as recently as the start of this year suggested that Casa might even be contemplating a withdrawal from EADS - although this was vehemently denied by the company.
Nevertheless, when EADS co-chief executives Philippe Camus and Rainer Hertrich visited Madrid last December for talks with the president of Sociedad Estatal de Participaciones Industriales (SEPI), the government holding company that formerly owned Casa and now has a 5.5% stake in EADS, it was agreed to create a commission to assess the extent of Spanish participation in EADS-led projects. The commission has yet to issue its report.
Francisco Fernandez Sainz, chairman and chief executive of EADS Casa, insists the company's staff "took integration [within EADS] in a very positive manner but, when you integrate companies of the size and complexity of Aerospatiale and Dasa, you are bound to get overlaps and misunderstandings". There would always be "family problems", but he is emphatic that there has been "too much noise on certain issues" - on the question of whether Spain has received its fair share of the EADS cake. He is adamant that EADS "gives Casa the strength of belonging to a big company, with access to an open market and a share in wider technology". This is "a message we have to communicate to the public" - hence the posters at Barajas.
EADS Casa, with only 7,000 of EADS's total workforce of 109,000, remains a junior partner in the European group, but the misgivings are fading fast. Recent months have seen a string of successes in which EADS Casa is playing a major part. Calculating the financial benefits with precision is not easy because EADS Casa's diverse activities fall within different divisions. But turnover figures for EADS's Military Transport Aircraft division (MTAD) - which EADS Casa dominates and which is headed by Sainz - provide a fair indication of the wider picture. "When we joined EADS, our annual turnover was about €350 million [$420 million]," notes Rafael Acedo, MTAD's head of programmes. "In 2003 we grossed over €730 million and, if all goes to plan, we will double this in the next five years."
Strategic investment
Casa was state-owned, via the SEPI holding company, and the latter remains committed to its investment. Well-placed sources in the company describe its stake in EADS as "strategic", adding that it provides "a very important boost to Spanish technology" and that it is "of maximum interest that Spain maintains this technological capability". Local investors hold about 2% of EADS via the Madrid stock exchange, bringing the total Spanish holding in the company to about 7.5%, but EADS Casa sources suggest that an overall Spanish participation in EADS of 10% would be "more adequate".
On joining EADS, Casa was assigned three strategic roles: take the lead on military transport aircraft; develop military derivatives of Airbuses, including tankers and special- mission aircraft; and build on its already extensive experience of producing maritime patrol aircraft and systems.
In all three areas, EADS Casa has forged ahead. An early success was a contract, completed last year, to convert two Airbus A310-300s into VIP aircraft for the Spanish air force. In early 2001 the Spanish air force awarded it a contract to upgrade five Lockheed Martin P-3B Orion maritime-patrol aircraft by installing EADS Casa's Fully Integrated Tactical System (FITS).
Delivery of the first upgraded aircraft is imminent and the others will follow over the next two years. The work is being undertaken at the Getafe plant, near Madrid. EADS Casa has won several similar upgrade contracts and is working on a project to install FITS on eight C-212 patrol aircraft for the Mexican navy.
In early 2001 came a contract from the German air force to convert four A310-300 freighters into Multi-Role Tanker Transports (MRTTs). The first aircraft is scheduled for delivery later this year. The deal was followed by a similar contract from the Canadian Forces to convert two A310-300 freighters into MRTTs. EADS Casa supplies the tanker kits, which were designed at its Getafe plant and produced at the Tablala plant near Seville.
Biggest contract
A major breakthrough was the signing in May 2003 of a €20 billion order for 180 A400M military transports. "This is our biggest contract in terms of the number of aircraft and the engineering effort," says Acedo. "OurC-295, CN-235 and C-212 aircraft, with payloads of 3-10t, are already the global leaders in the light and medium military freighter market. The A400M, with its 37t payload, will make us competitive for the first time in the market for heavy freighters, too."
Final assembly of the A400M will be at a new €280 million plant at San Pablo, adjacent to Seville airport. Excavations for the facility are already under way and completion is scheduled for late 2006. EADS Casa calculates that the A400M project alone will directly employ between 1,000 and 1,200 people within EADS in Spain and create 10,000 Spanish jobs indirectly
In January this year, meanwhile, the AirTanker consortium - linking EADS, Thales UK, Rolls-Royce and Cobham - was selected to negotiate a contract for the UK's Future Strategic Tanker Aircraft (FSTA), a private finance initiative (PFI) programme to replace the RAF's ageing Vickers VC10 and Lockheed TriStar tankers.
Tanker variant
EADS MTAD will supply an MRTT variant of the Airbus A330-200 for FSTA. The programme, covering a service period up to 2027, is valued at about £13 billion ($24 million). A formal announcement of AirTanker as the sole bidder is expected shortly. "Final closure should be in something like a year from now," says Acedo.
In February, EADS Casa signed an $87.4 million contract with Lockheed Martin for two CN-235 maritime surveillance aircraft, to be delivered in 2006, for the US Coast Guard's Integrated Deepwater System programme. The contract included an option for another six CN-235s and the final requirement could be around 35 aircraft. Design and development work is under way at Getafe and the aircraft will be produced at EADS Casa's San Pablo plant.
Contract negotiations were complex for two main reasons, says Acedo. First, the Deepwater programme is administered on a performance-related basis by Lockheed Martin and Northrop Grumman, entailing a constant re-evaluation of resource and budget allocations. Second, following the 11 September attacks, responsibility for the US Coast Guard was transferred to the Department of Homeland Security, entailing delays as new threats and administrative responsibilities were defined.
In April EADS, through MTAD, was selected by the Australian air force as the preferred bidder for a contract to supply a fleet of five A330 MRTTs to replace its existing Boeing 707 tankers. The first aircraft will be delivered in 2007. Two separate contracts, together valued at about €1.2 billion, are being negotiated. The first will cover the supply of aircraft by EADS Casa. The second, covering technical support for 20 years, will be with Qantas Defence Services.
With its A400M and A330 MRTT, EADS could be well placed to break into the US market. "It is no longer just Boeing that is using commercial platforms for military applications," says Sainz. "We will shortly have the products and capability. Now is the time to attack the US market."
After military transport and maritime surveillance aircraft, EADS Casa's third strength is in the production of carbonfibre composite components. "We are the EADS/Airbus centre of excellence for composites production and development," affirms Acedo. The Getafe plant produces all the composite horizontal tails for the Airbus range and is also manufacturing wing ribs for the A380.
Helicopters arrive
EADS Casa is also backing plans to use a Spanish army order for 24 Eurocopter Tigers to initiate full-scale helicopter manufacturing in Spain. The order, placed last year, was won by Madrid-based Eurocopter Espana, the Spanish arm of 100% EADS subsidiary Eurocopter. In addition to final assembly, Eurocopter Espana will be the sole-source manufacturer of the Tiger's rear fuselage. The army order would be the basis for creating "a permanent centre of competence for making complete helicopter structures in Spain", says Sainz.
With its string of recent successes and a bright future, the advertisements at Barajas airport are swiftly becoming redundant. Increasingly it is becoming self-evident that "Espana gana con EADS".
ALAN GEORGE / MADRID
Source: Flight International
