Chile is a quietly prosperous country that avoided the worst of the economic collapse of neighbouring states earlier this decade and now acts as a safehouse for the region's investment.
In aerospace terms, the country is small, with a handful of companies involved. The national flag carrier LAN Airlines has aggressively entered markets across the continent and has effectively created profitable businesses in air transport, cargo and maintenance. However, on the defence side the picture is less optimistic. The decline in spending by the Chilean air force over the past decade has left its small industry struggling and now it seeks out civil niches as well as offering lower cost defence products to neighbouring states.
Chile's national aerospace company Enaer, for example, is focusing its efforts on attracting business from Brazil, the continent's economic giant. It is heading to the Latin American Aerospace and Defence exhibition being held in Rio de Janeiro next week primarily to demonstrate its subassembly capability on Embraer's civil products as well as offering its maintenance, repair and overhaul services to the Brazilian air force. Marco Sciolla, Enaer marketing manager, says the company, like many former state-owned aerospace companies, had to re-evaluate its position.
For Enaer the strategic direction decided upon over 10 years ago was to grow civilian subcontracts and use its lower labour cost base to offer services to the continent's armed forces. The company still produces and makes sales of its own aircraft, the T-35 Pillán basic trainer, but it sees its future in third-party work. "We realised we could not play in the first league, but that we can make some money by focusing on the second league," says Sciolla.
The first fruits of this strategy came in 1993 with the award of the contract to produce empennage sets for the Embraer ERJ-135 regional jet family.
This has now been followed by subcontracts for the rear assemblies for EADS Casa CN-235 and C-295; lower centre faring for the Dassault Falcon Jet 900 and 2000 series business jets; and most recently the nose cone for the Eclipse Aviation Eclipse 500 very light jet. The company has plans to grow its subcontract work by investing in complex composites, aiming at European airframers' forthcoming projects.
However, another major revenue stream for Santiago-based Enaer is the servicing of military and civilian types. The company is the maintenance contractor for the Chilean air force, for which the company undertakes routine and heavy maintenance, major structural repairs, programme modernisation and avionics modifications.
Because the Latin American fleet of military aircraft is relatively uniform, there is market potential in becoming the service centre for the southern part of the continent, says Sciolla. The company is targeting especially Central American countries with tiny defence budgets looking to outsource maintenance, repair and overhaul of their military fleets.
There is also a civil spin-off from the work, with Enaer considering entering the airline maintenance arena, using expertise it accumulated on work such as the passenger-to-tanker conversion on the Boeing 707 for the Chilean air force and maintenance of its fleet of 737s.
In the heart of Santiago, another company is following a similar course towards business growth, spotting the niches that exist in the South American market. Desarrollo de Technologías y Sistemas (DTS) was founded in 1999 as a joint venture between Enaer and Israeli defence company Elbit to upgrade the Chilean air force's systems.
In that time the company has grown from sales of around $2 million to $11 million last year. Much of this growth has been accounted for by diversification into civilian products such as retail and call centre systems, but the company has also pushed into emerging defence markets, says Eduardo Aedo, DTS sales director.
The joint venture with Elbit provided DTS with the skills it needed to develop simulator software, with the most significant deal being one this year with Lockheed Martin to deliver the visual database for the Chilean F-16 Block 50C/D full-flight simulator.
The company also specialises in radar warning systems, but at a fraction of the cost of those available from Western suppliers. "Our market objective is Latin America, but the scale of activities is small so we have to chose very tailored devices for the needs of the air forces," says Aedo.
For example, in 2003 DTS developed lower-cost static flight simulators, with removable cockpits, for the training needs of cash-strapped El Salvador. The multipurpose simulators have been sold to three nations in the region, says Aedo. "We wouldn't look outside Latin America because we would not have enough money to market the product, relative to the value of the sale," he says. South American economies are weak, with defence budgets shrinking, meaning DTS has to find cost-effective products to stand a chance of making sales, he says.
DTS also specialises in the overhaul of redundant components. Many original equipment manufacturers shed responsibility for older parts, especially if the component producers no longer exist. DTS has developed a lucrative niche repairing obsolete flight control systems for customers in Latin America, Israel and the USA.
With its 3,000km (1,860 miles)-long coastline, Chile is spread along the continent and its aerospace companies are using contacts across South America to forge new inroads into what defence spending there is.
JUSTIN WASTNAGE / SANTIAGO
Source: Flight International
