Switzerland special: Foreign service

Less than 10 years ago, state-owned RUAG was effectively an arm of the military. Today it is a very different fighting force

From repairing business jets in Geneva through building fuselages for Bombardier regional aircraft to resurrecting the Dornier 228 turboprop, RUAG is a much bigger and more diversified business than the organisation which came into being nine years ago as a merger of Switzerland's state-run defence manufacturing assets.

In 1999, 86% of RUAG's revenues came from the Swiss government. Today, though Berne remains its biggest and most important customer and RUAG is state-owned (albeit at arms length), that share is under 40%. Aerospace - the largest of RUAG's three business groups - has led the way in the diversification strategy, with the biggest push into civil manufacturing and service and support. "That trend will continue," says Philipp Berner, executive vice president for aircraft and defence systems. "But we are still very focused on delivering our core product to the air force and government. The more external business and the more volumes we can generate, the more we can keep our prices down for the domestic customer."

RUAG's aerospace activities, worth SFr580 million ($572 million) in 2006, represent roughly half of the overall RUAG business, which also includes a defence and security division - mostly concerned with integrating weapon and command and control systems - and ammunition manufacturing. Sales across the group are split 55% in favour of defence, although that share is falling, and 47% maintenance and services as opposed to manufacturing.

Fairchild dornier

One of RUAG's most significant acquisitions was much of the Fairchild Dornier business in Oberpfaffenhofen, near Munich, after the assets of the bankrupt regional aircraft manufacturer were auctioned in 2002. Although it did not take over either of the company's two jet programmes, the facility allowed RUAG to branch into aerostructures for civilian aircraft as well as expand its maintenance and overhaul operation. Oberpfaffenhofen is a major supplier of structural assemblies to the Airbus A320 family and A330/A340, including pressure bulk heads, side shells, fuselage sections, tail cones and floor structures. The business will from next year begin manufacturing the aft fuselage for Bombardier CRJ700/900 regional jets, following Mitsubishi Heavy Industries' decision to focus its aerostructures activities on Boeing.

The German site is also one of RUAG's biggest centres. With 65,000m2 of floorspace, RUAG supports families of aircraft including Dorniers, Bombardier Challengers and Globals, Gulfstreams and Cessna Citations, as well as German armed forces Bell UH-1D helicopters.

Another interesting project out of Oberpfaffenhofen is the restart of Dornier 228 production. RUAG took over responsibility for the 19-seater fleet as part of the acquisition. However, the company has no plans to pitch the aircraft at a shrinking civil market. Instead, the aircraft - fitted with a glass cockpit - will be manufactured in low volumes and marketed at the special mission sector, says Berner. "It fits into our defence market and we are responding to market pull, but it is not correct to say we are developing a new aircraft or becoming a major manufacturer of aircraft again. We have stopped that years ago," he says, referring to early Swiss efforts to establish home-build aircraft programmes.

RUAG Aerospace is also involved in innovative technology projects. Last year it converted a Gulfstream G550 into a high-altitude and long-range research aircraft - known as HALO - for Germany's aerospace research centre (DLR). The aircraft will be used for atmospheric research and earth observation. RUAG also produces the Ranger unmanned air vehicle, which Swiss police plan to use to monitor crowds at this summer's European soccer championship in Switzerland and Austria.

The part of RUAG Aerospace that Berner specifically looks after is Swiss air force support, with additional customers who use the same equipment from Latin America to Asia. "We exploit the unique selling position of Switzerland: our high quality and reliability," he says. "It is a market where customers are willing to pay the for Swiss quality at a fair price."

Civil maintenance - RUAG also has facilities in Stuttgart, Berne, Geneva, Lugano and Zurich - is harder. "It's highly competitive, with lower prices than defence, and a more local business," says Berner. What RUAG can bring is synergies with its defence overhaul business. "We support the local operations in component maintenance. Often components are the same on business jets and defence aircraft." Aerostructures is also highly competitive, says Berner. "Cost is much more of an issue. The key is playing the supply chain. It's as much about organising than manufacturing."

Source: Flight International