CASA president Raul Herranz talks about his successful business strategy.
Julian Moxon/MADRID
WITH VIRTUALLY no rain in recent months, and the city now suffering the hottest weather in recent memory, the atmosphere in Madrid this summer is hardly refreshing.
Unless, that is, one talks to CASA president Raul Herranz about his success in transforming the company's fortunes over the last two years.
Since he took over the job in 1992, Herranz has not only reversed the company's financial performance, but he has completely changed its strategy, turning away from the regional- aircraft sector to focus on its traditional niche in light/medium military transports.
The first profit for seven years, Ptas1.2 billion ($10.35 million), was reported in 1993, a year after Herranz was appointed president. In 1994, the figure trebled, to Ptas3.4 billion.
"We have shown that CASA is more efficient than a lot of other aerospace companies in Europe," Herranz says, pointing out that CASA, unlike many of its European counterparts, cannot rely on a home market for the major portion of its sales. "We depend very little on contracts from our Government, which means we have had to be diversified in our approach to the market," he explains.
Exports accounted for 87% of CASA's total sales for 1994. Herranz points out that the last local delivery of CN.235 transports was in 1993 (18 aircraft) and, with the Government fighting to reduce Spain's budget deficit the immediate future holds little hope for similarly sized orders.
"I have defined three strategic objectives for CASA," says Herranz, "to maintain and consolidate our position in light/medium-sized military transports, to participate in all European programmes as risk-sharing partners, and to maintain and develop our well-known technological capabilities, especially within composites, where we have become, a centre of excellence".
The decision to reduce the emphasis on the CASA 3000 70-seat regional airliner, was taken neither easily or quickly, Herranz, realising that the project had become important to the workforce in terms of being a visible means of securing the future, also saw, however, that it made no sense to go ahead with a programme, for which the figures did not add up. "I didn't want to put the company at risk for one programme. We had no customer base in that sector, and I was aware that none of the regional manufacturers is making a profit."
Talks with other potential regional-aircraft partners bore little fruit, the most progress being made with British Aerospace, where a joint venture involving the 29-seat Jetstream 41 and the CASA 3000 was briefly considered. The attempt was abandoned in December. "The figures were not attractive," says Herranz. BAe then joined ATR, forming the AIR group announced at the Paris air show in June.
CASA remains committed to a regional partnership, insists Herranz, "but it can only be justified if there is a new aircraft. Our criterion is also that it should be launched within the framework of Airbus Industrie." He agrees that a 100-seater is the most likely new programme. "Airbus needs such an aircraft to compete with Boeing," he says.
The money for development of the CASA 3000, amounting to around $600 million, "...remains available". This would have paid for around two-thirds of the programme (BAe was expected to supply the remaining one-third). Herranz adds, however, that, "some negotiation would be needed" with Brussels, "...since it was approved for a 70-seat turboprop, and not a 100-seat jet".
Herranz's attention then shifted to developing what he calls CASA's "niche" market: light/ medium military transports. "We are the leaders in the world in this sector in terms of the number of aircraft sold," he says, "and we have aircraft in 60 countries, which gives us a huge customer base." Sales of the CN.235, the basic version of which was developed jointly with Indonesia's IPTN within the Airtech consortium, total 212. The aircraft is often offered against Alenia's larger G222 transport and Herranz claims that, the CN.235 has clocked up twice as many export sales in the past ten years.
Development of the CN.235 has continued uninterrupted since the CASA version entered service in 1987, but Herranz is now planning a more radical change, to meet the demand for what he calls a "larger" aircraft. This is likely to be a stretch of the existing airframe to accommodate an extra pallet (the aircraft now takes three). While the decision to go ahead is not final, it is likely, says one source close to the company, to be launched in mid-1996.
Further improvements will concentrate on increases in power, and the changes necessary to accommodate the stretch, such as a strengthened wing and larger rudder. The aircraft will be entirely developed and funded by CASA, although Herranz declines to say how much the stretch would cost.
The smaller C.212 remains popular, with 460 sales since its service entry in 1974, and delivery of six aircraft to Thailand this year. Herranz wants to keep the C.212 in the market as long as possible. "The light-transport market needs an aircraft like this...it is the only one of its size with rear cargo doors, and which is purely designed for military transport," he says.
The challenge, however, is to maintain the C.212's image as a product which is seen as modern. "So, we are launching a new version, the C.212-400, to send to the market the message that we still have the will to go on developing the aircraft, according to Herranz. Improvements will centre on an electronic flight-instrument-system "glass cockpit", a modernised main cabin, and a possible change in the flat-rating specification of the AlliedSignal Garret TPE331-10 power plant.
Increasing its share in European risk-sharing partnerships is CASA's second strategic target. The company has a 4.2% stake in the Airbus Industrie consortium, and around 30% of its income is derived from Airbus sales. "I would like to increase that stake at the first opportunity," says Herranz. He makes the point that while CASA's total sales in the aerospace sector are "four or five times less" than those of main Airbus partners Aerospatiale or DASA, "...our income from Airbus sales is about ten times less, which doesn't correspond with our relative weight in the aerospace industry".
Herranz admits, however, that taking a larger share "is not possible while Airbus remains a GIE [Groupement d'Interet Economique]". The new Airbus Military Company subsidiary, formed at the Paris air show, to manage development of the Future Large Aircraft (FLA) military transport, "may provide the opportunity to do it", although, any increase in its stake in the existing civil-aircraft consortium, would have to be based on a new Airbus programme.
The FLA itself "...makes a lot of sense...for myself, I'm convinced it is a must for European industry," says Herranz. He adds that the Spanish ministry of defence, the air force, and the ministry of industry "...are all in favour" of the programme. "The concept is seen very positively," he adds. Spain's budget deficit, although it is being reduced, makes any short-term decision difficult. "I'm talking to our Government about it," he says.
CASA is a risk-sharing partner in the Saab 2000, responsible for the wing, and has subcontract work for Boeing and McDonnell Douglas. Investment in its new automated composites-manufacturing plant near Madrid is already paying off. "We have invested to be the best in Europe. Now we're ready to manufacture much larger composite surfaces on aircraft such as the FLA, or Airbus growth versions," says Herranz. Space activities are also growing, with heavy involvement in the new Ariane 5 launcher, in the Helios 1 satellite, and the Envisat polar platform. CASA is also responsible for the platform of the Minisat national satellite programme.
Work on its portion of the Eurofighter, in which CASA has a 13% stake, includes design and development of the wing, production of four right-hand wings, and of the rear fuselage. The company is also responsible for the first two-seat prototype (DA6) which is due to be flown in January 1996. While Herranz admits, that having final assembly in each of the purchasing countries is "not the most efficient way to do it", he adds, that for CASA, the main cost will be in building a new hangar, "which is not such a significant investment", in terms of the added value to Spanish industry of the programme.
Privatisation of CASA is not on the cards, says Herranz. "We are a government-owned company operating under market conditions, living within our own balance sheet," he says. Debt was reduced "very significantly" to Ptas13.7 billion by the end of 1994, from more than Ptas20 billion a year earlier. Productivity is improving, "...although not as fast as I would like", and the workforce, now 8,240-strong, has been cut by 20% over the last five years. Partial employment has been introduced. "We have a good understanding with our unions," says Herranz.
Talks with South Korea on joint development of the KTX-2 advanced trainer, in which CASA would have a 20% stake, continue, although budget difficulties have yet to be resolved.
"The Governments are very interested," says Herranz, "but we still do not have a proper research-and-development allocation...we're trying to see how it can be solved." CASA clearly intends to hold its position as one of the "big five" European national aerospace companies and, with its immediate and long-terms strategies now set, and profits rolling in, there is clearly no danger of the company wilting in the summer heat.
Source: Flight International
