Italian exports

Strong regional growth predicted

1st Nov 2010


Italy has consistently been ranked as having the world’s 9th or 10th largest defence budget and – not surprisingly – is also a major exporter of military hardware and systems. Most of this activity is now consolidated in the form of the Finmeccanica group, which is Italy’s second largest company.


The origins of Finmeccanica date back to 1948 when the company was established as a holding entity to manage state participation across significantly different areas of activity: from the construction of short-to-middle range aircraft, through to automotive, electro mechanics and railway technologies. At the time in Italy there existed a system known as ‘country participation’, which saw strong political party influence and patronage exercised in highly strategic sectors, such as the automobile construction.


The year 1982 saw the start of the so called “Great Finmeccanica” project, which brought about the centralization of Italian companies that had core business in space technologies, defence systems, robotics and microelectronics - thus enhancing the cooperation among all of them, something that was at a minimal level before that time. Finmeccanica also began the acquisition of financially troubled assetts such as Aermacchi, the globally known aeronautical company that specialized in training and light tactical support airplanes. Aermacchi was fully purchased twenty years later. The process was dogged by continual political rivalries, and the structure only finally emerged in 1987 under the name of Finmeccanica S.p.A.


The first milestone in the new company’s history was achieved in 1989 when STET, a communication company, transferred to Finmeccanica three key businesses: Selenia, active within space technologies and defence systems which later merged with Aeritalia creating Alenia; the robotic and industrial automation corporation Elsag; and some shares of the Italo-French joint-venture SGS-Thomson, known soon after as ST Microelectronics. In the following years Finmeccanica was listed on the Stock Exchange, when part of its assets were privatized and it entered new international contractual agreements. Particularly relevant was the establishment of the joint venture known as AMS, which was established with Britain’s BAE Systems, and AgustaWestland - making it the second largest helicopter manufacturer in the western world. These economic maneuvers also allowed Finmeccanica to become the third largest company in Europe in the defence sector.


Today the Finmeccanica Group is the leading Italian manufacturer in the high technology sector and it plays a key global role in aerospace, defence and security industries. Its three strategic pillars include helicopters, offering a comprehensive range of machines from its subsidiary Agusta Westland, in both civil and military markets, defence and security electronics, ranking second in Europe and among the global leaders, and finally aeronautics. As far as defence is concerned, the Group companies in this sector include SELEX Integrated Systems, with a focus on homeland security and air traffic management systems; SELEX Galileo, which is active in avionics, electro-optical and UAV systems; SELEX Communications, whose area of expertise lies within advanced military and secure communication systems. In addition, DRS Technologies provides integrated products - including defence and support services for the armed forces, government agencies and contractors worldwide. Another player is Elsag Datamat, who are involved in the design and development of systems, services and solutions addressing automation, security, transport, defence, space and IT applications; SEICOS, which designs and manages next generation telecommunication networks, and finally SELEX Service Management, who supply services and applications for the management of complex ICT platforms.


In summary, Finmeccanica either directly or – just as commonly in conjunction with international partners - develops and produces missiles, torpedoes, naval artillery and armored vehicles, energy, for the supply of power generation plants and component, and rail transportation. Thanks to an entity known as the Space Alliance, Finmeccanica has become Europe’s leader in the space sector: Telespazio is one of the main international operators in satellite management, earth observation, satellite navigation and integrated connectivity, while Thales Alenia Space is active in the development and production of satellite systems for navigation, telecommunication, meteorology, environmental monitoring, defence, scientific missions and earth observation.


Although headquartered in Italy and counting approximately 43,000 employees in-country, the company also has a strong presence in two other markets with significant production assets: the UK with a staff of 10,000 workers, and the US with a workforce of more than 12,000. In Europe, Finmeccanica also has a presence in France, Germany and Poland, and is continuing to carry on its expansion plans, establishing a growing network of partnerships in emerging countries worldwide. Depending on the potential of each country of interest, the Group forms co-operative agreements with local partners to boost its presence in specific civil sectors (helicopters, regional aircraft, ATC systems and port security systems), it carefully monitors modernization programs as far as defence and civil infrastructure is concerned, and has already registered significant success in consolidating its presence through long-term investments and partnerships.


Turning to the Asian region: Malaysia: long-term partner and solid platform for the future


Finmeccanica actively took part in DSA (Defence Services Asia) held in April in Kuala Lumpur, together with its subsidiaries AgustaWestland, Alenia Aeronautica, Oto Malera, SELEX Integrated Systems and SELEX Galileo, this significant presence demonstrating a commitment to the region and allowed the company to further strengthen its relationship with the Asia-Pacific market. Malaysia is regarded as a key regional market and the country has developed close links with Italy over many years with a solid industrial alliance, embracing multiple sectors such as air traffic control, defence and security. The industries of both countries cooperated in various programs and Malaysia represents a fundamental partner for Finmeccanica’s strategy of growth within the region, also evidenced by the recent opening of a representative office in Kuala Lumpur and different joint ventures established in the country.


In the helicopter market, AgustaWestland boasts experience in Malaysia that dates back more than twenty years: helicopters of various models were sold to the country - being deployed for military tasks and also for government and commercial use. Part of the current operating fleet include eleven AW109 LOH used by the Malaysian Army and six Navy “Super Lynx” 300s, while the AW139 has entered into service with the Malaysian Fire and Rescue Department and the Malaysian Maritime Enforcement Agency (MMEA). The helicopter’s manufacturer works through its subsidiary, AgustaWestland Malaysia Sdn. Bhd., based at Kuala Lumpur’s “Sultan Abdul Aziz Shah” Airport and handles support and maintenance services on a regional level.

The Malaysian division of the manufacturer continues to play a major role in the Malaysian helicopter market, expanding its presence and increasing its capabilities through a continuous program of investment. At the same time, SELEX Integrated Systems, along with with local partners have created two joint ventures specializing in the integrated logistical support sector, aiming to boost growth of Malaysian industrial know-how through technological transfer. The first joint venture – Colmenia - operates within the naval-industry sector, managing various activities with other Finmeccanica-owned companies. The other, ATS (Advanced Traffic System), which employs over 120 specialized technicians, provides technical assistance and maintenance to air traffic control radars. On the avionics side, SELEX Galileo has established a partnership with Khassim Maon (MKG) addressing the commercialization and technical support for the precision approach radars used by the Malaysian Air Force.


The various Finmeccanica companies believe they have valuable opportunities in the country for the short-to-medium term. AgustaWestland believes that – in addition to other helicopter types - the AW139 will be involved in government and commercial activities, including related Coast Guard duties. During DSA, Alenia Aeronautica provided presentations on the innovative ATR 72ASW - a militarised version of the regional commercial aircraft ATR 72 conceived for anti-submarine warfare. In addition the company also promoted the ATR 42MP, a maritime patrol version of the civil ATR 42; the military tactical transport C-27J “Spartan” and the Eurofighter “Typhoon” twin engine supersonic multirole fighter built in cooperation with Britain’s BAE Systems and EADS from Spain and Germany.


Alenia Aeronautica has shown a strong interest in the Asia-Pacific region, particularly with respect to the C-27J, with a potential export market including India, Taiwan, Australia, Vietnam, Thailand, Indonesia, Brunei and Malaysia.
Alenia Aermacchi enjoy a growing presence in the region. Alenia Aermacchi’s MB-339CM trainer is in service with the Royal Malaysian Air Force with the M-346s version selected by the Philippines, signing a contract in 2008 for the acquisition of 18, which will be delivered shortly. The order book has received a recent boost with the order by the Republic of Singapore for the supply of 12 advanced M-346 training aircraft, with delivery of the first aircraft expected in 2012. Finmeccanica chairman and CEO, Pier Francesco Guarguaglini, expressed his satisfaction: “The selection of the M-346 by the Singaporean government represents a huge success for the Italian high-tech industry and confirms the international supremacy of this aircraft. We are especially proud to be chosen by an air force such as Singapore’s, which is well-known for being one of the most sophisticated in the world, with extremely careful and precise selection processes. The selection of the M-346 by Singapore paves the way for new successes in other global markets, where important campaigns are already under way”.


Artillery manufacturer Oto Melara is in the process of promoting its products of small and medium caliber naval artillery, as the Malaysian Government implements a weapon systems modernization program for the Coast Guard. Additionally the company has shown interest in the Malaysian Navy construction program for new vessels. The company is also interested in the sale of new systems or updating existing products. In so far as ground forces are concerned, Oto Melara is also supporting the Army for the acquisition of new 8x8 vehicles equipped with Hitfirst 25-30mm guns.


SELEX Integrated Systems have proposals for upgrades for the ATC systems, the Port Security System for the Malaysian Ministry of Transportation, and the monitoring systems for the exclusive MMEA economic areas.
AgustaWestland: operations, targets and strategies.


Each one of Finmeccanica subsidiaries plays a different role and has specific targets within the Asia-Pacific market. Probably the most significant is AgustaWestland which has seen significant growth and increasing success in several countries. The Japanese helicopter market was targeted by the manufacturer with the sale of various helicopter types for military, government and commercial applications, totaling orders for around 100 aircraft so far. In support of its increasing business activities in Japan, AgustaWestland opened its new regional business headquarters in Tokyo in 2008, which plays an important role to further expand the company’s business in a country considered fertile ground for future expansion.

Several partnerships involving key players such as Kawasaki Heavy Industries, Mitsui Bussan Aerospace, Marubeni Aerospace, Kaigai Aviotech and Kanematsu Corporation have further reinforced the role of AgustaWestland in Japan through industrial partnering and customer support agreements. Three new helicopters were delivered to customers in Japan last April, highlighting the continuing growth of the company in this important market. These new aircraft include the first AW119Ke delivered to a country in the Asian region. This is an 8-seat single engine helicopter ordered in April 2009 by a private customer, now operated as a VIP transport helicopter based in Kitakyushu in Southern Japan, and which is the latest AgustaWestland machine to be certified by the Japan Civil Aviation Bureau following the A109, AW109Power and AW139 models – all of which are in service with commercial and government entities in Japan.


The Japanese Coast Guard also signed a contract for six additional AW139 medium twin helicopters, which will be used to perform rescue and maritime patrol missions. The total number of AW139s operated by the country’s Coast Guard currently amounts to eleven, while the entire fleet of AgustaWestland helicopters operating in Japan has now reached seventeen. The helicopter producer sees a significant number of new opportunities in the Japanese market for various commercial purposes including VIP/corporate transport, emergency medical service (EMS), electronic news-gathering (ENG), fire fighting, disaster relief and utility applications.


In the South Korean market AgustaWestland sold the AW139 helicopter for corporate transport, patrol, search, rescue and fire fighting, while the AW119Ke and AW109Power are in service with the Korea National Police Department. In addition the Navy operates the “Super Lynx”.


Growing success is also seen in the Australian and New Zealand helicopter market. Orders for over 50 commercial and military machines have been received in the two countries so far, and have a 50/50 chance of selling the NH90 to the Royal Australian Navy (for which the prime is NHI rather than Eurocopter). With the opening of AgustaWestland Australia Pty. Ltd (AWAPL), the company believes it will enhance its marketing and sales activities within the region. The AW109LUH type is an essential part of the manufacturer’s offer for an integrated helicopter aircrew training system for the Australian Defence Force under AIR 9000 phase 7. Also, the AW109Power light twin helicopters are being operated by the Royal Australian Navy (RAN) to provide its aircrew with improved training capabilities and to perform ship-borne operations. Recently New Zealand has signed a contract for six AW109LUH light twin military helicopters and a dedicated flight simulator.


Looking at the commercial market, the best selling AW139 has rapidly become the medium twin machine of choice for a conspicuous number of operators in the area. The Queensland Government and that of New South Wales operate their AW139s providing emergency medical and rescue services to the community. Helicopters New Zealand (Helicopters NZ) ordered five offshore transport-configured AW139s to further boost its capability to support leading petrol companies. Also the AW109Power and the AW109Grand light twins have proved to be successful, especially as far as VIP transport is concerned, while the AW119 single engine is providing effective EMS service with the Taranaki Rescue Helicopter Trust in New Zealand. The support for the fleet of AgustaWestland commercial helicopters in Australasia is provided by the authorized distributor Heliflite Pty Ltd., which offers maintenance and repair services. Additional service bases have been opened in Brisbane and Auckland.


The role of the subsidiaries


SELEX Communication, the Finmeccanica lead global supplier of land, naval and avionic secure communication systems, designed to protect critical infrastructure for civil, military and government customers, has operated in the Asia-Pacific region for the last twenty years. Over 13,000 Personal Role Radio (PRR) have been sold to Australia in the past five years and are currently used by the Army. However, the area of interest for SELEX Communication is not limited to Australia. The subsidiary is actively promoting various products throughout the Asia-Pacific region, including the future soldier modernization programs, which includes the Joint Project 2072 for Australia, where SELEX Communication is ready to offer its know-how and expertise in the C4ISTAR (Command & Control, Communications, Computers, Information/Intelligence, Surveillance, Targeting Acquisition and Reconnaissance) area.

Another program, the Soldier System Radio (SSR) was developed from the company’s leading position as a supplier of military Personal Role Radios (PRR) and as a radio supplier for multiple Future Soldier programs in Europe and the rest of the world. It is a highly innovative radio, which enhance the functionality and performance for the soldier-system environment. Thousand of SSRs have been already adopted within the Asia-Pacific region.


SELEX Communication has also been developing the so-called, Software Defined Radio (SDR) equipment, offering extreme flexibility in multiple mission sceanarios and responding to the new communication needs. In addition, the company has developed the Military WiMax, a technology responding to the increasing need for extending the range of previous communication systems, permitting both Line of Sight (LOS) and Beyond Line of Sight (BLOS). The Finmeccanica company has been at the forefront in developing military WiMAx solutions, having provided it to numerous customers worldwide. Many countries in the Asia-Pacific region have expressed an interest in this technology and a number of orders have been received to date, though many details remain confidential.


SELEX Galileo has also been active in the design of a product known as Guardian protection against Remotely Controlled Improvised Explosive Devices (RCIED). The product supports electromagnetic compatibility solutions that may be necessary for co-located operations beside communication and other systems. Many countries in the region have also expressed an interest in another SELEX initiative: the Sentinel Voice over Internet Protocol (VoIP) Tactical Networking capability, a technology that could replace legacy systems that are no longer supportable. Sentinel uses an advanced architecture to support interoperability across levels of command and features a wide range of commercial and military interfaces, and can be used to support the progressive migration of legacy systems to new technological environments.


SELEX Galileo has an established presence in Singapore, Australia and India. In addition it is targeting the diversified and growing South Asian defence and security market, leveraging its wide range of services such as the protection systems for fixed and rotary wing aircraft, UAS development, advanced sensors, and surveillance mission systems. The company works closely with Singapore Defence Science and Technology Agency (DSTA), as well as the Armed Forces, currently proving EO equipment for the F-50 Maritime Patrol Aircraft (MPA). Other than providing integrated solutions to program requirements, the company has shown particular interest in potential MPA programs and can offer devices ranging from EO turrets, which integrate the ERICA Plus camera and radar, to form the complete mission system known as ATOS (Airborne Tactical and Observation System). Together with its management office in Singapore, SELEX Galileo is promoting the combat-proven HIDAS (Helicopter Integrated Defensive Aids Suite), which offers protection to rotary aircraft, and the AGP (Aircraft Gateway Processor) based on the HIDAS core processor technology. SELEX Galileo is offering the Indian armed forces its wide range of next-generation sensor systems, providing highly successful ISR solutions such as the previously mentioned ATOS mission management system which integrates the “Seaspray” surveillance radar family and an efficient Airborne self-protection and situation awareness system.


India: avant-garde technology and long term commitment


During more than forty years of activity in India, Finmeccanica has worked side by side with the country in multiple development projects. This commitment has seen the establishment of a company office in New Delhi and an industrial presence that counts more than 400 highly qualified employees. The Group is actively taking part in key projects together with influential players from Indian industry - BHEL, BDL, HAL and Tata Sons to name a few - and is currently seeking new strategic alliances in the public sector, as well as with private businesses and important government research centres. There is a growing realisation that India is placing a great deal of emphasis on national security matters, which creates the potential for cooperation with all the different Finmeccanica subsidiaries. Several of these are already active in the country and are marketing products and systems for military and civil electronics.
Alenia Aeronautica is offering the C-27J “Spartan”, to the Indian military. This tactical transport aircraft is capable of a wide variety of missions including the transfer of troops and paratroopers, MEDEVAC, search-and-rescue, in-flight refueling, humanitarian assistance, firefighting operations and several customized roles.

The company, as part of Eurofighter “Typhoon” is offering the aircraft in the MMRCA (Medium Multi-Role Combat Aircraft) competition. Additionally the anti-submarine ATR 72ASW and the maritime patrol ATR 42MP twin turboprops are considered to be strong prospects for sales. Alenia Aermacchi proposes a wide range of training aircraft and services: the basic trainer SF-260TP, the intermediate jet trainer M-311 and the innovative advanced M-346 “Master”.


AgustaWestland provides support for the “Sea King” helicopters to the Indian Navy. After starting its role as a supplier for the country back in the 1970s, the manufacturer recently finalized a contract for 12 AW101 heavy helicopters addressing government needs. The company has also formed a joint venture with Tata Sons for the final assembly of the single-engine AW119 in India. With an eye aimed at present and future needs, AgustaWestland says the company is capable of satisfying the requirements of the Indian Armed Forces with helicopters such as the AW119, AW109LUH, NH.90 and AW101. The company argues that these are ideal for various tasks, both on land and embarked aboard naval vessels. Its commercial presence in India has been increasing over the last few years thanks to the sale of over 30 helicopters, including the AW119, AW109 Power, GrandNew and AW139. Finally, with a growing fleet and an improved order portfolio, AgustaWestland has expanded its service network in India in order to guarantee higher levels of support and maintenance to its customers.


SELEX Integrated Systems, the producer of products addressing the homeland security market is able to combine the experience of all of the companies belonging to the Finmeccanica Group within network-centric working environments. Missions include guarding national borders down to individual streets, harbours, airports, railway stations and crucial infrastructure. The company can also provide the Indian armed forces with integrated systems for naval vessels, as well as C3I and C4I systems for ground use and radar surveillance systems.


SELEX Communication has been present in India for more than 20 years, providing tactical and naval avionic communication systems, either directly or in collaboration with HAL and BEL (Bharat Electronics Limited). In the future, this Finmeccanica subsidiary would hope to exploit its experience in the secure military communication field with introducing a variety of next-generation systems. SELEX Communication is also present in India for tactical communications, Battle Management Systems and also telecommunications components.


SELEX Galileo regards itself as an ideal supplier for new generation sensors needed by the Indian Armed Forces, both for the modernization of the existing platforms as well as for new programs. As far as avionic surveillance systems are concerned, the company offers advanced solutions such as the Seaspray AESA radar and the previously mentioned mission system known as ATOS.


Finally, the space industry sector is seen as a vital market, as India has always shown a strong interest in this field and is expanding its role as both a satellite producer and provider of telecommunication services, meteorology research and earth observation information. The new objectives of India’s space strategy include the exploration of the Moon and a variety of manned space missions. This market represents an area of considerable possibility for Telespazio and Thales Alenia Space, to leverage off their existing capabilities in the satellite and space services domains. As well as these commercial applications and opportunities, the Indian Armed Forces are believed to be in the market for more satellites for military applications.

Defence Review Asia at a glance