On the Record with
Shimon Eckhaus, Marketing VP, Israel Aircraft Industries

IAI Targets $1 Billion in Asia This Year

Despite the instabilities in the world markets, 2001 was a good year for Israel Aircraft Industries. With new contracts amounting to nearly $2.9 billion, representing annual growth of 11%, IAI proved that its geographical and operational diversification strategy is working even in tough years.

"We sustained an impressive growth despite unexpected difficulties in several important markets, such as the economical pressures in Turkey, the decline of the technology sector in the world, and the sharp decline in the commercial aviation market," says IAI marketing VP Shimon Eckhaus.

"The business we accumulated in 2001 provides the flexibility and capability to plan our future strategies with a high degree of confidence," he told Show News. IAI notched growth of 3.9% in exports in 2001 to $2.195 billion, compared to $2.112 billion in 2000.

Asian markets represented 25% of the exports, amounting to $541 million.

IAI has become a global enterprise, operating in 92 countries. Its great diversification widespread reach allow it to persevere despite difficulties in specific countries and markets, and to wait for better conditions. Besides Turkey, such pressures have been experienced in Southeast Asia and Latin America.

"Until 1997 we sustained an annual growth rate of 8%, but since then, our growth almost doubled up to 15% level," Eckhaus says. "Much of this growth was generated by focusing on growth delivering activities and changing the organization to become more competitive and efficient."

"We realized there are many advantages to working with partners, and that in many programs they provide an important added value, beyond their direct contribution in products and technologies, logistics and market access," Eckhaus says. IAI and HAL of India recently disclosed such a partnership.

Another focus has been a vertical approach to marketing, integrating products and services provided by various divisions and plants within IAI, its subsidiaries, and local partners. IAI has likewise streamlined its customer service activities. The cyclic character of the commercial aviation market, and long-term cycles of defense procurements, makes such a long-term strategy a must for major market players, Eckhaus says.

In a bid to better balance its commercial and military activities, IAI last year sold its Galaxy Aerospace operations to Gulfstream. In space, two IAI satellites are now operational-Amos for communications and the Eros-1 imaging satellite. Orders for three more, including Eros 2, Amos 2 and Ofeq-5, a new Israeli spy satellite, were received in 2001, too. Orders for two Amos communications satellites were received last month; they will to facilitate broadband communications from China, in part looking ahead to the 2008 Olympics Games.

The Israeli department of defense is also planning to buy a defense communications satellite, most probably from IAI.

IAI's commercial aviation activity is centered on its Bedek division. The company is working to cope with the slowdown in the aviation market, and is broadening its activities to cover more platforms and engines, including the V2500.

IAI operates in numerous countries in the Asian region, mostly in defense programs, and especially in UAVs. Korea, India, China, Singapore, Australia and Thailand are the most dominant export markets for Israel, where UAV programs are already operational and more are expected. Contracts with China were frozen last year, as the Israeli government cancelled the sale of PHALCON AEW aircraft under U.S. pressure. But following the conclusion of the compensation terms with China in February 2002, marketing efforts in this market are also expected to resume. Sri-Lanka also proved to be an attractive market, buying and upgrading systems, including helicopters and fighter aircraft.

"Our target for 2002 is to double our activity and sales in the region, reaching over $1 billion in sales," Eckhaus says.

By Tamir Eshel