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On the Record
SAVERIO STRATI, CEO AVIO SPA
Empowered by a new ownership structure, Avio SpA is eyeing several growth markets to rapidly grow the value of the business. Avio is here for the first time. Last year its parent Fiat sold the company to the Carlyle Group (70%) and Finmeccanica (30%). "Our main strategy has not changed; we still believe strongly in being a reference partner of the major OEMs worldwide for civil engines," says company CEO Saverio Strati. But there is more to it than that. He adds that "we intend to increase our MRO services on subsystems that we design, develop and produce."
In the military engine arena a more aggressive approach is also emerging. "We are going to increase our presence in overseas markets," Strati adds. The company is partnered on several military engine programs for aircraft such as the Typhoon, Tornado and M-346 trainer. "Avio also wants to increase its presence in the field of tactical propulsion," he highlights.
There is a certain logic to the business model, particularly when looking at the company's new ownership structure. "When the main shareholder is a financial group [the Carlyle Group], it is clear that their strategy is to increase the value of their investment in the short-term," said Strati. However, he quickly adds that long-term endeavors are also receiving the support of the secretive Carlyle operation. Moreover, Carlyle has given management full control and isn't meddling in day-to-day operations.
Strati is largely upbeat about the new ownership regime: "We are more autonomous now." The greater control also comes with a burden of responsibility, though. "Our future depends entirely on us," he points out.
But the new arrangement has also saddled Avio with debt, something management never had to contend with. Strati contends Avio has dealt with those realities better than expected. "In the first eight months we reduced the amount of debt beyond our expectations."
As the company evolves, "an initial public offering is likely," said Strati. No firm timeline exists, although it could be in the next few years. There are no plans to spin off any activities.
One thing that hasn't changed with the new Avio is support for consolidation in the European engine industrial base. In the past, the company has advocated an EADS-like consolidation on the engine side. Strati thinks the time is ripe for some of these steps to be taken: "I believe this could happen in the near future." But the mode of consolidation is still to be determined. When it happens, Strati leaves no doubt Avio would be involved.
But more immediately, Avio is in advanced negotiations to join a propulsion team for the Boeing 7E7. "This program marks an important investment for the future," Strati notes, pointing to the performance enhancements Boeing is looking for.
Space is also a key element of Avio operations, since the company
holds 70% of ELV Co. —the Italian Space Agency holds the remaining
30%. ELV Co. is leading the development of Vega, a European small
satellite launch vehicle, which is slated for first launch in early
2007.
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