Airlines India, Indian Airlines

Lancashire workers could find themselves moving to the Middle East as the impact of a multi-billion pound aerospace deal kicks in.
Staff at BAE Systems are expected to be offered the chance to move to Saudi Arabia after the kingdom strengthened its relationship with the UK by agreeing to replace its ageing fleet of fighter jets with 72 Eurofighter Typhoons.

The deal, which was confirmed by the Ministry of Defence yesterday, is worth around £7 billion to the manufacturer’s bases in Warton and Samlesbury, both near Preston, which employ 9,000 people and are at the heart of the programme.

However, it is believed Saudi Arabia will want a percentage of the lucrative maintenance and upgrade work, estimated to be worth £10 billion, to take place in the Middle East.

South Ribble MP David Borrow, a member of the parliamentary defence committee, believes that could be BAE’s significant operation in the kingdom being extended.

He said: “I would think they would be looking for a long-term maintenance facility to be based in Saudi, in partnership with BAE, which already has a large base in the Middle East.

“That could be extended as part of this deal, which further solidifies the UK relationship with the Saudis, I am sure they will be looking to work in partnership with BAE on an maintenance and upgrade work.”

Hundreds of other companies – from high-tech engineers to local restaurants – in Lancashire are also expected to benefit as suppliers.

North West Aerospace Alliance executive director Martin Wright, which represents many of BAE’s suppliers, said: “Any major order has a positive impact on other companies, as well as bringing stability to the presence of a major economic engine like BAE in the region.

“Obviously there is the engineering impact it will have on the economy, but the presence of a major employer like BAE somewhere like Warton or Samlesbury has an impact on local shops, restaurants, all sorts.”

BAE has a long tradition of links with Saudi Arabia since it first sold its Lightning jets to the kingdom in the 1960s. That was followed in 1977 by a deal which led to billions of pounds of work coming to BAE over the years.

Around 5,500 people, many originally from Lancashire, currently work at BAE’s base in the Saudi capital Riyadh.

An ambitious attempt to revive South-South economic cooperation around India, Brazil and South Africa (IBSA) is expected to receive a major fillip when the heads of state of these developing country majors meet in Brazil during the second week of September.

While the IBSA countries compete with one another in world markets and logistical constraints hamper expansion of trade, analysts believe there exists considerable opportunity for these three developing countries to technically collaborate with one another in specific high-vallue areas such as aerospace and atomic energy.

On Sep.13, when India’s Prime Minister Manmohan Singh meets his counterparts from Brazil and South Africa, an attempt would be made to thrash out a trilateral free trade area (FTA) agreement. The proposed agreement would not just be among the three countries but involve regional groupings, that is, SACU or the South African Customs Union (comprising South Africa, Botswana, Lesotho, Swaziland and Namibia) and MERCOSUR or Mercado Común del Sur (comprising Brazil, Argentina, Uruguay, Paraguay and Venezuela — with Bolivia expected to join in).

It was in June 2003 that the foreign ministers of India, Brazil and South Africa first met in Brasilia to set up the IBSA dialogue forum. This forum became a formal initiative with meetings in New Delhi (March 2004), Cape Town (March 2005) and Rio de Janeiro (March 2006). There is widespread agreement that trade among India, SACU and MERCOSUR can go up considerably in the years ahead.

Intra-IBSA trade currently accounts for only two percent of the total volume of trade carried out by the IBSA countries. No single IBSA country is among the top ten trading partners of the other two countries. Yet, trade among the three countries and regional groupings has gone up considerably in recent years.

Two-way trade between India and MERCOSUR more than doubled between 2001 and 2005 from less than one billion US dollars to 2.3 billion dollars. Similarly, bilateral trade between India and South Africa has gone up by 133 percent in these four years from 1.3 billion dollars to 3.1 billion dollars. Trade among the IBSA nations could rise to 10 billion dollars by 2007.

After a series of discussions among representatives of four academic institutions and non-government organizations — the South African Institute of International Affairs (SAIIA), Business Unity South Africa (BUSA), the Consumer Unity & Trust Society (CUTS) from India and the Institute for International Trade Negotiations (ICONE) from Brazil — the conclusion that emerged is that the IBSA countries would benefit considerably if they cooperated with one another in developing their respective aerospace industries.

“The concept of IBSA originated in the desire of all the three countries to reform the United Nations Security Council but it then went way beyond this political idea to become an initiative for economic cooperation,” Peter Draper, head of the “development-through-trade” programme at the Johannesburg-based SAIIA told IPS recently in Pretoria.

“All three IBSA countries have vibrant democracies, are at comparable levels of development and have similar problems in dealing with poverty,” said Mbulelo Rakwena, diplomat and chief director for Latin America and the Carribean in South Africa’s foreign affairs department. Given the “chequered history of South-South cooperation”, he hoped the IBSA initiative would not ‘’degenerate into a talk shop reiterating platitudes” or become an exercise in “empty political dialogue”.

Jerry Vilakazi, chief executive officer, BUSA, says that despite the fact that many pronouncements are made about South-South economic cooperation, “developing countries have a higher comfort level in trading with countries in the North, including their erstwhile colonial masters”.

One constraint hampering trade among the IBSA countries is the high cost of transportation. Consignments from India and Brazil to South Africa first travel to Europe before reaching their destination because of low trade volumes, thereby increasing freight costs. Because of similar considerations, that is, low traffic, it is less expensive to fly from India to the U.S. than to Brazil, although Brazil is closer.

Despite the fact that the three countries have been acting closely with one another during negotiations at the World Trade Organization, the IBSA nations compete in international markets to export leather, garments and agricultural commodities like cotton and sugar to developed countries. At the same time, there is considerable potential for the three countries to cooperate in industries and sectors such as biotechnology, pharmaceuticals, ethanol and mining operations, besides aerospace.

Investment relations among the three countries have been ad hoc and erratic: Indian pharmaceuticals producer Ranbaxy has a presence in both South Africa and Brazil and vehicle manufacturers Tata Motors and the Mahindra group have invested in South Africa. India, in turn, has received investments from South Africa’s diamonds major De Beers and SAB Miller in alcoholic beverages. However, there have not been any major investments by Brazilian firms in either India or South Africa. While Brazil is the second largest recipient of foreign direct investment after China, India and South Africa are both conspicuous by their absence in that country.

Although language barriers have hampered economic relations among the IBSA countries — in India, it is difficult to find Portuguese translators though not Spanish ones — what has acted as a real dampener is lack of awareness about one another’s countries. A survey conducted by SAIIA, CUTS and ICONE found that most businesspersons interviewed in the three countries were not even aware of the IBSA initiative.

Nevertheless, there is consensus that just as South Africa can act as a hub for trade with the entire continent of Africa, and Brazil for Latin America, India too could act as a gateway for trade and economic relations with the entire SAARC region — the seven countries of the South Asian Association for Regional Cooperation (SAARC) comprise India, Pakistan, Sri Lanka, Bangladesh, Nepal, Bhutan and Maldives.

Pranav Kumar, policy analyst with CUTS, told IPS that the one important industry in which the three IBSA countries could come together despite logistical constraints is aerospace. “India is strong in military aircraft and space technology, Brazil has a lot of expertise in building passenger aircraft, while South Africa is ahead of the two others in the area of aviation electronics,” said Kumar, adding that there was “mutual complementarity” in this sector that could be built upon.

Mario Marconini of ICONE says that since Brazil’s aircraft manufacturers were among the country’s most important exporters accounting for exports worth two billion dollars a year, “there is a need for aviation experts in the three countries to sit together to work out how best technical cooperation arrangements can be worked out”. He adds that all three countries would stand to gain a lot from such cooperation as the international aerospace industry was growing at an impressive, sustainable pace of 25 percent a year.

Another area of technical cooperation could be civilian nuclear energy that is expected to get a boost once the recent agreement between the governments of India and the U.S. is finalized. Brazil and South Africa are both members of the Nuclear Suppliers Group and both have backed India’s position on relaxation of rules for supplying nuclear fuel.

Union officials are holding talks with a Wrexham aerospace company to try to avert more than 50 redundancies.
Magellan Aerospace Structures based at Llay, has told staff the jobs are at risk following the loss of a major contract with the Airbus plant at Broughton in Flintshire.

It is understood the specialist engineering company will axe 55 posts.

Amicus spokesman John Hamilton said they were trying to save the jobs, adding: “This is a big blow.”

He added: “We’re trying to establish this north east corner of Wales as a centre of excellence for the aerospace industry and this is a setback to those objectives.”

Mr Hamilton, a regional officer with the engineering union, said they had been told 40 jobs were under threat in the factory’s fabrications department and 15 in the treatment plant.

Magellen specialises in precision engineering, metal surface treatments and assembly of aerospace components.

Amicus said the lost Airbus contract was in connection with the Hawk 800 business jet, which is built by the American aerospace giant, Raytheon.

The Broughton plant supplies wings and other components for the aircraft.

Mr Hamilton said: “Unless the company can bring in another large order, it looks certain that jobs will go.”

Nobody from Magellan Aerospace Structures was available for comment on Monday.

B/E Aerospace Inc. more than doubled its second quarter profits, earning more than $18.7 million on sales of $271.5 million during the three-month period.

During the second quarter of 2005, the airplane cabin interiors maker earned $8.4 million in profits on sales of $207.6 million.

B/E Aerospace’s higher profit margins equate to earnings of 24 cents per diluted share during the second quarter of 2006, up from 14 cents per diluted share in 2005.

The commercial aircraft division of B/E Aerospace (NASDAQ:BEAV) is based in Winston-Salem. The division reported $182.1 million in sales during the second quarter, up 33.5 percent from a year earlier.

The Navy’s new submarine-snooping jet will look familiar to plenty of frequent fliers. But it won’t be your father’s Boeing 737.

Boeing has a $4 billion initial contract to build just five test airships based on the venerable 737 design. At least one facet will be comfortably familiar in the new P-8A: its brains still will be designed and built by Smiths Aerospace engineers here.

Smiths has headquarters in England, but its local operation is at 3290 Patterson Ave. SE, the former Lear Siegler plant. There, 150 design engineers are racing to create military navigation systems to control flight and missions for the retrofitted jet. If the Navy ultimately orders all 108 war planes, Smiths expects to make $200 million from the deal.

Friday, engineers and the rest of the crew at Smiths got their first look at the Navy plane simulation. Their tour was just steps away, in the company’s parking lot where Boeing parked a tractor trailer loaded with interior trappings of the militarized 737.

“It’s a multimission platform, able to detect submarines, surface ships and other aircraft,” said Lon Nordeen, Boeing’s manager of international marketing. “It takes a proven 737 airline, and puts a whole new systems suite into it.”

Although the war plane will carry weapons, its first function is to survey the seascape.

Mission management governs onboard systems for sensors, missiles, communications and other weapon-related functions. Its commercial or military applications are used on the Airbus A380, Boeing 787, and Lockheed Martin F-35 JSF.

Flight management systems, also developed locally, provide software and navigation technology used on aircraft including the 767 tanker, C-130 AMP, E-2, E-6 and Nimrod.

Boeing’s tractor trailer is carrying its jet simulator to 30 sites around the country, including Navy bases where future pilots for the P-8A will be stationed. It is slated for test flights in 2009, followed by more than 100 planes starting in 2013.

Smiths is one of four major suppliers to the P-8A, winning the first contract in May 2004.

“It just was a natural fit for us,” Smiths’ Jim Smith said. “We already are the flight management supplier to the commercial 737.”

That passenger plane dates back to the mid-1960s. The Navy version will be based on the 737-800, the latest in a line of more than 6,000 aircraft.

“It’s a cost-effective solution for the taxpayer,” said Dale Masbruch, Smiths vice president of flight management systems. “The reliability’s much higher.”