Nicolas von Kospoth, Managing Editor of defpro.com, talked to John Craig, CEO of the Paramount Group, about AHRLAC, as well as the company’s role as one of Africa’s largest defence contractors in regional and international defence and security markets.
defpro.com: First, could you please provide our readers with a brief overview of the Paramount Group?
John Craig: The Paramount Group is at this point Africa’s largest private defence contractor and one of the fastest growing defence companies in the world. It was founded in 1994 and focuses on providing a broad spectrum of fully integrated turnkey solutions to global defence, peacekeeping and internal security forces.
Paramount has established itself as a global innovator with the development of one of the world’s most modern and advanced families of armoured combat vehicles, and a revolutionary aircraft, the first aerial platform of its kind. Integrated with the latest technologies in electronic systems, these world-class platforms enable Paramount to deliver a total defence system to its customers.
The Group is a leading innovator in the design and development of state-of-the-art products that it manufactures in locations throughout the world. It is partnered with some of the world’s largest and most reputable organisations in the global defence community.
Paramount Group has the unique ability to understand its client requirements and to use its extensive knowledge and experience to design cost-effective, future-proof solutions. As a result, Paramount has enjoyed strong growth and achieved an excellent track record of delivering successful projects.
defpro.com: How do you assess the achievements of the Paramount Group during the first half of the year and what are your overall aims and prospects for 2012?
Craig: 2012 is proving to be a very good year for us. We obviously don’t measure our results in half years. But, certainly, this year we are growing by almost 30 per cent over the previous year. Thus, it has been a good first half for us; our facilities and our personnel are all very busy on various orders and I think that the second half of the year is equally important for us. We are at the point of hopefully closing some major deals, which you will naturally hear about in due course. But we will have a lot of very important activities in the second half of the year.
defpro.com: In September 2011, the Paramount Group unveiled the Advanced High-Performance Reconnaissance Light Aircraft (AHRLAC). Could you first please portray this aircraft to our readers?
Craig: AHRLAC is a unique type of aircraft. It is a manned aircraft operated by two persons, a pilot and a systems operator, sitting in a tandem configuration as they would in an attack helicopter. To our knowledge there currently is no other aircraft in this solution space.
AHRLAC offers a number of unique aspects. This includes its unrestricted canopy, purpose-designed to give you all-round visibility for intelligence, surveillance and reconnaissance (ISR) roles. Further it has a turboprop pusher-propeller configuration, offering the crew an unrestricted forward-visibility. So it not a conventional “engine front/propeller front” aircraft that has been pushed into a reconnaissance role for which it was not originally conceived.
defpro.com: When the aircraft was unveiled, Aerosud’s Managing Director Paul Potgieter called AHRLAC a “revolutionary aircraft”. Which are the main characteristics and capabilities of AHRLAC that make it revolutionary?
Craig: The aircraft was designed with a flexible ISR and light attack configuration in mind. So this is not a commercial light aircraft that in an afterthought has been configured for these roles. That is what gives rise to a unique construction and concept.
A second aspect is that multi-mission capability was part of the initial consideration. It carries a payload pod underneath the fuselage that can be fitted with different mission payloads. This allows the aircraft to be reconfigurable and rapidly adapt to various types of missions. As you can imagine, this has great benefits for the customer’s investment, as one base platform can be adapted to various missions, according to the need and the time.
defpro.com: Let’s run through the development history of AHRLAC: When was this project conceived and which development stages have since been completed?
Craig: AHRLAC is an opportunity or a gap in the market that we recognised about four or five years ago and leading us to embark on the development of an aircraft. The only aircraft comparable and operating in the sort of sphere might have been the Bronco, an American aircraft that has not been in production for many years.
It required the spark of somebody making the decision that South Africa should develop its own aircraft. Our chairman, Ivor Ichikowitz, loves all things related to aviation and came to realisation that South Africa actually had competence with the development and construction of aircraft. Although South Africa already had a big chunk of this competence, which is shown in the development of the Rooivalk attack helicopter, in service with our Air Force, it is really a first in Africa that an aircraft is conceived and designed from scratch.
Ivor had the idea that it is time for South Africa to step up and not just be a maintenance facility for other companies and for products designed a long time ago. The more exciting part of life is to develop an own intellectual property. This is the only way to grow real competence and great careers.
In terms of milestones achieved, the concept works and the wind tunnel testing is completed. Further, we have accomplished hundreds of missions with a quarter-scale model, which demonstrated the aircraft’s fundamental stability and flight performance.
We are now in the phase of building our first full-scale flying aircraft, which is well advanced. We will be showing key subsystems of the aircraft to selected visitors to the AAD trade show in September and we are hoping to have the first platform assembled towards the end of this year, with the first flight scheduled for the first quarter of 2013.
defpro.com: Which key industrial partners are involved in this project and to what extent have governmental agencies contributed to the development effort?
Craig: AHRLAC is a private-funded initiative. The Paramount Group is funding the development and commercialisation. Our technical partner is our associate aerospace division, Aerosud. We benefited from their experience with previous aircraft, such as the AH-2 Rooivalk attack helicopter, and their general aerospace competence. Although our technical partner helped us in the development effort, this remains a programme funded as a private venture by the Paramount Group.
Of course, we have a lot of interest and support from the government, in the broader sense, as this is seen as a strategic type of project around which aerospace competence would be developed here in South Africa. But it is important to know that this is not a government-funded project.
defpro.com: Do you consider AHRLAC as a platform that complements the capabilities of unmanned aerial vehicles (UAVs) or, rather, as a manned competitor?
Craig: I think AHRLAC is both. There are a number of roles in which it is complementary to UAVs. However, our philosophy is that a man in an aircraft for surveillance roles has got huge advantages over UAVs, which are able only to see and feed back the information of what the camera is looking at in the particular point in time. To our mind, the human being still offers the best all-round surveillance. An aircraft crew can recognise objects of interest at a distance and then zoom in their cameras or sensors for a closer look. Therefore, we believe that a manned aircraft makes a lot of sense in this role.
There are a number of missions which you can naturally only carry out with UAVs and we are not suggesting that UAVs are dead because AHRLAC was conceived. There will always be missions in which it would be extremely dangerous to send a manned aircraft. But a general all-round aircraft, which can be deployed from training through to general surveillance to protecting borders and key installations, as well as having the ability to intervene and deliver an end-effect with weapons? This is a spectrum of capabilities, which we don’t believe can be found with UAVs at this point.
defpro.com: An often-cited argument in favour of UAVs is lower costs. Considering that AHRLAC is a manned platform, does is still offer the affordability advantages over platforms with comparable capability profiles?
Craig: Of course, otherwise we would not have invested in such a programme. It is important to recognise that UAVs range from very light hand-launched close-range aircraft to massive and incredibly expensive aircraft with high-altitude/long-endurance capability and high payload competence. The latter cost up to a hundred million of dollars per unit and only the richest countries on earth can afford to acquire and operate them. The initial acquisition cost for a UAV is only one part of the equation. You then need operators trained and a vast footprint of support, personnel and equipment to be able to launch, support and recover a UAV.
This is an area where AHRLC is completely differentiated, being designed to be self-sufficient, with a two-man crew operating from unprepared airfields and performing their mission with a minimum of personnel to support them. When you look at mission costs or the entire systems costs, the type of UAVs that you would compare to AHRLAC in terms of mission competence, are vastly more expensive.
defpro.com: Which particular markets do you target with this product and what market potential do you assess for AHRLAC?
Craig: AHRLAC is not only a product for the developing world. We received a huge amount of interest in this concept from developed-world air forces and security forces. And there are a number of potential customers who are very actively monitoring and tracking the system’s development. I think that global demand will run to thousands, if not tens of thousands, units of the system. But time will tell.
We have plans to set up production facilities in South Africa. But it is important to note that our global aspirations will also see us, in time, set up manufacturing activities in other regions of the world. This will certainly include Asia, where we had a lot of interest in major programmes and from industrial partners wanting to be part of our global manufacturing set-up.
Our projections for the market size say that it could support more than one manufacturing centre abroad. Our plan is not only to create a global manufacturing centre in South Africa, but also to go and seek out partnerships abroad and to establish regional manufacturing and distribution arrangements.
defpro.com: I understand that the Africa Aerospace and Defence (AAD) tradeshow in September 2012 will be an important event for the Paramount Group. Which particular trends in the African defence and security market do you perceive and how is the Paramount Group positioning itself at this year’s AAD show to address these trends?
Craig: AAD is for us an important market trade show that reaches most directly the African market, which is our natural expanded home market. This coming edition will see an expanded exhibition from Paramount, representing our largest presence at an exhibition so far. This will include a considerable number of new products from the fields of land systems, aerospace and electronic systems, which we plan to make visible at the show.
Another trend is that the show itself is growing, becoming well-entrenched as the leading show to reach the African market, much as IDEX is for the Middle East. The regional importance of the show is being confirmed and that is also evidenced by an unprecedented amount of international exhibitors – not only from the South African industry but everyone who has an interest in the country’s market in general.
The AAD trade show is an important event where South African companies can show that they are still innovating and coming up with new and relevant technologies for global demand.
defpro.com: Would you say that the international awareness of the potential of South African defence industry is growing in terms of cooperation and foreign investment?
Craig: Yes, I think so. Wheeled armoured vehicles have long been a figurehead of South African defence industry, going back to even before the Second World War. That is evidenced by the Mine-Resistant Ambush Protected (MRAP) vehicles of many allied forces, which have seen high-profile use in modern-day conflicts. All of those really have their origin in South African technology.
Nevertheless, there was a period some years back when the industry in South Africa was shrinking, re-examining itself and uncertain as to where it was going. But this year’s AAD exhibition will show that there is a resurgence and growing relevance of South African technology, not just to African but also to global markets.
defpro.com: The Paramount Group has made the headlines with interesting development and production cooperation projects with countries such as Azerbaijan, Jordan and naturally many African customers. Would you say that the Paramount Group has a special feeling for the needs of emerging markets, as well as countries that are not gifted with voluminous defence budgets?
Craig: The simple answer is “yes”. These are the markets that we have been working in for almost 20 years, since our inception in 1994. We listen to the market demand and are responsive, in terms of the products that we are creating for these markets, but also with respect to our business model, of creating supplier credit finance and funding structures, which allow our developing-world customers to take on large projects and spread the financial burden over several years. We have projects that we fund for developing-world governments up to 15 year terms. That is something we have done in response to market demand, which has helped grow the business and customer demand.
It is not only the appropriateness of the products for the developing world, meaning that they must be robust, flexible and good value for money. It is also a flexible business approach, which helps customers fund the project, as well as actively supporting the transfer of skills, competence and technology, and creating regional partnerships in key markets to manufacture and support products. These are all fundamental elements of our business philosophy, which possibly gives us a better fit to the market requirements than some of the more traditional NATO-based manufacturers.
defpro.com: African air forces mostly still operate fleets of ageing US, European, Russian and Chinese aircraft. Many of these aircraft are not in an operable condition and budgets will not allow for considerable modernisation or procurement programmes. Will the African military aviation market still be dominated by donations or low-cost sales of surplus aircraft?
Craig: This is an interesting question. You are quite right that there are a lot of legacy fleets dated back to the cold war and largely Soviet-origin aircraft dotted around the continent. More and more of these aircraft are reaching their end of life and it will be very difficult and probably not economically worthwhile to look at doing life-extension programmes. The question is: what after that?
Part of the solution we have found is in supplying and supporting surplus aircraft, such as the South African Air Force Mirage fighter aircraft, which Paramount actively supports. Further, we have a number of customers to whom we have transferred aircraft, providing a fundamental air force capability. But of course, that is only a small part of the market.
From what I can see, the African market is still a key market for lead-in fighter trainers and multi-purpose jets. In a few instances there is demand for super-sonic fighter aircraft – the Chinese are quite active in that respect. However, the new-built super-sonic aircraft market in Africa is not really one that the Paramount Group is going to enter in the short term. There are only very few countries in the region that can justify the acquisition of a top-end type of combat capability.
But this is a market in which an aircraft such as AHRLAC can actually play an important role, considering the real-world requirements, which involve national and border security, as well as securing economic zones.
defpro.com: How do you assess the potential of closer industrial cooperation with companies from emerging markets to field new solutions for customers in these regions? Or are projects such as AHRLAC emblematic for Paramount’s own efforts to field suitable products for these markets?
Craig: The field is wide open. Both, from the point of view that there is regional demand, as we observed in the case of AHRLAC, as well as due to existing regional competence. India and Brazil have well-established industrial competence in aircraft manufacturing. Further, our business model is such that we would encourage partnerships with competent industrial partners in those regions. There are a number of discussions on the way. So don’t be surprised if in a year or three we have industrial manufacturing centres in various regions.
defpro.com: To sustain the level of quality and diversity of the Paramount Group’s products and services, the company requires competent specialists from many fields of activity. How is the Paramount Group involved in creating and fostering a workforce that also builds on the potential of South Africa’s and other African countries’ labour market?
Craig: Sustainability for the long run requires the renewal of your product line-up and renewal of your human resources – human capital is the most important one. In our land systems and aerospace fields we established an innovation and training centre, which is separately funded and set-up from our ongoing production activities. That is where we grow and nurture young talents – the next generation of innovators – and create an environment in which they can learn from the more experienced colleagues, but also have the freedom of mind to think outside the box and develop new skills. This is not just about product development, it is also about technologies including production techniques. We are actively supporting and investing a lot of money to make sure that we are sustainable in the long run. We need to attract and grow the right talents to take the company forward.
defpro.com: What is your assessment of the South African government’s efforts to creating a favourable economic environment for defence companies and encouraging indigenously developed defence solutions?
Craig: I took a while for our new government during what I would call the dawn of the new democratic era to understand the position and the value of the indigenous defence industrial complex and to recognise that defence industry can actually have an important national economic function. However, our government is being very supportive in terms of developing and creating high-value jobs and creating a platform in which intellectual property can be generated in South Africa. This helps South Africa to become an economic centre around which the commercial benefits of value-add of intellectual property may steadily increase.
There are a number of initiatives that our government is pursuing, including through our Department of Trade and Industry (DTI). Among them is the creation of aerospace and defence villages, attempting to create a cluster of like-minded business that support each other and yield a critical mass of industrial partners.
So, in general, our government has a realisation of the role that they can play and they are creating and facilitating an enabling environment.
defpro.com: Finally, what are your personal visions and aims for the course of the Paramount Group in the next years?
Craig: One of the objects that we have set to ourselves is to become a billion-dollar company in the next three or four years, in terms of our sales revenue. I know that size is not everything, but it is certainly a globalised target that we have set ourselves. Even though we are not there yet, we are well on target.
Apart from that, our objective is to remain a company which is fun. Of course we are a serious player, dealing in serious matters of defence and security. But Paramount is a company which is committed to allowing its employees to work in a fun environment and to be free to innovate and think of new ways of doing things. There is a strong desire in the Paramount Group, while continuing to grow, to retain its core cultural values and to be a company that is different and a good place to work.
Courtesy of Defence Professionals (defpro.com), first published at http://www.defpro.com/daily/details/1045/
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