Denel Aerostructures turnaround progressing well


Denel Aerostructures is progressing well with its turnaround and is on track to break even in 2016. Company executives say it has survived a very difficult period and is ready to take advantage of numerous opportunities lying ahead, in both the civil and military aviation markets.

“The turnaround is proceeding well,” said Ismail Dockrat, CEO of Denel Aerostructures (DAe). He said there has been an improvement in financial performance as DAe is getting more done with less. “We have survived a very difficult period and are well positioned to take advantage of opportunities lying ahead.”
“We believe we now have customers who are satisfied with what we do. Saab says we’re one of the best suppliers in the world,” he added. DAe manufactured several main components for the Gripen fighter. Dockrat added that Cedric Gautier, the Head of the Airbus A400M programme, had also commended DAe. On a recent visit to South Africa, Gautier said that DAe is “one of Airbus’s most reliable suppliers for the manufacturing of the A400M. We are pleased with the quality of workmanship and the engineering know-how available in the company.”

However, Dockrat cautioned that, “We have challenges…there are still big things ahead for us.” Having to bear an image of the ‘black sheep’ is one such challenge. The Treasury’s Budget 2012 Estimates of National Expenditure document stated that, “Denel’s aero structures business remains a challenge to the entire Denel group as it continues to be the major contributor to Denel’s losses. This is largely as a result of the A400M contract concluded with Airbus Military which is not commercially viable.”

In 2010/2011 Denel Aerostructures posted a net loss of R237 million. However, this was an improvement over the R263 million loss in the 2009/2010 financial year and a big improvement over the R328 million loss the year before that. Denel received R700 million from the treasury in 2012/13 to recapitalise DAe, which is a “strong statement of government’s support,” and enhances DAe’s ability to do new business, Dockrat said.

The treasury report states that, “A framework for the resolution of Denel Aerostructure has been developed and is underway. The framework included internal restructuring and renegotiation of the Airbus A400M work package contracts. The 2 per cent improvement in the performance of the Aerostructure business in the previous year was an encouraging sign that the company is beginning to turn around, mainly due to ongoing restructuring in the business.”

As part of its restructuring process, DAe is moving from its 75 000 square metre facility to a 25 000 square factory in order to reduce rental and consolidate the manufacturing process.

Colin Singarum, Executive Manager: Business Development at Denel Aerostructures, told defenceWeb that DAe was getting over its image as the “black sheep” of the Denel group and “Denel Aerostructures is still making a loss, but huge progress is being made.”

DAe is renegotiating its contract with Airbus and reviewing the pricing and schedule of work. In addition, DAe may be given more parts to manufacture. “We are making good progress with finalising the new contract with Airbus. We are very pleased with developments there,” Dockrat said.

He told defenceWeb that over the next ten to 15 years Airbus will be the anchor customer for the company as the A400M is its ‘anchor product’. “We will find other customers, and will find other programmes,” as experience with the A400M is helping DAe to market itself and find new business.

Apart from increasing the scope of Airbus work, the CEO said that Denel Aerostructures would like to align itself with government programmes, such as the South African Air Force, South African Express and SAA. SA Express is renewing its jet and turboprop fleet and DAe would like to see if it can secure work packages there. If the procurement of new aircraft results in offsets requirements, these may go to DAe.

With regard to Project Saucepan, the search for new maritime patrol aircraft for the South African Air Force, Dockrat said DAe is “engaging with all suppliers”. He added that Denel Aviation is the obvious choice as a maintenance provider – it can also integrate equipment.

DAe is also bidding commercially on all major aircraft build programmes, especially in Europe and the United States. “We want to do more in the civil market. We don’t want to be seen as just a military company,” Dockrat said.

As DAe is looking for new business, one of its strategies to boost activity is to focus on the five main OEMs (Airbus, Boeing, Embraer, Bombardier etc.) and look at their main suppliers and then ask them “how we can help”. Dockrat said DAe would be looking at suppliers with long production runs.

Dockrat was optimistic about the future, especially in the civil market, where major players like Airbus and Boeing have massive backlogs of thousands of aircraft. “Despite the economic downturn, outlooks looks robust,” he said. With the rising oil price airlines are renewing their fleets with more efficient aircraft.

DAe’s involvement in the civil aviation sector extends to its manufacture of horizontal tailfins for the Gulfstream G150 business jet – it is the sole supplier for that component and has built a dozen so far this year. The G150 contract was awarded several years ago after DAe successfully bid for it.

Dockrat said that the business aviation market suffered greatly during the global recession but is recovering. “We have seen the number of G150 shipsets increasing gradually. The outlook for the market remains positive.” He said there was a strong correlation between the state of the global economy and the business aviation market. “The G150 gives us a profile in the civil market. We want to build on it.”

Apart from A400M components (wing to fuselage fairing and top shells) and G150 tailplanes, DAe is manufacturing drop tanks for the Rooivalk attack helicopter and has just finished supplying some extra rotor blades for the Air Force’s A109 Light Utility Helicopters, which it assembled.

On June 18 Saab and DAe marked the conclusion of Saab’s contract regarding Gripen components. DAe has delivered 603 main landing gear units, rear fuselages and pylon sets to Saab, which has used them on Gripens for a number of export nations. Although the contract has ended, DAe said it is maintaining its relationship with the Swedish company for future projects.

DAe has a wide variety of equipment to manufacture parts, including a five-axis cutter, three autoclaves for curing composite materials, freezers for keeping parts at –18 degrees, clean rooms for composites production, furnaces for melting and curing and baths for anodising, chemical etching etc.

An operations area is able to design parts from scratch and set up the necessary manufacturing processes to actually build those parts. DAe has the ability to produce parts from scratch – for instance, it has designed, certified and produced components for the A400M.

After the part is designed, it is produced: either machined, pressed or made out of composite materials. Then special processes are applied to parts, such as anodising and plating, heat treatment, painting and marking. The part is then tested (through X-rays, dyes, acoustic testing etc.), assembled and shipped.