Denel Aerostructures (DAe), the loss-making aerospace division of Denel, has plans to diversify its income streams after successfully renegotiating a contract with Airbus Military worth hundreds of millions of rand related to the A400M military transport aircraft.
Ismail Dockrat, the chief executive of DAe, said that the new agreement would strengthen DAe’s capacity to market its products and services to other aircraft manufacturers and to enter into new partnerships for future projects.
Dockrat said at a function this week at which the renegotiated agreement was signed that DAe was one of a select few companies outside of Europe responsible for the design and manufacturing of vital parts on the high-speed turboprop aircraft and it had already ramped up its production of vital parts for the A400M that would be delivered to customers in the coming months.
DAe, which received a R700 million recapitalisation from the government last year, reduced its losses by two-thirds in its year to March but still dragged down the financial performance of the state-owned Denel group.
The division underwent a major restructuring between 2009 and last year but is only projected to break even in the 2016/17 financial year.
Dockrat said the restructuring reduced its headcount from just over 700 to 380.
He said DAe would have to remain as lean as possible for the next two to three years while it ramped up for the A400M contract, but there would be a gradual rise in jobs as the division got to the serial production phase of the contract.
Dockrat stressed that DAe could not rely on the A400M project alone and wanted to diversify its income, noting that the company had other contracts, the most important of which was for Gulfstream’s G150 business jet.
DAe had used the A400M deal as an anchor contract and leveraged its position with Airbus to secure new business. “Our strategy is not to rely on this one contract only. The extent to which we will be able to generate more jobs is a direct function of the extent to which we can win new business.”
Dockrat said the position achieved by DAe should not be underestimated and it was now a recognised mature tier-one supplier to Airbus
“If you keep that customer happy and are delivering on time and on quality that means everybody in the aerospace industry globally looks at you as a reliable supplier. That is very important for us,” he said.
Malusi Gigaba, the Public Enterprises Minister, encouraged DAe “for its own growth” to use the experience and knowledge acquired in the A400M programme to diversify its revenue streams.
He said DAe was one of the significant pillars to the government’s vision of establishing a flourishing aerospace industry, which was one of the most effective sectors for the generation of industrial technology and the development of technical skills to drive economic development.
“The aerospace sector is identified in IPAP2 [the new industrial policy action plan], alongside nuclear and advanced materials, as one of the sectors with the potential for the long-term development of the advanced capabilities necessary to change the economy’s structure.”