EADS Diversifying Base With Saudi Award
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Michael A. Taverna/Paris
EADS officials hope a new multibillion-dollar turnkey award to build a Saudi border surveillance system will boost efforts to develop a potent homeland security business while lessening the European company's dependence on Airbus commercial aircraft activity.
On June 30, EADS's Defense & Security Div. was named prime contractor for the Saudi Border Guard Development program, a vast undertaking to secure the kingdom's land, air and sea borders, that could ultimately cost $10 billion or more. The company had earlier been selected to build the first leg of the network, covering the Iraq border.
The value of the prime contract was not given, but is estimated to be 1.5-2 billion euros ($2.1-2.8 billion). The program--informally known as Miksa, after the Saudi interior ministry, which runs it--had initially been planned as a bilateral negotiation between France and Saudi Arabia. However, in 2006 the project was thrown into competition, with eight countries, each led by a "national champion," vying for the prize.
Thales and Raytheon, two other leading security system integrators, had also been considered front-runners. BAE Systems was among the short-listed companies. Finmeccanica, EADS/CASA, Russia's Rosoboron and Polytechnology of China took part in an earlier round.
The five-year program--which EADS called the largest turnkey security award ever competed on an international basis--will cover system design and installation of 9,000 km. (5,600 mi.) of fence, along with sensors and secure command, control, communications and intelligence (C3I) systems. The project will be organized on national, regional and local situational awareness levels. The Saudi-based Al-Rashid group will manage construction, and the project could entail long-term investments in the country by EADS, says Stefan Zoller, who heads the Defense & Security Div.
The program is expected to lead to follow-on awards, but whether these will be competed or integrated into the prime contractor remains to be seen. The deal initially discussed with France was a 7-billion-euro, 12-year undertaking involving up to 225 radars, 20 or so border patrol helicopters, and an undisclosed number of surveillance aircraft and patrol vessels.
The Saudi contract was the fifth for EADS as a security system integrator, including recent wins in Qatar and Romania. Whatever the deal's ultimate extent, it will mark a big step forward in EADS's quest to stake out a lead position in the field. The work also should boost EADS's objective of generating half of revenues from non-Airbus activity by 2020.
Chairman/CEO Louis Gallois says the airline industry downturn underscores the good sense of this strategy, and the company will continue moving toward that goal. If large aircraft acquisitions are out of the question until economic stability returns, investment in new technologies will continue unabated He notes that one-third of operating earnings came from non-Airbus activities last year, compared with virtually zero when EADS was formed. "There is room for further improvement," he adds.
One new twist will be to enhance connections between space and defense, which share may of the same technologies, such as radar, and could benefit by coordinating their export efforts, notes Astrium Div. CEO Francois Auque. With Astrium specialized primarily in space components and the Defense & Security Div. mainly in ground segment and electronics, there is less than 5-10% overlap between their activities, he says.
Astrium is supplying a1-billion-euro secure dual-use satellite communications network, including a ground network, to Yah Satellite Co. of the United Arab Emirates.
Photo credit: EADS
