Just over a year ago we explored Denel Aerostructures (DAe)’s plans for the South African Regional Aircraft (SARA) project. The past year has been a great one for the company, so we decided to have a detailed look at its history and speak to CEO Victor Xaba and deputy CEO Theo Kleynhans about the future of SARA and their impressive turnaround and plans for diversification.
A Brief History of DAe
DAe, a division of the largest manufacturer of defence equipment in South Africa Denel SOC, was established in 1964 as Atlas Aircraft Corporation. In 1992 it was absorbed into the Denel SOC conglomerate and its name changed to Denel Aviation. In 2006 the division was separated into what is now DAe, the manufacturing division, and Denel Aviation, specialists in the servicing and maintenance of several kinds of aircraft.
Since Denel SOC began it has sought not only to become leaders in military aerospace and landware defence in their own nation, but also to become world leaders in their field. Denel SOC has had many international clients and currently enjoys business from countries as diverse as Ecuador and Finland. Not only does it provide systems and components to its industrial client base, it also provides systems and consumables to end users. The company also benefits from its involvement with a number of equity partnerships, joint ventures and cooperation agreements with important international players in the global defence industry.
As for DAe, it now has the largest aerostructures facility in Africa, a plant with 500 staff members and 28,000m2 in which to work. The world-class facility allows for a manufacturing process that results in the assembly of ultra-lightweight aerostructures for the global aerospace market.
DAe’s progress and team of highly skilled employees means they are now design partners to Airbus Defence and Space, and have also been involved with other companies such as Agusta Westland, BAE Systems, Boeing, SAAB and Honda Aircraft Company.
It is DAe’s engineering solutions that make up an important part of the company’s value to their clients. In being able to offer engineering solutions that are not linked to their manufacturing programme they offer unusual depth and capability when it comes to the development of new technologies, as can be seen in the successful implementation of their products.
One Year Ago for DAe
It’s always interesting to check in with a growing company after a year has passed. However, it’s safe to say that a year in the aerospace industry, especially in terms of the development and manufacturing of aircraft, is not a long time at all. The years between the conception of an aircraft and its first flight can easily reach double figures, which is understandable when considering the costs, complexities and safety considerations that go into making an entirely new product.
When we spoke to previous CEO Ishmail Dockrat last year he introduced us to what was at the time DAe’s newest project, unveiled at the African Aerospace Exhibition in September 2014. The ongoing project, SARA, is to be led by DAe and involves a large amount of cooperation from the most important sections of South Africa’s aerospace industry.
Dockrat told us about some of the market research and plans for the aircraft last year. “The evidence suggests that there are lots of these kinds of locations on the continent that would have a need for such an aircraft. For example, in the South African context, it’s places like Pietermaritzburg, Polokwane and Nelspruit, specifically those kind of municipalities, that we’d be looking at for this kind of aircraft”, he explained. “We believe that we have a contribution to make towards connecting communities and making it easier for people in urban centres to be able to travel point-to-point.”
The gap in the market has arisen due to a combination of consumer demands and the fact that current technology is simply out of date. Current aircraft, using twenty-year-old technology, are no longer economical or fuel efficient. Few of them are pressurised, which means they cannot fly above weather – both problems SARA will be designed to address, and subsequently take its dominant place within the market.
A year ago DAe had recently unveiled SARA and started its leadership of this important development in South Africa’s aviation industry. SARA was born of a desire to maintain the company’s design and development capabilities, which had been taken to a new level after the creation of the Rooivalk military helicopter.
The concept for SARA is that of a new turboprop airliner covering low density routes and seating 17-24 passengers, and specifically targeting destinations with short airfields not served by scheduled flights. In the past DAe have specialised in defence, but while defence possibilities are being looked at for SARA it is currently being viewed as a civilian aircraft.
Developing an entirely new aircraft is a challenging process and a venture that can carry substantial risks. In order to mitigate this DAe have been undertaking an extensive marketing survey in order to gain insight into how the proposed aircraft might meet demand within the industry. Victor Xaba explains that “what we decided to do was to conduct an independent, international market study and we selected a consulting group and commissioned them to do the study for us. It’s a sizable team working for a number of weeks and they were able to provide us with very substantial information”.
Luckily, the information gathered seems to bring good news for the ongoing SARA project. Xaba says that “the study clearly indicates to us that there is a good market for the SARA concept. The market exists for of a number of reasons. Firstly there is the growth that is taking place in that sector, particular the zero to 800 kilometre range. There is also the fact that SARA is a point to point aircraft, which means it can operate on short airfields. In areas like Asia, Malaysia, and South America there is quite a lot of requirement for that type of point to point activity”.
This positive market research means that the development plan, originally anticipated to last seven years, can continue to go forward. “The funding model for an aircraft like this will always be ambitious, so taking these challenges we have now started to launch activity with industry, with government and with the aerospace community in South Africa in order to attack these aspects of the market”.
It should be noted here that the SARA isn’t DAe’s own initiative. Instead, due to their expertise and history of development and design they have been chosen to lead a team of designers, engineers, manufacturers and investors, so that the final aircraft will not be a DAe product, but the whole project will have been led by the company.
Xaba identifies the next year for SARA as being one in which business plans become well defined and secured and can be implemented alongside the early stages of design. “We have got a number of strategies that we have launched in order to ensure that we can take us to a prototype design phase, a default business plan, a default program plan, an industry collaboration plan and a national benefit plan, so those are our specific targets for the next 12 months’, he explains.
While SARA takes up a lot of DAe’s time and energy there is another ambition at play behind the scenes, and this is for DAe to break into the international market. The Rooivalk military aircraft was recognised as an excellent product and many were surprised it didn’t garner significant international interest. DAe have worked with the Finnish navy, and the Swedish defence force have also expressed interest in their products. However, the international market is something they’re still keen to break, and the SARA project will be important in achieving that aim. Theo Kleynhans says that “clearly we would like to now move on and leverage off past successes in order to penetrate other markets and customer areas”.
In order to diversify their customer and product portfolio DAe have been working with US Aerospace giants Airbus and are looking to develop similar relationships with Boeing and HondaJet, with whom they have already secured a contract. They are also looking to break into the European market, and if the SARA project is successful it should find demand from around the world.
DAe’s plans for diversification are part of bold new strategies for the company, involving restructuring and moving away from the constrictions of project-led management. Kleynhans describes DAe’s new direction as a “cultural break”, which will necessitate “proper education and getting everyone on board with a joint vision, aligning everyone to their goals and making sure that we all work together if we can”. Delivering new strategies means taking a hard approach, explains Kleynhans: “When you make a restructure programme you have got to allow management to work quite disruptively and take the odd risk, calculated as it may be. You cannot use the soft approach – it just delays the pain”.
These strategies are seeing DAe through the final stages of a turnaround plan implemented several years ago. Kleynhans says that “we are forecasted to make profits this year. Which is of course always part of the turnaround plan, and I think we are achieving this one year ahead of target”. With good news like this it’s likely things continue to improve for DAe, and that SARA will be soon be a presence in the skies of Africa, and perhaps around the world.