AEROSPACE & DEFENSE

Saudi Arabia 2020 | INDUSTRY & DEFENSE | B2B

Northrop Grumman and AACC are investing in R&D and human capital to help the government develop a sustainable and efficient defense sector on par with the best.

Walid Abukhaled
WALID ABUKHALED
Chief Executive Middle East
Northrop Grumman
Mansour Bineid
MANSOUR BINEID
CEO
Aircraft Accessories & Components Company (AACC)

What should the Kingdom focus on to achieve Vision 2030's goal of spending 50% on local industry and ensuring high-quality manufacturing?

WALID ABUKHALED The first step was completed in 2016, when the government outlined clear defense-related policies and a proper industrial defense strategy to achieve the goals of Vision 2030. We are beginning to see the concrete results of these plans, such as when the Cabinet approved the regulations to establish the General Authority for Military Industries (GAMI) and the Saudi Arabian Military Industries Company (SAMI). This will help develop a local defense ecosystem that is both sustainable and efficient. Working on the localization goals is important for Saudi players, but it is just as crucial for international companies. Bringing real technical capabilities to the Kingdom and developing programs with the local ecosystem will have to be part of any foreign contractor's strategy. The localization strategy becomes truly effective when it is reinforced by adequate R&D investments. We need to get to the point where the Kingdom can develop its own product line and export it.

How have your commercialization and Saudization efforts developed?

MANSOUR BINEID Our focus on landing gears has been proceeding with work requests by the Royal Air Force to overhaul its A-330s. In 2019, we witnessed many contracts across our four lines: A-330, F-15 SA, MRTT, and Typhoon. We are looking to stabilize the work process to improve efficiencies on production rates and develop our people's capabilities. Investing in our people is our main target, and our Saudization plans have also advanced at a positive rate. We have recruited a batch of 25 young Saudis, and we are seeking to develop their skills through training programs, each for specific segments, but across a wide range of areas. In this sense, key areas of focus have been lifecycle management, supply chain, pricing, leadership, and project management.

What is your overall assessment of the warfare environment?

WA Saudi Arabia is one of the largest importers of defense equipment in the world, and, given the regional security challenges, I do not see this changing. In the long term, the goal is to become an exporter. As technology matures and advances, there will be additional opportunities across all operational segments, from control systems to intelligence, surveillance and reconnaissance, and traditional munitions. Saudi Arabia is focused on achieving efficiencies, and there will be greater emphasis on cybersecurity as well as command, control, communications, computers, intelligence, surveillance, and reconnaissance and sustainment in defense. We are extremely well positioned within these industry developments, and we see ourselves as a true strategic partner of the country in developing these capabilities.

How do you expect your new facility and the acquisition by SAMI impact your business?

MB The 100,000-sqm facility is designed according to the latest engineering specifications and international standards. Moving to this new facility will more than double both our flexibility and capability, especially regarding the F-15 program. Since it was inaugurated, Boeing provided us with seven projects, and four of them have already been completed. The acquisition of SAMI comes also as a significant step; we are the first and so far, the only company acquired by the newly established entity, and this deal was the result of total alignment between our shareholders' vision and ambitions. On the operational side, it will help AACC reap a larger share of the benefits from the growth of the aerospace industry.

What is your assessment of the technical capabilities of local employees working in the Saudi defense industry?

WA From a human capital point of view, Saudi Arabia has undergone enormous changes in the last decade and has greatly increased the pool of available technical talent. In 2018, we sponsored the STEAM Innovation Challenge at King Abdullah University for Science and Technology, where 300 students from 16 universities created solutions for regional and global challenges in cybersecurity, supply chain localization, and the environment. This is the type of innovation we are looking to foster across the Kingdom.

Why should MRO players pay attention to R&D?

MB The aerospace industry is defined by a very high-pace of technological development and innovation, often spearheading other industries. As such, keeping up with major updates and trends is crucial. Striking a balance between purchasing and internal development is thus paramount to achieve long-term, sustainable growth. To achieve this balance, we created a platform to share thoughts on any topic, and it has already produced concrete results. Another area that R&D efforts should be directed toward is materials. If we can use 3D printing or other ways to manufacture materials, we could revolutionize our industry.