CHAPTER 7 Technology Transfers in Commercial Aircraft Support Systems Contents

Page INTRODUCTION ...... 247

COMMERCIAL AIRCRAFT SUPPORT SYSTEMS IN THE . 249 Commercial Aircraft Support Systems ...... 249 Commercial Aircraft Support Systems in the Middle East: Current Status . . . . . 251 Perspectives of Recipient Countries and Firms ...... 261 Perspectives of Supplier Countries and Firms ...... 275 Future Prospects ...... 291

IMPLICATIONS FOR U.S. POLICY...... 292

SUMMARY AND CONCLUSIONS ...... 293 APPENDIX 7A: COMMERCIAL AIRCRAFT SUPPORT SYSTEMS: SELECTED RECENT CONTRACTS IN THE MIDDLE EAST ...... 296

Tables Table No. Page 62. operating and Performance Statistics of Selected for 1982 ...... 253 63. Employee Totals for Representative Airlines, 1982 ...... 253 64. Airport Traffic Statistics for Representative Airports ...... 254 65. Commercial Fleets in the Middle East in Servicers of March 1984 . . 256 66. U.S. Exports of Commercial Transport Aircraft ...... 277 67. Typical Configurations and Purchase Prices of Various Competing Aircraft . 278 68. Ten Leading U.S. Exporting Companies...... 280 69. Export-Import Bank Total Authorizations of Loans and Guarantees and Authorizations in Support of Aircraft Exports ...... 282 70. Export-Import Bank Summary of Commercial Authorizations for Loans and Guarantees ...... 283 7A-1. Selected Recent Commercial Aircraft Support Systems Contracts in ...... 296 7A-2. Major Projects and Sources of Investment, 1971-81: Commercial Aircraft Support in ...... 297 7A-3. Major Projects: Civil Aviation in Algeria, 1979-82 ...... 297 7A-4. Selected Recent Commercial Aircraft Support Systems Contracts in . 298 7A-5. Selected Commercial Aircraft Support Systems Contracts in ....,... 299

Figure Figure No. Page 14. Industry Funds for Research and Development ...... 281

Map Map No. Page 5. Airports in the Middle East and North ...... 255 CHAPTER 7 Technology Transfers in Commercial Aircraft Support Systems ——-— .—

INTRODUCTION

The Middle East has been one bright spot quire substantial ongoing efforts. Whether in the generally depressed worldwide commer- commercial airlines are mere symbols of na- cial airline industry in recent years. Sales to tional prestige or important components of the region of large commercial aircraft and economic and technological development de- related services required to support airline pends on the extent of technology transfer, operations grew dramatically in the 1970’s and particularly in aircraft support systems. have continued into the 1980’s, despite the re- cent depressed condition of world air trans- Commercial aircraft support systems cover port. This was due to both increased oil reve- a wide range of capabilities which include: 1) nues and to the increased transport needs of airport design, , and manage- the Middle East during their decade of dra- ment; 2) basic airplane ground support includ- matic business expansion. The airlines of the ing fueling and loading/unloading of passen- Middle East have the newest fleets in the gers, baggage, and freight; 3) routine world, with the average age of jet and espe- maintenance/inspection of aircraft; 4) major cially non jet aircraft considerably lower than aircraft ( and powerplant) overhaul; the world average.1 The number of passengers 5) passenger reservation and cargo routing carried by alone increased from 1.3 mil- operations; 6) air traffic control flight opera- lion in 1974 to 10 million in 1982. From 1980 tions; and 7) in-flight operations including to 1981, Airways ranked second in the piloting and avionics control/communications. world in growth rate of scheduled revenue Each of these areas requires specialized equip- tonne-kilometers performed.2 According to In- ment, which entails training in its use and con- ternational Civil Aviation Organization tinued maintenance. The emphasis in this (ICAO) statistics, scheduled air passenger chapter is on large commercial (mostly inter- traffic in the Middle East region will increase national) operations although the discussion by 10 percent annually up to 1992. This rep- touches smaller civil aircraft, and civil helicop- resents the most dynamic growth pattern of ters. Aircraft sales to the region are covered, any region in the world.’] particularly as they relate to technical serv- ices, training, and spare parts availability and While the Middle Eastern countries may to U.S. policy issues such as official financing have the financial resources necessary to pur- and export controls. sales and chase aircraft, operations and maintenance re- servicing are explicitly excluded, but the anal- ysis does clarify the limited utility of commer- — ‘The a~era~x’ agc of non jet alrrraft in the \l iddle h;ast is 5,() cial aircraft and related services for military >“ear~, (’{)n~parwd to 1:}. 7 ~’ew-s for such aircraft worldwide. F’or uses. j~’t air(.raft. the nurnlx’r is X.2 ~ears, and the world ti~’erage 9./i }.(’;irs Compared to other technologies covered in 2 The ~um of the pr(du{t+ ohtairmi })?’ multipl}ring the num- this study, technology absorption has been ex- her of tonne~ ( 1 tonne 1,000 kg) of re~enue load carried h~ the flight distances mt’asured in kilometers is the numher of tensive in the commercial aircraft support sec- re~[~nu[~ ton nt~- k ilometer performed, Separat. [j calculation+ are tor. Operating statistics of these airlines (in- made for passengers (including baggage). freight {including ex- cluding safety) are comparable to those of pr(’ss). and mail. major international airlines. This chapter ana- ‘Rohert llaile~r, “Hoeing Strikes Ilack, ” Jfiddle l“;ast Ijconom- ic l)ige.st, F’eh. u), 19H4, p. 35. lyzes the reasons for this comparative success.

247 248 . Technology Transfer to the Middle East ——

The analysis makes it clear, however, that profitable even during the recent recession while indigenous personnel in the Middle East period, despite its tragic crash in 1983.6 are increasingly operating commercial aircraft This chapter analyzes commercial aircraft support systems, some airlines may never be- support systems technology transfer to the come fully staffed by nationals. Middle East. First, requirements for commer- The United States is an acknowledged leader cial aircraft support are identified and their in avionics and aircraft engines, but adequate status is surveyed in the six countries under substitutes are increasingly available from study. The technologies include a broad spec- other supplier countries. U.S. aircraft sales in trum of application and complexity, but tend the Middle East region, important to sales of to be well established and governed by inter- auxiliary equipment and services, have been national norms. Recipient perspectives are negatively affected by U.S. foreign policy con- then reviewed, focusing on development plans trols on exports. The European consor- in this technology sector and their absorption tium’ on the other hand has expanded sales of the technologies. Most of the countries in the region, and, to prevent future loss of under study have placed great emphasis on sales, has even considered recertifying the Air- transportation needs, particularly civil air bus with British Rolls-Royce engines instead transport (passenger and freight) require- of its present U.S. origin Pratt and Whitney ments. Plans include construction of new air- or G.E. engines in order to avoid possible de- ports, expansion of existing airports so that lays arising from U.S. export licensing proce- they can accept larger aircraft and internation- dures. Some U.S. observers feel that U.S. com- al traffic, and increased personnel training fa- panies are also disadvantaged by subsidies cilities. Experiences with technology absorp- which the Airbus receives from its European tion have varied, but capabilities have been partners, and by a comparative lack of high- improved at a rapid rate over the past 10 level diplomatic support. This view, however, years, particularly in in-flight operations and is not shared by the Europeans who feel that passenger reservation and cargo routing. Al- U.S. aircraft sales are subsidized by U.S. Ex- though aircraft routine maintenance and ma- port-Import Bank and indirectly by NASA re- jor overhaul work is increasingly performed search programs. by the airlines themselves, many of the work- ers are expatriates and, in Saudi Arabia and All Middle Eastern countries under study Kuwait, will probably remain so for some time. have national airlines, but few turn a profit. The chapter also analyzes competition among Some, such as Saudia, are presently heavily suppliers. Likely short- and long-term develop- subsidized. In contrast, , a consortium 5 ments for the recipient nations and for the sup- of several Middle East countries, has been pliers are then described, and finally implica- tions for U.S. policy are given. One important issue addressed is the role of U.S. export con- ‘Members are Aerospatiale of (37.9 percent ownership), trols in affecting competition among suppliers. Deutsche Airbus of (37.9 percent), (20 percent), and Construcciones Aeronautics of (CASA) (4.2 percent). ‘The Gulf Air crash of a 737 near Abu Dhabi on Sept. ‘, , , and the UAE. 23, 1983, with a loss of 111 lives is still being investigated. Ch. 7—Technology Transfers in Commercial Aircraft Support Systems ● 249 ———.. -—— —.

COMMERCIAL AIRCRAFT SUPPORT SYSTEMS IN THE MIDDLE EAST COMMERCIAL AIRCRAFT The operations of airlines also depend on the SUPPORT SYSTEMS aircraft manufacturing industry. While none of the Middle Eastern countries under study Commercial air transportation systems con- have civil aircraft manufacturing facilities, sist of two interdependent components: first, Egypt is presently manufacturing military air- airline operations (including maintenance and craft of U.S. design.9 operation of aircraft); second, airport and avia- tion support services (e.g., air traffic control) The high costs of purchasing and operating provided by an outside agency, usually gov- modern aircraft are dominant factors in the ernmental. In both, equipment ranges from financial positions of airlines; in the United the simple to the very sophisticated. States, direct flying operations, maintenance of aircraft, and depreciation makeup over half Labor and capital requirements differ be- the total expense of airlines. A new McDon- tween the two components of the air transpor- nell Douglas DC-10 in 1980 cost about $60 mil- tation system. The operation of aircraft is lion,10 and the ratio of the capital value of flight highly capital intensive, with small flight equipment to ground equipment owned by crews operating very expensive equipment to U.S. airlines was more than 4:1 in 1980. serve large numbers of customers. Ground operations, by contrast, are far more labor in- These high aircraft costs affect labor re- tensive since they use less expensive equip- quirements in two ways: first, flight opera- ment but employ large labor forces to service tions themselves are very capital-intensive. and turn around aircraft in the shortest time With a trend towards larger aircraft in the possible. 7 1960’s and 1970’s, there has been a tendency to use smaller flight crews serving larger num- The occupational structure of air transport bers of passengers. Second, the high cost of is consequently very diversified. Airline per- aircraft on the ground puts a premium on rap- sonnel range from low skill level (clerks, bag- id turnaround so as to keep the aircraft flying. gage handlers) to very high skill level (mana- gers, pilots, mechanics, air traffic controllers). Labor represents the single largest cost item for airlines worldwide, with nearly 10 percent Air transport requires labor mainly in the cler- 11 ical, professional, craft, and service categories. of the work force being crew. In the One key occupational group is present in each airline industry, labor is highly skilled and category—namely, ticket agents, pilots, me- must assume a high degree of responsibility. chanics, and flight attendants. Each occupa- tional group has its own very specialized train- ‘Mark Lambert, ‘‘Egypt Rebuilds Its Aircraft Industry, In- ing requirements.8 teravia—Aerospace Reviews, February, 1984, pp. 157-60. —. ——————— 1oAircraft prices vary considerably, depending on plane con- 7 According to the U.S. Civil Aeronautics Board, flying oper- figuration and customer needs for training and spare parts. For ations made up 39 percent of the expenses of the U.S. airline example, a in 1984 reportedly ranged in price from industry in 1980. Expenses for other subsectors included (in $77 million to $84 million (747-SP) to $91 million to $106 mil- percent): maintenance-10,8; passenger service-9.4; aircraft lion (747-300 extended). and traffic servicing— 16.4; general and administrative—3.9; ‘‘Labor and fuel are the two largest cost categories in the in- promotion and sales—12.l; and depreciation, amortization, dustry worldwide. See William E. O’Connor, An Introduction other—8.4. See U.S. Civil Aeronautics Board, Air Carrier Fi- to Airline Economics (New York: Praeger, 1982). Cost per gallon nancial Statistics, March 1980. of jet fuel for U.S. air carriers increased from 12.7/gal. in 1973 8 In the United States, the occupational breakdown for the to 57,8/gal. in 1979 to 104/gal, in 1981, and dropped slightly air transport industry includes: professional and technical, 19 to 98. l/gal. in 1982. Cost of fuel as percent of cash operating percent (including pilots); clerical, 30 percent; craft workers, 20 expenses moved from 12.2 percent in 1973 to 28.1 percent in percent (including aircraft mechanics); service workers, 14 per- 1982. Aerospace Industries Association of America, Inc., Aer- cent; laborers, 4 percent; managers, 6 percent; operatives, 6 per- ospace Facts and Figures— 1983/84, Washington, D. C., July cent; and sales, 1 percent. U.S. Bureau of Labor Statistics, 1983, p. 86. Cost of fuel for airlines in the Middle East depends Washington, D. C., 1981. on refining capabilities and subsidies of the individual countries. 250 . Technology Transfer to the Middle East —— — . —— Ch 7—Technology Transfers in Commercial Aircraft Support Systems 251

Ground-loading operations for Saudia Airlines

Strict standards in employee selection and COMMERCIAL AIRCRAFT training are essential. SUPPORT SYSTEMS IN Ground operations by the airlines also re- THE MIDDLE EAST: quire considerable training. Aircraft servicing CURRENT STATUS and maintenance require specific skills and training, as does passenger service to a lesser During recent years, the Middle East/Far extent. Cargo and baggage handling may ap- East route with a load factor of 65 percent has pear to be the least skilled aspect of ground experienced the highest passenger growth (22 percent) of all IATA (International Air Trans- operations, but in fact skill is required to safely 13 handle shipments in international service port Association) route areas worldwide. The which on average weigh 600 pounds. Security /Middle East routes remained at 1981 personnel are also a vital part of the ground levels, however. Saudia ranked 17th in sched- operations since in storage and tran- uled tonne-kilometers performed in 1982 of all sit is particularly vulnerable to theft.12 The 121 IATA members and had a 22.8 percent pressure to turn aircraft around rapidly and growth rate from 1981 to 1982. Kuwait Air- the need to meet peak demands, add to the la- ways had a 20 percent growth rate in tonne- bor-intensity of the ground operations. kilometers from 1981 to 1982. Saudia ranked 15th among the 121 IATA members in sched-

13 The average load factor worldwide in 1982 was 64.2 percent. 252 ● Technology Transfer to the Middle East

uled passenger-kilometers14 in 1982 with Saudi Arabia 15 12,277 million. Saudia now ranks among the Saudia, the national airline, has the great- major international carriers, as shown in table est number of route miles of all national air- 62. According to IATA and ICAO data, oper- lines covered in this study and has surpassed ating statistics for these six airlines in the the beleaguered of Leb- Middle East such as revenue passenger load anon. Saudia has a fleet which includes 12 Boe- factor, average daily aircraft utilization, and ing 747s, 17 Lockheed TriStar L-1011s, 9 Boe- safety are comparable in most cases to those ing 707s, 20 Boeing 737s, and 11 smaller of other national flag carriers operating inter- planes. Saudia ordered 11 ’s to nationally. Also shown in table 62 is the fact be delivered during May through September that these airlines increased operations dur- 1984. ing 1982 while several airlines from other re- gions of the world experienced decreased oper- TWA and Saudi Arabia have been associ- ations. ated in civil aviation since 1945 when Presi- dent Roosevelt gave a DC-3 to Saudi Arabia’s As another indication of the relative size of King Saud. The first contract was signed in the airlines, table 63 gives employee totals for 1946 between TWA and Saudi Arabia with several airlines in 1982. Saudia airlines is by subsequent ones through 1984. TWA partici- far the largest air carrier of the six study coun- pated extensively in the management and tries with total personnel numbering close to operations of the airline in the early period, but that of TWA or Japan Air Lines. The num- since 1979 its involvement has decreased ber of in-flight personnel of Saudia, however, markedly. With the new 1984 contract, the is much lower than that of the non-Middle Saudis have taken over management of the Eastern airlines listed. , with airline. A successful program of training and 4,863 total personnel, is the smallest airline upgrading of facilities and personnel led to included in the tabulation. gradual “Saudization” of the work force even while the company was expanding at a faster Table 64 includes airport traffic statistics rate than any other national airline in the for representative airports in the Middle East world. During the 1970’s, Saudia had neither and the United States. Although not all inter- sufficient fleet nor personnel and facilities to national airports existing in these countries accomplish the task of moving foreign work- are listed in the table, relative traffic volumes ers in and out of the country. The main air- can be noted. Bahrain, Qatar, and the United ports at , and especially, used Arab (UAE) are included in the list aged facilities designed for the DC-6 era. Tem- since they carry significant air traffic in the porary airport buildings were rushed to com- region. Major international and domestic air- pletion within 18 months and by late 1976 the ports in the Middle East are shown in map 5. airline began to lease aircraft and integrate Descriptions of the airlines of the six coun- them into operations on a temporary basis. tries under study are given in more detail be- Some leased aircraft, mostly Boeing 747s and low. As a reference, relative sizes of several Douglas DC-8S, still are being used, usually of the commercial airline fleets in the Middle during the annual Haj pilgrimage.16 East are given in table 65. Saudi Arabia is continuing its large-scale air- port expansion projects which include both in- ternational and domestic airports. Eleven domestic airports will be upgraded to handle in- creased passenger traffic at a cost of approx- “Scheduled passenger-kilometers is the sum of the products obtained by multiplying the number of passenger seats sched- uled by flight distances measured in kilometers. “International Air Transport Association, World Air Trans- “The Haj is the pilgrimage of from all over the world port Statistics, No. 27, 1982. to , located in Saudi Arabia. Table 62.—Operating and Performance Statistics of Selected Airlines for 1982 — Passengers Tonne-kms performed Available tonne-kms— Load factor Country Airline 000s ± change Millions ± change Millions ± change Passenger Weight Saudi Arabia- Saudia ...... 10,060 41.9% 1,478 22.8°10 3,047 12.40/o 64.20/o 48.50/o Kuwait ...... 1,461 16.6 456 19.9 849 6.7 65.7 53.6 Egypt EgyptAir...... 2,433 9.2 395 14.1 702 2.6 60.3 56.3 Algeria Air Algeria...... Not reported ...... Iran ...... 2,009 30.5 215 15.7 352 22.0 67.3 61.6 Iraq Iraqi Airways ...... 481 5.2 187 -..— 12.7 388 20.3 59.3 48.2 United States TWA ...... 17,854 –1.6 4,429 –1.5 8,149 –2.1 63.9 54.3 United States Eastern Airlines ...... 35,500 –1,4 4,334 –1.0 8,014 –2.5 57.7 54.1 ...... 14,838 –3.1 4,310 –6.4 6,827 –6.9 67.4 63.1 France ...... 11,584 0.2 4,218 1.8 6,765 3.8 64.1 62.3 Federal Republic of Germany ...... 12,775 –1.5 3,746 4.4 6,317 8.5 59.6 59.3 Japan ...... 13,329 –4.4 4,993 3.2 8,125 –4.6 62.5 61.4 Total a...... 384,610 –0.9% 87,529 0.4% 152,901 –0.3% 62.0% 57.2%

Note: ± IS percent change from previous year data aTotal industry value for IATA Members in 1982 based on approximately 121 IATA member airlines SOURCE: International Air Transport Association. World Air Transport Statistics, No 27 1982

Table 63.— Employee Totals for Representative Airlines, 1982 . Total ± Other Maintenance Ticketing Traffic- change Pilots and cockpit Cabin and overhaul and sales handling All other over Country Airline copilots personnel attendants personnel personnel personnel personnel Number 1981 Saudi Arabia Saudi ...... 670 - 216 2,671 4,014 2,626 5,437 8,096 23,730 5.70/o Kuwait Kuwait Airways . . 174 76 487 1,808 1,139 734 2,113 6,531 4.9 Egypt EgyptAir ...... 251 81 633 1,981 — — 6,537 10,731 4.2 Algeria Air Algérie ...... Not reported ...... Iran Iran Air ...... 193 81 721 1,378 882 2,253 4,027 9,535 –2.7 Iraq Iraqi Airways . . . . 136 120 330 1,958 390 478 1,451 4,863 4.3 United States TWA...... 1,802 971 4,905 7,051 3,752 7,739 3,024 29,244 –4.3 United States Eastern Airlines. . 2,839 1,212 5,987 10,228 5,036 10,324 4,325 39,951 –0.7 United Kingdom British Airways . . 2,104 447 4,375 9,009 3,376 8,943 9,700 37,954 –15.8 France Air France ...... 1,320 771 4,239 8,767 — — — 34,537 2.8 Federal Republic of Germany Lufthansa ...... 1,564 562 3,938 8,353 4,361 6,603 5,331 30,712 0.1 Japan Japan Air Lines . . 1,355 646 5,132 4,951 3,575 3,449 2,632 21,740 0.9 . . SOURCE: International Air Transport Association,World Air Transport Statistics, No 27, 1982 Table 64.—Airport Traffic Statistics for Representative Airports (1981 unless otherwise noted)

State Passengers Freight Mail (000 embarked and disembarked) City Aircraft movements (000) . (000 of tonnes) (000 of tonnes) Airport Commercial air transport Total—— International Domestic Total International Domestic Total International Domestic Saudi Arabia: Jeddaha Jeddah International ... 87.5 b 7,505 3,499 4,006 478 350 12.8 NA NA NA Kuwait: Kuwaitc Kuwait International 273 2,376 2,376 0 55.1 551 0 2.2 22 o Egypt Cairo Cairo International . . 518 5,239 4.741 498 568 563 05 NA NA NA Algeria: Algiers Dar El Beida ., 401 2,870 1.520 1,350 32.2 28.4 38 NA NA NA Iran: Teheran Mehrabad lnternational 158 1,689 283 1,406 39.1 33.7 54 17 16 01 Iraq: Baghdad International 6.3 618 618 0 16.7 167 0 05 05 0 Bahrain” Bahrain a Bahrain International 38.2 1,588 1,588 0 174 174 0 15 15 0 Qatar: Doha International ., 156 662 662 0 16.7 167 0 0.5 05 0 U .A. E.: Abu Dhabi Abu Dhabi Internationala . . 347 924 899 25 261 NA NA NA NA NA United States: Washington, D.C. Dulles International ., 29.2 2,133 377 1,755 23.2 114 118 179 2.3 157 United States: San Francisco, Cal If. San Francisco International . 2686 19.848 2!170 17.678 3179 NA NA 1051 NA NA United States: Philadelphia, Pa Philadelphia International ., 255.6 9,009 468 8,540 933 8.9 843 459 05 455 NOTE Totals may not add up due to rounding a1980 statistics. Complete data not available for the King Abdul Aziz airport but later 1981 data imply a rate of over 100.000 total commercial air transport movements per year ‘1978 data point C Kuwalt as a city-state has no domestic air servlces NA—not available SOURCE International Civil Aviation Organization Airporl Traffic– 1981 Digest of Statistics No 287 1982 Ch. 7— Technology Transfers in Commercial Aircraft Support Systems ● 255 — ——. — ————— —. Table 65.—Commercial Airline Fleets in the Middle East in Service as of March 1984 (on order as of March 1984 in parentheses) — Boeing Douglas Lockheed Airbus Country Airline 707 727 737 747 757 767 DC8 L1011 A300 A310 A320a Saudi Arabia Saudia ...... 9 — 20 12 — — 6 b 17 (11) Kuwait Kuwait Airways ...... 7 4 — 4 — (3) 3(5) Egypt EgyptAir ...... 6 7 (3)C 8 Algeria Air Algérie ...... 11 13 2 d Iran Iran Air ...... 5 10 4 10 6 Iraq Iraqi Airways ...... 3 6 3 4 Bahrain, U. A. E., Oman, Qatar Gulf Air ...... 9 8 Middle East Airlines ...... 7e 3 (5 plus 14 options)f Libya Libyan Arab Airlines.. . . . 4 10 (6) (4) ALIA...... 5 6 3 5 Syrianair ...... 3 2 Cyprus Cyprus Airway s ...... 4 1 (2) (4 plus 4 options) Totals (existing and firm order) ...... 50 45 59 35 0 (3) 6 30 16(20) 4(16) (4) a The development funds for the Airbus A320 were approved by the consortium in March 1984 b Leased from Overseas National and Icelandalr. c These three extended range versions due to be delivered July 1984. d Leased from Lufthansa. e MEA previously had 18 707s (lATA, WATS 1982) but 6 were destroyed and 5 extensively damaged in the Lebanon Conflict f These may have been canceled, although the contract has not been formally abrogated, according to the M/dd/e East Economic Digcst, Feb 3, 1984, p 35

SOURCE Taken from Exxon International CO , Air World Survey—-Engined Fleets of thre Worlds’ Airlines 1983. Florham Park, N J and OTA communications with Boeing Commercial Airplane Co Ren.- ton, Wash , and Airbus Industrie, N.Y., March 1984, Note that “firm orders” for a particular jet and “options” in particular can be fairly volatile numbers The 707, 727, DC8, and L1011 are no longer in production. Ch. 7—Technology Transfers in Commercial Aircraft Support Systems ● 257 imately $295 million. At five airports (, $3.2 billion. It began receiving commercial Gassim, Gizan, Abha, and Tabouk) the expan- flights on December 5, 1983.20 The airport was sion is designed to accommodate wide-body designed to handle 7.5 million passengers in jets (Lockheed TriStar and Airbus) which will its first year while it was still in the first stages be equipped to meet the highest international of initiating its operations. The number will navigational standards. At the smaller air- reach 18 million passengers annually by the ports, the projects are designed to accommo- year 2000.2] date aircraft instead of Fokker Servicing the pilgrimage, with its 800,000 F28s. These airport projects in rural areas visitors, more than 70 percent of whom travel were originally tendered in 1983. However, in in and out by air, is the second most impor- 1984 it was reported that the Presidency of tant task for Civil Aviation, after supplying Civil Aviation (PCA) was retendering these facilities for national needs. During the 45- to domestic airport expansion projects in order 18 60-day period preceding and following the Haj to economize on expenditures. pilgrimage period to Mecca each year, the traf- Saudi Arabia’s major international airports fic density at Jeddah airport approaches that consist of: International, Jeddah In- of some of the busiest U.S. airports, such as ternational, and Riyadh International. Pres- O’Hare in Chicago. Hundreds of charter flights, ently, only Saudia calls at King Khalid Inter- many by airlines not normally servicing the national Airport (KKIA) at Riyadh, but KKIA Kingdom, must be guided to safe landings and will soon open to international carriers accord- their airplanes serviced rapidly. It is a unique ing to Civil Aviation President Sheikh Nasser problem, and the Saudis have increased their Al-Assaf. 19 Pan American Airways and Saudia use of modern computer techniques both to presently operate a joint service between New handle the aircraft and the pilgrims them- York and Dhahran. Saudia also now flies to selves. The Jeddah airport in its design and New York from Jeddah. Foreign carriers operations thus represents adaptation of com- which serve Jeddah or Dhahran include Ali- mercial aircraft support systems to local re- talia, Air France, British Airways, Lufthansa, quirements. Middle East Airlines, and Iran Air. Some 44 airlines now fly into Saudi Arabia, and Saudia Egypt flies to major European, North African, Arab, Cairo is among the most active air centers and South Asian cities. in the Middle East and is served by a number Riyadh’s King Khalid International Airport of international air carriers. Egypt’s one in- was completed in 1983 at a total cost of about ternational airport is located in Cairo. Facil- .— - — — —- ities at the Cairo airport are to be expanded ‘“Saudi Business, Oct. 16-27, 1982, and Oct. 23-24, 1982; Saudi to handle a projected fourfold increase in pas- Report, Nov. 29, 1982. “It is also believed to be the first case of a retendering senger traffic and rapidly increasing air freight prompted by King Fahd’s recent decree that all government tonnage. Alexandria’s El-Nouzha Airport, lo- tenders must be announced publicly. “Airport Expansion Pro- cated on the eastern outskirts of the city, re- jects To Be Retendered, ’ Saudi Business and Arab Economic Report, No. 6, May 28, 1983, reported in JPRS, Near East sumed scheduled operations for domestic South , June 30, 1983. I t is reported that Saudi Arabia flights in late 1980. The airport has two oper- may revise a portion of its ambitious airport modernization pro- ational runways, one of which will be length- gram because of anticipated cuts in government spending due to decreased oil revenues. This is not, however, expected to stop ened to accommodate international flights. any of the large construction or upgrade plans included in the latest phase of airport modernization, but it may result in a ‘“Jim Bodgener, “U.K. Airlines Battle for KKIA Rights, ” scaling down of certain programs, such as those in the East- Middle East Economic Digest, Sept. 11, 1983, p. 38; Jan. 27, ern Province. See Jeffrey M. Lenomvitz, ‘‘Slack Oil Funds May 1984, p. 26. Force Saudis To Cut Airport Plans, ” Aviation iJeek and Space “’’King Fahd Opens the King Khalid International Airport: Technology, May 21, 1984, pp. 41-45. A Tour Through Riyadh’s New Airport, Which Is One of the ‘Tony Odone, “KKIA: Beginning a New Phase in Saudia Ara- Biggest in the World, ” Al-Majallah, No. 196, Nov. 12-18, 1983, bia, ” Middie h’ast Economic Digest, Nov. 11, 1983; Saudi Re- pp. 18-21, as reported in JPRS, Near East/South Asia, Jan. 30, port, Nov. 29, 1982. 1984. 258 ● Technology Transfer to the Middle East

Africa, and the Middle East. The airLine is con- sidering the creation of an all-cargo subsidiary. A private cargo company, International Air Cargo Corp., was formed in early 1977.”

Algeria Algeria has a relatively good transportation network and is devoting substantial resources to its expansion and modernization. Algeria’s international airports consist of Dar el Beida in Algiers, Annaba, Ain-el-Bey in Constantine, and Es Senia in Oran. Other major airports are located in Bechar, Hassi Messaoud, In- Salah, Tamanrasset, and In-Amenas. Fifty- five smaller airports are located across the country. Air Algérie, the state-owned and operated airline, continues to expand its international services. At the end of 1981, Air Algérie was operating a record 250 scheduled domestic flights weekly, for cargo as well as passen- gers.” Its fleet consists of 11 Boeing 727s, 13 Boeing 737s, and 3 Lockheed Hercules aircraft as well as 42 Beechcraft and Grumman air- craft for crop spraying, pipeline surveillance, and other purposes. Most of the equipment in Algerian civil aviation is made by U.S. firms,” although Air Algérie leases two Airbus A300s from Lufthansa. The leading foreign suppliers rank ordered by total sales in 1979-82 were the United States (aircraft and engines, $165 million), In- dia, Belgium, and Hungary. By total expend- itures since 1979, civil aviation projects ranked second for Algeria among the five tech- Haj Terminal, King Abdul Aziz International Airport, nology sectors studied in this assessment Jeddah, Saudi Arabia. The roof structure iS evocative of bedouin tents ($265 million from 1979-82). This was a signif- icant rise over the total value of contracts awarded during the 1972-78 period ($5.7 mil- The national airline, EgyptAir, has six 707s lion). In addition, the absolute number of con- (plus two more leased), seven 737s, eight Air- tracts approved in the later period was higher bus A300s, two Fokker F-27s (leased), and two than the number approved in the earlier 1972- Cessnas.” EgyptAir (formerly United Arab Airlines) has been operating since 1931. It pro- vides flights to about 40 cities in Europe, Asia, ‘)U.S. Department of Commerce, Overseas Business Reports, OBR 81-31, “Marketing in Egypt,” December 1981. “U.S. Department of Commerce, Foreign Economic Trends, 22 International Air Transport Association, World Air Trans- Algeria 198.2, p. 11. port Statistics, No. 27, 1982; also ~msonal communication, Air- ‘ ‘Information provided by` the U.S. Embassy, Commercial bus Industrie, New }rork, Xlarch 1984. Section, Agiers, 1982. Ch. 7— Technology Transfers in Commercial Aircraft Support Systems ● 259

78 period, reflecting the Algerian Develop- Iraqi Airways presently has three 707s, six ment Plan’s emphasis on transportation. 727s, three 737s, and four 747s. Iraqi Airways ranked 44th out of 121 IATA members in 1982 Kuwait international tonne-kilometers performed, but it grew 12.7 percent by the same indicator dur- Kuwait, as a city state, has one international ing the 1981-82 period. airport and no domestic airline routes. Its in- ternational airport has recently been expanded Iran to handle 4 million passengers and 30,000 tons of cargo per year.26 Iran has international airports in Abadan, Esfahan, Teheran (Mehrabad International), Kuwait Airways, the national airline, has , and Zahedan. There are 36 major and four 747s, seven 707s, four 727s and two secondary domestic airports open to civil avia- HS 125s. Kuwait Airways tion, Iran Air, the national , was owns three Airbus A310s and has five more founded in 1962, taking over limited freight on order. Three Airbus A300s are also on or- and passenger operations from two private der. This company has the fewest route miles companies. Its load factor grew appreciably, of the six national airlines covered in this and in 1977 it served 25 different domestic air- study. Kuwait Airways is an independent line item in the Kuwaiti budget; it is given a sub- ports and provided services in international sidy and capitalized as an extraordinary item. routes to 24 different countries in North Amer- ica, Europe, and East Asia. Iran Air has five Operating losses in 1980 reached $33.3 million, 707s, ten 727s, four 737s, ten 747s, and six reflecting the fact that flying expenses in- Airbus A300s. Iran Air ranked 50th out of 121 creased by 56 percent in 1 year, 1979-80, due IATA members in 1982 scheduled tonne-kil- partly to aviation fuel cost increases. ometers performed and 49th in scheduled Passenger traffic grew between 1976 and passenger-kilometers. 1980 by 45 percent, while freight traffic grew by 160 percent. The airline’s capital has been Regional Efforts substantially raised to permit purchase and There are a number of regional efforts to de- amortization of the first six sched- velop commercial airlines and support systems uled to be delivered in 1984. In addition to in the Middle East. These include technical as- Kuwait Airways, Kuwait is served by Gulf sistance programs, as well as one regional air- Air, Saudia, Iran Air, British Airways, Air line company, Gulf Air, which is jointly owned France, KLM, and Lufthansa. by four Middle Eastern countries. Iraq Many technical assistance programs are being pursued with foreign participation. The Iraq’s international airport is located in Baghdad. The first phase of the new Saddam U.S. Federal Aviation Administration (FAA), Hussein Airport has now been completed, and for example, is presently conducting techni- cal assistance programs promoting the re- as of 1980, work was underway on a new in- gional development of commercial aircraft ternational airport at . The present support in the Middle East. These include status of both these projects, however, is assistance in design and development of the uncertain, due to the war with Iran. In the Kuwait International Airport, where the Na- north, an international airport at is 27 tional Aviation System has two resident U.S. under design. advisors. In Saudi Arabia, the FAA runs — . —— Saudi airman certification services for the Boe- “U.S. I)epartment of Commerce, ()\rerseiis Business Reports, ing 707/737/747 and the Lockheed L-101 1. OIIR-79-18, ‘ ‘Marketing in Kuwait. ” ,June 1 !)79, ‘-1 nf{)rmation prf)~-ided h~ the IJ ,S. I)epartment of (’ommerce, During the period 1951-82 the FAA trained 1 nternational Trade Administration, Fel). 10, 19/+3, over 550 personnel in the six countries under 260 ● Technology Transfer to the Middle East

study in air traffic control, air navigation fa- aircraft, requests for assistance are increas- cilities, airport services, and flight standards.28 ingly in the more sophisticated fields of avia- tion. Assistance has been provided in the AACO (Arab Air Carriers Organization) has organization of government civil aviation de- attempted to organize an aircraft spare parts partments and the location and operation of pool similar to those in Europe such as the facilities and services, particularly personnel ATLAS (Boeing 747) and KSSO (DC-10), but training. In Egypt and other Middle Eastern the results have been mixed. Saudia is the countries civil aviation training centers have holder of L-1011 spares at Jeddah, but Lock- been created or assisted. heed spares are also stored in , Jordan by TriStar Parts Ltd.29 Gulf Air is a joint venture between Bahrain, Qatar, the UAE, and Oman. Gulf Air was The IATA Program for Developing Nations founded in 1950 as Gulf Aviation Co. and was Airlines (PDNA) assists airlines in developing nationalized in 1974 to become the flag carr- countries in funding for individual or joint air- ier for the four countries.32 It is now one of line projects and in arranging and coordinat- 30 the region’s largest passenger carriers, carry- ing consulting and airline training services. ing numbers of passengers comparable to Iran, A training seminar, sponsored jointly by Air and EgyptAir. After rapid expansion in AACO and IATA, was held in Amman, Jordan the 1970’s, the airline plans to consolidate cer- in April 1983. The basic purpose was to de- tain operations in the 1980’s and must cope termine the specific training needs and with problems such as the worldwide trend priorities of airlines in developing countries toward fare deregulation, and overcapacity and to establish the foundation for a com- due to increased competition on Gulf routes. prehensive PDNA training program in the Overcoming difficulties which included lack of future. In addition, initial steps have been infrastructure and competent personnel, Gulf taken to explore the possibility of conducting Air realized a small profit in 1979 which stead- detailed feasibility studies for a Regional Air- 31 ily increased to $10 million in 1980, $19.4 mil- line Training Center in Amman. 33 lion in 1981, and $34 million in 1982. Gulf ICAO also promotes civil aviation in devel- Air has recently expanded its network some- oping countries worldwide. A major instru- what. In 1982, it started flights to Amman, ment in this work is the United Nations De- Jordan and Larnaca, Cyprus, reopened a link velopment Program. So far, most of the to , and inaugurated a -to-Cairo organization’s work in this area has been service. By the end of 1982 it was operating directed toward the development of the ground a fleet of eight Lockheed L-1011 TriStars and services required for civil aviation and in par- nine Boeing 737s.34 ticular air traffic control, communications, and Historically, the dominant airline in the re- meteorological services. [n the past few years, gion was Middle East Airlines (MEA) of with the advent of larger and more complex . It was largely responsible for making .--- —--- ..--— . . 8 Beirut the hub of international air travel to ‘ Quentin S. Taylor and J. Stuart Jamison, “FAA’s Interna- the Middle East. In 1979, Lebanon began a tional Training Programs, ’ Journal of Air Traffic Control, October-Dececember 1982, pp. 6-9. 29These spare parts generally include only airframe line —. — replaceable units, with engine parts inventories held elsewhere. “’’Gulf Air: Flying Against the Flag, ” Middle East Economic Information provided by TriStar Parts Ltd., January 1983. Digest Special Report, September 1981, pp. 41-43; and Dudley 30See for example International Air Transport Association, Nigel, “Gulf Air: A Servant of Four Masters, ” Middle East Eco- 4’Consultancy and Training Services Directory, ” first edition, nomic Digest, Mar. 21, 1980, p. 10. Nov. 1, 1981; “IA TA-Improved Productivity Through Com- t~Ibid.; ~d “Gulf Air’s profits Flv Against the Trend, Mid- mon Effort, ” August 1982; and “ for the Developing dle East Econorm’c Digest, vol. 27,-Issue 4, Jan. 28, 1983, pp. World, ” 1982. As stated by IATA, the basic objective of the 8-9, and “Gulf Air Posted 34 Million Dollar Profit in 1982, ” PDNA is “for member airlines to develop self-reliance, thereby An-Nahar Arab Report and Memo, vol. 7, Issue 27, July 4, 1983, strengthening the global commercial air transport system. p. 8. 3]IATA Annual Report and Executive Committee Report, “’’Arab Airlines: Co-Operation in the Face of Competition, ” 1983, p. 24. Middle East Magazine–Aviation Survey, August 1983. Ch. 7—Techno/ogy Transfers in Commercial Aircraft Support Systems ● 261

$300 million program to expand and modern- Usually, these routine inspections or checks” ize Beirut airport, and in 1980 MEA an- are based on flight hours and are called Pre- nounced its planned fleet expansion would in- flight, Transit, A, B, C, and Structural Inspec- clude the purchase of five tion checks. The Pre-flight check is performed aircraft, plus an option for 14 more. MEA sur- each morning prior to dispatch and anytime vived the civil war of 1975 and the political the aircraft is on the ground for more than 4 instability in the late 1970’s, but the 1982 war hours. The Transit check is performed before in Lebanon caused severe problems for the car- each flight, usually in a “walk-around” inspec- rier. MEA lost six Boeing 707s and another tion. The flight crew can perform this check five may be scrapped because of extensive if maintenance personnel are not available. damage. In addition, its ground facilities were The A, B, C checks are called scheduled checks damaged in the fighting. Insurance will pro- since they are performed at specific time vide only a small portion of the replacement periods. Each operator develops and obtains costs, due to the restrictiveness of war risk approval for his pattern of scheduled checks, coverage. The airline reportedly began to base but in broad terms the A check usually is per- its operations from Larnaca, Cyprus instead formed approximately weekly (every 100 of Beirut. MEA does apparently plan to re- hours) with the B check interval four times place the aircraft lost and to continue its fleet that of the A (every 400 hours) and the C check modernization/expansion program based on interval four times that of the B.36 the A310. The war has, however, eroded Bei- rut’s position as a gateway, and MEA as a ma- In order to avoid peaks and valleys in main- jor factor in Middle East commercial aviation. tenance work and numbers of personnel, the checks are often combined into a “phase’ check which consists of elements of all three PERSPECTIVES OF RECIPIENT checks, e.g., A + B/2 + C/8. There are many COUNTRIES AND FIRMS variations of these phases, normally estab- lished to correspond to a particular operational Keeping an airline fleet operating is a schedule. technically demanding business. This section Each inspection generates additional main- first outlines requirements for maintenance of tenance not part of the routine maintenance. commercial aircraft, reviews training pro- A complete maintenance cycle includes these grams associated with aircraft sales, and dis- routine checks as well as major overhaul cusses the requirements such as airport de- (structural inspection). Over the course of a sign. Next, the experiences of six Middle East complete maintenance cycle, nonroutine main- countries are analyzed in order to assess the tenance man-hours approximately equal the extent of technology absorption and the sig- routine maintenance man-hours. nificance of commercial airline support sys- tems in their economic development programs. The number of personnel required depends on the type of check being performed and the Requirements for Commercial —. ——— Aircraft Operation “The maintenance check is defined as a maintenance action requiring thorough examination of an item, component, or sys- Routine Maintenance. –Each aircraft model tem for general condition with emphasis on proper attachment, safety wiring, cotter pins, fasteners, clamps, latches, tubing, has a routine maintenance program for oper- plumbing, electrical wiring and connctions, linkages, bearings, ation in scheduled service. Routine mainte- alignment, clearances, lubrication, obvious damage cracks, nance tasks consist primarily of inspection of delamination, fraying, operating pressures, fluid leakage, ex- cessive wear or play, corrosion, evidence of overheating, rub- the airframe, engines, systems and compo- bing, aging, preservative coating or finish, cleanliness, and gen- nents to assure safety and satisfactory oper- eral appearances. ation of the aircraft. Such routine maintenance “The Structural Inspection (or airframe overhaul) is usually performed at intervals 10 times that of the C check, or, in the is carried out by the individual Middle East- example noted— 16,000 hours. Major overhaul is discussed ern airlines. below. 262 ● Technology Transfer to the Middle East length of time the aircraft is available for to maintain the airplane. The specifications maintenance. The size of the aircraft also and/or engineering drawings of equipment re- determines maximum crew size. The Boeing quired to maintain a particular aircraft model 747, for example, requires a maintenance crew are supplied to the buyer as part of the sales approximately twice the size of that required package. The buyer can purchase equipment for the 737. While a Pre-Flight or Transit through the seller, from outside sources, or can check can be performed with as few as three manufacture the equipment. Availability of to five people, a Phase (or C check) could re- equipment or manufacture of equipment at a quire up to 50 people (for a 747) or 25 (for a particular operator’s maintenance base de- 737). pends entirely on the industrial capabilities of the local area. In most areas in the world, there Crews must include personnel skilled in air- are local industries capable of manufacturing frame and systems, powerplant, electrical, the required equipment. Provisioning of equip- avionics, sheet metal, and interiors. These per- ment, whether through the aircraft seller, or sonnel must include some who are licensed to from other sources, is a separate negotiation. work on and, particularly, to signoff work for A potential customer can include these costs release of the aircraft to operations. Crew com- in the total package. position for a scheduled maintenance crew should be approximately 50 percent airframe Maintenance provisions and their costs can and system mechanics, 20 percent engine spe- be very important in making an aircraft sale. cialists, and the remainder equally divided Equipment investment forecasts are per- among electrical/electronic, radio, instru- formed regularly for presentation to potential ments, sheet metal, interior, and quality con- customers, Since spares and ground support trol specialists. Additional specialists from the equipment investment and maintenance costs operator’s maintenance shops are utilized on comprise about 20 to 25 percent of an airline’s an “as-required” basis on airplane checks. The operating costs, improvements in methods suggested ratio of licensed personnel to skilled of maintenance, extensions in maintenance is approximately 1 to 3. schedules, and reductions in numbers of spe- cial tools and equipment required are factors Each operator, if purchasing an aircraft influencing sales. Over the life of an airplane, from a company such as Boeing or Airbus, re- spare parts sales can easily equal the purchase ceives information in the form of documenta- price of the airplane. Efficient management of tion, complete drawings and verbal briefings, spare parts inventories has become increasing- as to the ground support equipment required ly important, due to the high costs of main- taining excessive stock and the long leadtimes required for obtaining certain aircraft parts. Major Overhaul.–Major overhaul is costly and technically demanding. A fleet of approxi- mately 15 airplanes is normally required to jus- tify establishing an overhaul center, but there are many other considerations such as fleet com- position, age, and engine types. The only major overhaul center presently in the Middle East is in Saudi Arabia. Despite attempts to establish a regional center, such a facility has not been set up, and seems unlikely in the near future. A major overhaul of an aircraft is usually con- sidered to be a structural inspection, during Photo credit Saudi Arabian Ministry of Commerce which the airplane is moved into a hangar with Jet turbine engine repair built-in work stands (or docks) which allow ac- Ch. 7— Tecbnology Transfers in Commercia/ Aircraft Support Systems c 263 cess to all areas of the airplane. The aircraft is become self-sufficient in aircraft operation and lifted on hydraulic jacks high enough to allow maintenance. Training thus directly contrib- retraction and extension. The in- utes to technology absorption. Generally terior furnishings (seats, galleys, and lavatories) speaking, the smaller the airline the greater are removed and interior wall and ceiling panel- the need for follow-on training as the pool of ing and insulation are taken out. Components experienced personnel and trainers is smaller. are removed, serviced, or repaired as required. A comprehensive and professional training Personnel required to staff a major overhaul program is considered extremely important to center include those skilled in engineering, train- the sale of aircraft. While a superlative train- ing, production planning, quality control, spares ing program will not win the sale, lack of such planning and procurement, and shop personnel a training program can significantly contrib- skilled in many different functions, such as elec- ute to loss of a sale. I n the competitive envi- tronics, welding, instruments, nondestructive ronment of commercial aircraft sales. this fact testing, sheet metal, machining, and plastics re- is well known, hence all suppliers stress train- pair. A total of approximately 450 people is re- ing in their packages. Because of this, no one quired to staff such a maintenance base. supplier has a significant advantage over com- petitors because of the training programs Guidelines for major overhauls in the United offered. States are established by the FAA, and these guidelines are also used in the Middle East, re- Personnel training associated with the sale gion. Frequency of major overhaul depends of a commercial aircraft generally includes on the operator’s approved maintenance both flight operations and maintenance.39 A schedule and on flight hours. Boeing recom- typical training program offered by major air- mends a major overhaul at 16,000 flight hours craft manufacturers and included in the price for the 737 airplane. A structural inspection of an airplane consists of: 1) flight operations, would be performed every 6 ½ years for an usually including complete training for a cer- operator flying 7 hours a da-y, 2,500 hours per tain number of flight crews,40 dispatchers, and year. 38 flight attendants: and 2) maintenance train- ing, usually including training in airframe and Many operator-s contract to perform all lev- systems, electrical systems, avionics systems, els of maintenance including structural inspec- corrosion prevention, and control, and post de- tion for Middle Eastern airlines. The struc- livery practical maintenance training. tural inspections are performed mainly in Europe or the United States, but there are fa- The three major U.S. aircraft manufacturers cilities available in the Far East and other provide about the same level of flight opera- parts of the world. Normally, the operator de- tions training support. Of the three, Boeing termines where and how much contract main- is the most prominent in the commercial air- tenance will be carried out. line field, with Lockheed (maker of the L-1011) no longer producing commercial aircraft. (The Training Programs Associated With an Air- McDonnell Douglas DC-10 jumbo jet is out of craft Sale.— Through training, airlines seek to production except for a military version, but ‘ 1‘ .S (’oti[ of F’[dera] l{f~ulat irm~, I;3 17, Fedora] .1 Yiation Icirlllnistr:i[]on. ‘1’]tk 11 /\eronauLic\ and Spa(’(~- I’urt .$~l, i\p- 39Personnel trained for flight operations include: pilots, flight pendix A Major Alterations, Mojor Repairs,. and Preventive engineers, performance engineers. (1 l~j)il [4ht, r\. f] i~l] [ ;lt t (,11( i Maintenance, p. 624 ff. Only two systems for overhaul are used ants, instructors suptm iwrs, iiIICi k )a(i lr] :ic-t [ Lt-\ I )( M )n] f ~pt’r:i t I Ir \ i n t ht, ~{~rld, t 1][> [ 1.>. f+’/\ ,+3 sj’+tt,n~ an(i ii f~rlt ish s} st[~n~, wit h [)(~rsonnel trained for maintenance int’lu(i[ t’1[’~.l r](i:ilr+, ‘Iirfr:irrlf th{ 1;/l )1 sj’st [’m domlnat ]n~ w~)rldwid(’, I ATA ar;d 1(’ ~10 clo and systems spt~cialists. ak’it )nic ~ spt’(’l :~1 ] ~t ~, :i n(i ] n + [ ru{’t f ~r~ n CII prom u IEa t (J {~~(v-h a u I sp[’{’ i fi ca t i on \ >1] p[~rl ] ~( 1l-s. “lpor a ft~wmg 717 i[ is rc~(~~nlrl~~~r~cle(j that a nl:i,j(jr {J\~’rha[]l “ “’I’hc> t~pi(al t(xk~]]t (.rti~ ~t)nslst + of a pilot, first offlf(r ~ xxwr a ft~’r X) ,()()~) h( jurs I { IJw(’t[’r, the ;-i 7 n{)rnlal 1~ flit’~ 1( jn~rt,r. ((st ~pll(~t ) iin(i flight [m~inw~r. SOIII(I of tht’ new’(’r p]ancs SUL’11 a~ fli~ht w~m[’nt.~ A\suming 12 h~}ur< p{ir (la} utilizat ]on. {Jr i. tot) t 11( I )tIugl as hl I )-,<( ) or ll{x’ln~ 767 r[~f~u I r-(, ( }n 1}’ t w{ 1 pfu ~] )It’, h~)ur+ ~]tr- ~(,ar. t h[ in~p{,ct ion M()\Il(i 1)[ pt’rforn~lwl t,l [,r~ i I . n:itn[’1~ t ht~ pilot ami (>opilf)( This is due to improved instrumen- Jre:i r< tation and more automatic features. 264 “ Technology Transfer to the Middle East their MD-80 142- passenger , previous- operation in the Middle East has proceeded ly called the DC-9-Super 80, is still being pro- successfully. From a flight operations view- duced.) The amount, type, and technological point, Middle Eastern students generally are sophistication of training techniques in well educated and have sufficient knowledge courses offered by Airbus are roughly compa- of English to permit efficient and effective rable to that offered by Boeing in both flight training. (Since all flight and maintenance crew and line maintenance training. classes are taught in English, training time and efficiency depend on the English fluency Most airplane customers have a significant of the students. ) Language problems in air- number of options with respect to brand craft operations training are usually most names of equipment, control and functions of noticeable in the case of ground support per- the avionics equipment and numbers of “sys- sonnel. tems” to be installed in their aircraft. Much of the avionics equipment is used by several Egypt and Algeria have the largest numbers different airplane manufacturers. The new in- of nationals maintaining their aircraft, while tegrated digital avionic systems introduced in the Saudis and the Kuwaitis the smallest. the /767, McDonnell Douglas MD- Since being a mechanic is not a prized occupa- 80, and Airbus Industrie A310, for example, tion in these latter two countries, reliance on are expected ‘to have an impact on air carrier Pakistani, Egyptian, Jordanian, and Palestin- operations equal to the introduction of radio ian mechanics will probably continue far into navaids (navigational aids) and two-way voice the future. 41 radio half a century ago.” In this case, the Airport Development. – In the Middle East, entire collection of avionic sensors and subsys- some of the world’s newest and most techno- tems has been designed to function as an in- logically sophisticated airports have been built tegrated flight control and management sys- to accommodate expanded airline operations. tem. This will enhance operational efficiency Several of the newer, larger airports in the and flight safety and ease flight crew work Middle East have been planned, designed, and load. sometimes constructed by foreign consultants Aircraft companies generally provide train- and contractors. ing in the Middle East similar to programs The selection of a site suitable for a new provided to customers in other developing or airport normally depends on certain criteria developed regions. From a flight crew view- which are also applicable to the expansion of point, there is not much variance among oper- existing airports. The location of an airport is ators arising from special qualifications re- generally influenced by the following factors: quired to fly a specific aircraft. At the request 1) type of development of the surrounding of the customer, courses can be extended to area, 2) prevailing weather conditions, 3) ac- deal with language difficulties. All Middle cessibility to ground transport, 4) availability Eastern students must, however, meet mini- of land for expansion, 5) presence of other air- mum requirements before attending mainte- ports in the general area, 6) surrounding ob- nance training courses. structions, 7) economy of construction, 8) According to U.S. industry experts, train- availability of utilities, and 9) proximity to ur- ing of personnel in and ban centers. These factors vary greatly among -— . — the Middle Eastern countries. 41 "New Avionic Systems offer Efficiency, Safety Benefits,’ The design of the passenger terminal com- Aviation Week and Space Technology, Apr. 19, 1982, p. 52. plex must accommodate different types of Training programs for the use and maintenance of avionics packages at the “line maintenance” (or systems) level are mod- users—passengers, visitors, airlines, airport ified for each customer. The “shop level” (or test repair operators, and concessionaires. Different de- overhaul level) is not considered as critical, and courses gener- ally teach ‘‘typical configuration components to several cus- sign objectives, and consequently criteria, can tomers at a time. be identified for the different users. The most Ch. 7— Technology Transfers in Commercial Aircraft Support Systems ● 265 important evaluation criteria for passenger of radar and instructs the pilot by means of terminal planning are: 1) ability to handle ex- voice communication.4s pected demand, 2) compatibility with expected aircraft types, 3) flexibility for growth and re- The Operation of Commercial Aircraft sponse to technology changes, 4) compatibility Support Systems in the Middle East with prevalent ground access modes, 5) com- Designing airports, and operating and main- patibility with the total airport master plan, taining commercial airline fleets are complex 6) potential for delay, and 7) financial and eco- and technically demanding tasks. Some Mid- nomic feasibility. dle Eastern countries have effectively used In addition to the passenger terminal, air- these technologies. A major purpose of the dis- freight handling and storage facilities, control cussion that follows is to analyze factors con- tower, powerplants, fuel storage, repair hang- tributing to this comparative success in tech- ars, administration buildings, fire station, nology absorption. communications, concessions, parking, often Saudi Arabia.–The Saudi Arabian national hotels or residential facilities, and public airline, Saudia, is one of the fastest growing safety facilities are needed. Airport planning airlines in the world. Carrying 4,000 tons of and development is thus a complex architec- freight in 1970, it grew to accommodate 100,000 tural, engineering, and logistical task. tons of cargo and 9.4 million passengers in Air Traffic Control.–Air traffic control 1981. Saudia systemwide traffic increased 11 (ATC) requires various types of navigational percent in 1983 to 11.1 million passengers, and surveillance and communication equipment the airline expects continuing expansion in (both in the cockpit and on the ground). The 1984, particularly on routes to the Far East. technologies involved, while widely used, are The stated goal of the International Airports fairly complex, and training in their use, main- Project directorate under the Ministry of De- tenance, and repair is not trivial. The equip- fense and Aviation is “to plan and build air- ment presently installed in the Middle East port facilities vital to the continued social pro- ranges from state of the art to outmoded. gress and economic growth of the kingdom. “44 Aids to aerial navigation can be broadly All three international airports in Saudi Ara- classified into two groups: 1) those that are lo- bia are undergoing or recently completed ma- cated on the ground (external aids), and 2) jor expansions. Jeddah’s new $6 billion airport those installed in the cockpit (internal aids). (opened in spring 1981), the King Abdul-Aziz Some aids are designed primarily for flying International Airport covers 104 square kilo- over oceans; other aids are only applicable to meters, making it in area the biggest in the flight over land masses; and finally there are world. Bechtel (U. S.) supervised construction aids that can be used over either land or wa- while a Ralph M. Parsons/Daniel joint venture ter. Some aids are used only during the en —— route portion of the flight, while other aids are “There are t~’~ t~’p~s of radar: Primar}’ and heacon. I’rimar}’ necessary in terminal areas near airports.42 radar show’s reflections from the aircraft bod~ as small “h]ips; on a radarscope. Beacon radar (sometimm referred to as sec- The principal aids for ATC are voice com- ondar~r radar) consists of a radar recei~’er and transmitter on munications and radar. English is the inter- the ground that transmits a strong coded signal to an aircraft if that aircraft has a transponder. A transponder is an airborne national language of ATC. The controller mon- receiver and transmitter which receives the radar signal from itors the separation between aircraft by means the g-round and responds by returning a coded reply to the in- ———.—— — . . terrogator on the ground. Most commercial aircraft carry trans- 42 Rohert lloronjeff. }’)mm’ng and Design of .4irports (New ponders. }rork: hlc(; raw-1 Iill, inc., 1975), For further descriptions of alter- ““ Saudia Continues (~rowth - At a Cost, ” .iliddle I;as[ }4.’c(}- 4 na[ ii’e AT(’ s~’sten]s+ consult ,\irport and ,4jr Traffic (’ontm] norni(> I)igest, Aug. 28, 1981, p, 29; Roy Allen, ‘Air Freight SjFstem.S, OTA-S’I’1- 17,5 ,Januar}” 19%2, and Re~rie~r of the F.-l ,A Ilusiness Zooms Ahead, ” .-l~’iation: .4 Aliddle East fi;conomic j :)xy ,f’atjon~ .lir,sp~cc ,S~5tem Plan, oT44-sT1- 176. August IIige.st Business Feature, ,June 25, 1982, pp. 62-64; ‘iSaudia Ex- 19S2, both publications of the U. S. Congress, office of Tech- pects Traffic Rise to Continue, ” ,4 ~iation Ii”twk and Space Tech- nology Assessment, Washington, D.C. nolo~~, NI a~’ 28, 1984, p. 37ff. 266 “ Technology Transfer to the Middle East -—— —

i -! t

New Riyadh Gateway— King Khaled international Airport iS the new aerial gateway to Riyadh, capital city of the Kingdom of Saudi Arabia. Its four-passenger terminals are alI served by air bridges The mosque, center left, rises 40 meters above the arrivals level roadway operates it. The new Riyadh airport, which will Recruitment of personnel, both ground and exceed Jeddah’s in eventual size, was also built flight crews, has been international in scope, by Bechtel, using more than 12,000 workers Saudia now has over 600 pilots. Saudia ex- from 35 countries.45 The third major airport pects 400 to be nationals by the year 1990. Un- is Dhahran International. til recently, training of Saudia pilots has occurred largely in TWA facilities in the Saudia has had a predominantly U.S.-man- United States. The suppliers of hardware (and ufactured fleet until its latest purchase of 11 software) for the computerized reservation wide-bodied Airbuses for delivery in 1984. In system have also been involved in training of order to service its large fleet, Saudia has Saudia staff. Much of the training of staff, ex- established extensive maintenance facilities. cept for pilots, has taken place in the exten- Saudia completed a comprehensive mainte- sive Saudia facilities in Jeddah. nance facility in 1979 and can perform all of its own aircraft checks and overhauls. TWA Training of Saudi nationals by both Saudia has had a deep influence on Saudia standards airlines and for the Presidency of Civil Avia- and operating procedures, but European influ- tion has been more successful, according to ex- ences have also been felt. perts, than technical training in most other -—— .- —— — —— sectors of the Saudi economy. Faced with ex- 45 Transport: Airport I’acilitie+ Keep I’ace \$’it,h Kingdom’s tremely high costs for expatriate labor, Saudia (; rowth, Saudi .\r:~bia: ,Iliddje East .Speciaj Heport, John chose to recruit high school graduates and N’he]an ([d ). Nlicidle E; ast F;conomic I)igest Iiouse, 1,ondon gave them in-house training. Most Saudia traf- (August 1 9/+2), pp. 161-164. See also, Roberl Bailey, ‘‘Count- down Begins for- ,Jt!ddah Airport “ .\liddle l

*.. .

More than half of the flight crews are now least possible delay. The Saudia Metrology Saudi nationals. Laboratory tests and calibrates the equipment In certain technical areas and in the more used in the aircraft to ensure proper perform- ance. Their MEMIS (Maintenance and Engi - complex maintenance of aircraft, Saudia still neering Management Information System) is depends on foreign technicians. A drive to particularly useful in time control. and in the find, train, and retain Saudis in this field is now under way, but it will be several years be- issuance of purchasing and repair orders. Self- sufficiency in maintenance is thus rapidly be- fore the majority of such technicians are Saudi ing realized within Saudia, and maintenance nationals. training courses are being expanded to include Saudia now performs all A, B, C, and D more and more key personnel. checks, and plans to carry out base checks The Bendix Corp. (U.S.) is engaged in a 15- (every 6.000 hours) on its Lockheed TriStars. year agreement which aims to eventually staff Saudia can carry out major repairs and hot 46 Saudi Arabia’s airports with Saudi nationals. section maintenance on several types of en- In a separate award, Bendix’s technical serv- gines. By 1984, Saudia plans to contruct and ices subsidiary, the Bendix Field Engineering operate an entirely new maintenance base in Corp., won a $337 million, 5-year air traffic Jeddah, which will meet projected mainte- control contract. It will supervise 31 airports nance requirements to the year 2015. Saudia in operations, systems engineering, and main- has recently begun operations with a twin-cell tenance. Six hundred Saudi staff will be civil engine test facility located in a new sup- needed; 500 of them will be managers and tech- port area of Jeddah’s King Abdul Aziz Inter- 47 nicians. national Airport. Saudia thus eventually expects to operate In a given year, more than 700 hangar visits will be made by Saudia aircraft for routine without a major expatriate work force. on the checks, modifications, and repairs. Saudia uses its own Automatic Test Equipment, a comput- er-controlled laboratory facility, to diagnose problems in electronic equipment so that air- planes can be put back into service with the 268 ● Technology Transfer to the Middle East —. — .—— ——— ——————— ——— other hand, one reason why the airline has reproduced in , Russian, French, Span- operated at a loss over the past few years is ish, Chinese, and English.51 its massive investments in training, computer- The key to the long-term objective of “Sau- ized systems, and flight simulators, as well as 48 dilation, ” says Ibrahim Serage, Saudia’s new aircraft and other capital investments. training director, is giving trainees sufficient In 1980 alone, official subsidies for Saudia Air- incentives and “opportunities for promotion. lines amounted to almost $75 million. The air- This means we are not training people simply line is determined to eliminate subsidies 52 for jobs, but for career development.” In gradually through higher fares and increased 1980, the company recruited 700 employees, efficiency. The government, through account- of which 200 became Saudi flight crew.53 The ing and financing procedures, is attempting ratio of Saudi pilots to nonnational pilots fell to provide incentives to operate the airline as from 1975 (75:25) to 1980 (50:50) as the de- a profit-seeking enterprise. Saudia’s airfreight mand for flyers grew rapidly. The goal is to business has been an important component of raise the ratio to the 1975 level by 1985. To its growth and Saudia is considering modify- that end about 100 pilot trainees are recruited ing its A-300s on order to a combination pas- each year. Some observers have pointed to the senger-freight configuration. Aiming to make tragic fire on the Lockheed TriStar L-1011 on the new airport at Jeddah the hub for air- August 19, 1980, as an indication that Saudia freight traffic to the Middle East, the airline 54 may be growing too fast. Nevertheless, Sau- plans to increase its airfreight business and dia has a good maintenance record and its pi- enhance profitability. lots are generally considered capable. Saudia, which tries to restrict recruitment The strides being made by Saudia are very to nationals, expanded its training budget in impressive; complete staffing by Saudi nation- the late 1970’s: the budget grew by 164 per- als, however, will not occur in the near future. cent between 1977 and 1981 to $47.7 million. Successful technology absorption in several In 1977, there were 4,261 trainees; the figure 49 aspects of commercial aircraft support sys- projected for 1981 was 9,149. Approximate- tems has come as a result of lengthy experi- ly 1,200 Saudi nationals are being-trained by ence, and a strong commitment to training. Saudia at its $42 million institute in Jeddah. Saudia is a comparatively independent oper- Some Saudi nationals are also studying in the so ation and can offer technicians exceptional United States. Saudia courses include flight housing and other perquisites and has, there- crew training, computer programing, market- fore, been able to recruit and retain educated ing, and technical and managerial skills. World blue-collar technicians. Training programs Wide Languages (United Kingdom) comput- have been costly, but they have contributed erizes translations and typesets manuals deal- significantly to the high quality of operations ing with installation, operations, and techni- and maintenance of Saudia. cal specialties. Indicating the international nature of Saudia operations, the manuals are ‘]’’ Saudi Arabia Continues Growth, ” op. cit., p. 30. —.— “Quotation cited in “Saudi Arabia–The Manpower Contro- 48 Roy Allen, “Air Freight Business Zooms Ahead, ” op. cit., versy, ” Middle East Economic Digest, Apr. 24, 1981, pp. 40- pp. 62-64. 41. See also “Saudis Seek Technical Self-Sufficiency, ” Aviation 49Edmund O’Sullivan, “Saudi Arabia–Bridging the Labour Week and Space Technology, May 14, 1984, pp. 68-70. Gap,” Middle East Economic Digest, May 22, 1981, p. 53. ‘34’ Saudi Arabia Continues Growth, ” op. cit., p. 29. 50The Sierra Academy of Aeronautics located at Oakland In- “John Whelan, “Airline Safety Questions Follow Riyadh Dis- ternational Airport, Oakland, Calif., will use a computerized, aster, ” Middle East Economic Digest, Aug. 29, 1980, p. 35. The multi-engine aircraft simulator to train pilots from Saudi official declaration of cause for the accident which killed 14 crew Arabia. The training features the 99 instrument approaches and 287 passengers was a fire of undetermined origin in the used at King Abdul Aziz International Airport, Jeddah Inter- cargo compartment. Factors contributing to the fatal results national Airport, King Khalid International Airport, Riyadh were listed primarily as in not making a maximum International Airport, Dhahran International Airport, and air- stop landing and immediately evacuating upon landing and not ports in 15 other cities in the Kingdom, “Courses for Saudi properly utilizing the flight crew during the emergency. Infor- Pilots Added to U.S. Program, ” Saudi Report, Jan. 24, 1983, mation provided by the National Traffic Safety Board, Wash- p. 3. ington, D. C., March 1984. Ch. 7—Technology Transfers in Commercial Aircraft Support Systems “ 269 ———. . . . . — — ———. — — ——

Kuwait.–Kuwait’s aim to become a regional a well-remembered example to Kuwaiti plan- center and a hub in East-West air traffic has ners of the need to monitor technology trans- been the driving force in civil aviation policy fers.55 and the growth of Kuwait Airways during the An airport development plan completed in past two decades, Kuwait Airways is unusual 1975 has been largely ignored, and the pres- among world-class airlines in that it has no ent Civil Aviation Department has authorized domestic air service. Yet Kuwaitis probably a new conceptual study by Aeroport de travel more by air than people from almost to cover requirements to the year 2000. An any other nation. The airline, however, cannot IATA team has prepared another report on make up in receipts on international air trav- the subject. Both reports identify coordination el for the lack of domestic air service. In addi- between military and civilian airport needs as tion, heavy losses due to increased operating a major factor in determining whether or not costs in the past 3 years, and the fact that a new second airport can or should be built. longer range aircraft make stops in the Mid- Another key issue is Kuwait’s future impor- dle East less necessary than before, have tance in regional and international air traffic. changed the likely future growth pattern of Studies indicate that the existing airport, with the airline and probably will modify the need a design capacity of 4 million passengers per for building a new airport. year, will have to cope with about 5 million The Kuwait Airways Corp. (KAC) has been passengers by 1990. This compares with 2.8 expanding the range of services it offers using million in 1981. Like Algeria and Egypt, Ku- eight-seat aircraft that fly up to 6 hours non- wait is thus anticipating a growth in air pas- stop. Air taxis to the and parts senger traffic beyond its present physical and of Europe were initiated in 1982. The goals of service capacities. the new service are said to be to reduce the The aircraft support industry in Kuwait is use of private planes and to increase sagging heavily staffed with nonKuwaitis. Even prior revenues of the company. Another tactic to to the completion of expansion plans, efforts boost profits is the goal of increasing KAC’s were made to expand recruitment. For exam- market share on Gulf flights. To do so, how- ple, in August 1980 airline pilots (as well as ever, fares were reduced by 35 percent for trips employees of the fire department) were ex- within the area in order to make the airline more competitive. empted from military conscription. The over- burdened airport traffic controllers were to be Kuwait Airways has placed a ceiling on fur- “stretched” by upgrading automated controls. ther hiring, and the management intends to A computerized radar system was put into ef- cut the substantial losses of the past few years fect in September 1980 at a cost of $3.7 mil- through emphasizing profitable routes, such lion. Chief executive officer of KAC Ahmad as the one to New York, and perhaps by of- al-Mashari announced in June 1981 that an in- fering less frequent service or canceling some service training system for Kuwaiti and other routes. Politically, however, it maybe difficult Arab engineers and technicians had been for Kuwait to withdraw from certain routes started.56 while continuing to serve others. Staff training is included in the $775 million Kuwait’s sole airport, Kuwait International, contract between KAC and Airbus Industrie was built in the 1970’s. In the 1970’s the Bri- tish firm Frederick Snow designed a “Pacific Consultants, the Ballast Nedem (the Netherlands), and Soleco (Italy) were all involved in the building of the air- which an Italian contractor was unable to port. Minor parts of the present airport system, including the build in the very hot climate of Kuwait. A Jap- jetways, were designed or furnished by U.S. firms. The airport anese architect, world-famous in this field, development plan was drawn up by the Netherlands Airport Consultants. solved the problem: huge slabs had to be 56"KAC Plans Major Projects, Middle East Economic Di- sawed in two at great expense. This remains gest, June 12, 1981, p. 28. 270 ● Technology Transfer to the Middle East —— --— —-— -.— —. — — .-

60 for purchase of 11 aircraft.57 Some say that the 15 percent annually. The airport at Cairo will Boeing 767 had the technical edge over the be expanded according to designs by Aeroport Airbus A310; moreover the U.S. company had de Paris. The first annex will raise overall ca- the advantage of having provided the rest of pacity from 5 million to 10 million passengers KAC’s fleet. Boeing reportedly lost this award annually when it is completed in 1984. An- for political reasons. The Airbus was reported- other 5 million may be accommodated by a ly selected because the political positions of second annex to be built by 1987. The airport major consortium participants, particularly plan allows for completion of further annexes France, were seen as more acceptable.” Polit- as necessary. ical considerations in aircraft sales in the re- A complete overhaul of the air traffic con- gion are covered in more detail in a following trol system for the whole country is underway. section. Thompson-CSF (France) will build and equip The political importance attached to having the Cairo air navigation center- as well as seven a national airline should not be overlooked in radar stations in other parts of the country, explaining Kuwait’s strategy. In the future, linked together by microwave. Air traffic con- KAC’s expected increase in services and as- trollers will be trained on the SIMCAT simu- sets will result in expanded requirements for lator to be supplied by Thompson-CSF. The skilled manpower, even with more extensive French Government is helping the Egyptian use of automation. Two points should be Government to finance the package–worth noted. First, there is no indication that the $72.5 million. The French officially subsidized work force will be primarily Kuwaiti. Depend- financing was reportedly a critical factor in the ence on expatriates must be increased to carry decision to choose the French company. out these plans. Secondly, although training Regional airports at Alexandria, Aswan, is included in the plans, it is not clear whether and Luxor are being improved. There has also the planned training is sufficient in view of the been discussion of building two new interna- physical expansion. tional airports in the northern Delta area. Egypt.–Expansion of Egypt civil aviation These would be located at Alamein and Ameri- sector has been uneven during the past few yah and would tie into industrial development years, despite projections which show large fu- schemes for the region. 61 ture increases in passengers. While financing EgyptAir has been redefining its relation- problems have not postponed construction of ship with the government over the past few airport facilities and telecommunications im- years. Ali Gamal al-Nazer, Tourism and Avia- provements, EgyptAir has had to retrench 59 tion Minister, announced in November 1980 plans for major aircraft purchases. Redefini- that the company was doubling its capital to tion of its market segment, competition, and $72 million through investments from the Na- management problems have contributed to the tional Bank of Egypt and the Misr Insurance slowdown in expansion of the state-owned air Co. Independent observers noted that Egypt- carrier. Air had been permitted to exercise increasing Passenger traffic through Cairo is expected autonomy and had been commercially success- to rise rapidly from the current level of 4 mil- ful, recording operating profits of $17.4 mil- lion passengers per year, possibly at a rate of lion for 1979.62 — Nonetheless, planned investments have 57Middle East Economic Digest. vol. 25, May 29, 1981, p 26. been scaled back. Orders for four McDonnell 5H’”Pro-Arab Stand ‘Wins Airbus Deal’, “Middle East Eco- nomic Digest, July 11, 1980, p. 34. The number of aircraft given ‘“Robert Bailey, “Safety First at Cairo Airport, ” Middle East in the 1980 announcement of the contract award was six but Economic Digest, June 12, 1981, p. 24. the 1981 figure was revised to 11. ‘i)’ ’Northwest Development Planned, ” Middle East Economic “Alan Mackie, “EgyptAir Trims Expansion Plans, ” hfidd~e Digest, July 3, 1981, pp. 7-8. l+la.qt Econonu’c Digest, Sept. 5, 1980, pp. 3-4. 62Mackie, op. cit. Ch. 7— Technology Transfers In Commercial Aircraff Support Systems ● 271 —

Douglas (U. S.) DC-10/30 aircraft were canceled ticket agents does not present a great prob- 65 in August 1980. Refer-ring to the purchase of lem. three Airbus Industrie A300s, the Tourism Algeria. -Algeria is simultaneously expand- and Aviation Minister said that the new in- vestments could not all be made simultane- ing airports, purchasing aircraft, and planning 63 for increased demand for trained staff due to ously. The company decided to forgo the the forecasted increases of 3 million to 5 mil- long-haul market, for which the DC-10s were lion passengers annually in passenger air traf- ordered, concentrating exclusively on the me- fic during the 198084 development plan peri- dium-range market. Further planned invest- 66 od. Two of the fundamental criteria involved ments were being limited. Discussions focused in the plan are to decrease charter freight and on either canceling or reducing in size by 75 to upgrade the fleet in the face of growing air percent the planned maintenance center to traffic. service the Airbuses at Cairo Airport. The Algerian 5-Year Plan mentions alloca- The government, nonetheless, affirmed its tions for a potential fleet of 54 aircraft. How- support for EguyptAir virtual monopoly as ever, because aggregate investment levels are it protected the company from potential com- petition from a newcomer. Arabia (Arab In- not specified, it is unclear how much expan- sion beyond present levels will actually occur. ternational Airlines) was incorporated in De- The 1980-84 development plan aims to provide cember 1978 with $15 million in capital owned international coverage for the southern part 60 percent by pritvate Egyptian and 40 percent of the country and to expand facilities in the by Saudi Arabian investors. Its staff of 150 north to meet increasing demand. Approxi- were all Egyptians.64 But after operating for less than 6 months, it was forced to terminate mately 00 airports are to be built or upgraded, operations, It was not permitted to fly on lu- 20 of which are located in the south. These will be used primarily for short-haul stopovers en crative international routes, which would route to points in west, central, and southern bring it into direct competition with the state- Africa. owned company. Closely restricted domesti- cally, Arabia finally succumbed to price- Contracts for design and construction of two cutting tactics. Further evidence of the gov- of these airports were recently won by the ernment commitment is the fact that of the state-owned international Airport Authority $226 million allocated for civil aviation in fiscal of . The turnkey contracts for the air- year 1981-82, EgyptAir was to receive $103 ports at Batna and Setif are reportedly val- million. ued at $100 million.67 The Egyptian labor profile, which includes Despite deliveries in May 1982 of two Boe- an abundance of labor and a large professional ing aircraft, a 737 and a 727, Airbus Industrie contingent, is well suited to air transport. appears to be gaining ground in negotiations. Specific vocational training programs are re- One attractive feature of Airbus proposals has quired, however, for each occupational cate- been broad sales and leasing packages that gory (the four major areas being aircraft pilots, take manpower needs into consideration. For flight attendants, ticket and station agents, and aircraft mechanics). Skilled labor occupa- “’Jllgypt’s acquisition of militar}r aircraft t,whnolog~’ (through licensed assemhl~’ and military pr(xwr(~nlent) ma?’ impro~e te{h- tions such as mechanics may present the nical capahi]i ties u wful t o ~h~’ conltn(~rciaJ aircraft +t’c t or. .s[Y~ greatest difficulties in terms of availability of Clar[’nce .+4. J{ohinson, Jr., “F~~~’pt Seeks Te(’hnoloK} ‘l’rans- labor, while training flight attendants and ff’r. .4 l’i:~tion JI”Nl ichat’1 Frost, ‘‘Algeria I)lans !’vlajt)r Airport I;xpansic)n, “‘“ Ijgypt (’ance]s 1)(’-1 (.)s, ,lljridlf~ j;a.st J;(’(>nor7]i(” :Jliddle J,’astl)i~vj.st, h;conomic l)ig~.s[, Aug. 28, 1981, p. 7. A ug, 2!), 19x(), p. I X; itl ackie, op {’it, ‘-.lfiddle ]’;ast ~,’cor?on]ic l)igest, .Jul~ 2, 19H 1, [). 4: “ 1 ndian> “’.Jenah Tutnj i, “Arah W’ings: F’lying th~~ (’hm-k’r tt’a~,” ;lli~i- Sign ,lirporl (’ont ract <, ,}tiddli~ l+;a,st F,’(”onon]it’ ljigf’.st. \ ()\. dlt’ l.’a.~( l

example, Lufthansa (West Germany) will train logical effects of flying on the flight crews as Air Algérie crews on A300s at the Frank- well as for testing aeronautical equipment.72 fort/Sieheim base of Lufthansa.68 This arrange- Algeria has plans to purchase a research air- ment is part of the terms of a lease for two craft with the help of a $7 million loan from Airbus Industrie medium-range passenger the Arab Fund for Economic and Social Devel- planes. Eight Air Algérie maintenance teams opment (AFESD). It will be used for testing will also receive technical training. Until the ground control equipment by some African Algerians are fully able to take over opera- and all Arab countries.73 tions, Lufthansa itself will provide crew and If Algeria proceeds with its planned fleet ex- maintenance technicians. pansion, investment on the order of $55 mil- According to some estimates, Algeria may lion could be required and an additional 1,000 need up to 25 Airbus Industrie A300s in the workers could be needed. It appears that the next 15 years.69 Although the comparable Boe- overall composition of the national labor force ing 757 is less expensive, Airbus is said to could support the annual levels of growth have the edge. In this case the French have planned in airline-related occupations, given offered to train Algerian engineers and aircraft adequate vocational training in the specific oc- mechanics at Airbus’ factories in Toulouse. cupations required. Moreover, the French proposed to setup com- Serious attempts are thus being made by Al- plete maintenance facilities for Air Algérie at geria to develop manpower apace with in- El-Djazair within 3 years. creases in air traffic and airport expansion. A civil aviation school for pilots and techni- Airbus Industrie, with its multigovernment cians is planned as a step towards implemen- support, is said to offer attractive training ar- tation of the current development plan.70 The rangements and financing terms. Thus Airbus school, to be located in Constantine, will be is said to be favored for large purchases of air- modeled on the Ecole Nationale d’Aviation craft in the coming years. Its estimated value as a Civile in Toulouse.” Iraq.— Iraqi Airways uses Lufthansa serv- turnkey package is from$115 million to $230 ice for its aircraft maintenance but performs million. Funding of $818,800 has been pro- its own routine maintenance (A and B checks). vided through the United Nations Develop- Plans have been laid to build new airports in ment Program while the Algerian Government most provinces with a view to expanding and has allocated some $68.2 million. The Enter- improving Iraqi Airways services. There are prise Nationale d’Exploitation Meteorologique plans to expand the domestic network through et Aeronautique, within the Transport Min- airports to be built at Arbil, for which the de- istry, is in charge of the project. Tractional (of sign contract has already been let, and at Belgium) is carrying out preliminary studies Amara, Kirkuk, and Najaf.74 Decreased oil rev- for the proposed 636-student institute. enues and the strains of the Iran-, Algeria plans to purchase sophisticated however, make delay of these plans likely. equipment for use in training and research. Iraqi Airways has experienced impressive For example, Algerian leaders have been dis- growth, especially since 1977, and consider- cussing the purchase of flight simulation able investments have been for new airports, equipment from Latecoere (France). The sim- both international and domestic. Foreign con- ulators would be used for testing the physio- tractors from a wide variety of nations have —- . . . — . 68"Air Algérie Leases Airbuses,” Middle East Economic Di- gest, May 22, 1981, p. 8. 72"Aviation Contract Discussed, ” Middle East Economic Di- 69 "Airbus Looks to Air Algerie. Middle East Economic Di- gest, Apr. 11, 1980, p. 22. The contract was valued at $45 gest, Oct. 15, 1982, p. 6. It presently has no Airbus or Boeing million. aircraft on order, however. 73Middie East Economic Digest, Aug. 8, 1980. pp. 15-16. 70F’rest, op. cit. “Information provided by U.S. Department of Commerce, In- “Middle East Economic Digest, Feb. 27, 1981, p. 8. ternational Trade Administration, Feb. 10, 1983. Ch. 7—Technology Transfers in Commercial Aircraft Support Systems . 273 participated. Pacific Consultants of Japan won contract to train over 400 Iraqis in airport elec- contracts for airport design studies in 1976 tronics.” The courses to be given in the United and 1978. The major construction contract for Kingdom will include both classroom study, the Baghdad International Airport (valued at at universities and technical institutes, and $900 million) was awarded in 1979 to the hands-on training at airports and at centers French company Spie-Batignolles and Fouger- of aviation equipment manufacture. A simi- olle. The major Basra Airport construction lar contract worth $530,000 to train Iraqi air contract was awarded in 1980 to an Austria- traffic controllers in the United Kingdom was West Germany consortium of Universal awarded at the same time. Hoch and Treflou and Bil Pinger. In 1978 British firms thus have been particularly Scott, Brownringy and Turner of the United successful in the Iraqi aviation training mar- Kingdom received a contract of unspecified ket. Some companies have had long-time work- amount for design of passenger terminals; ing relationships with Iraq, such as the Lancer another British group, Kirkpatrick and Part- Boss Group which has been dealing with ners, received an airport consultancy contract Iraqis for 20 years, Non-British firms have in 1982. In conjunction with the contract, Pak- made inroads in this market. For example, in istan’s Feedai Agency is supplying labor for January 1982 an airport staff training con- this construction. tract worth $1.4 million was awarded to the The primary suppliers of passenger aircraft West German firm Flughaven Frankfort am and parts have been U.S. corporations. Three Main. Boeing 727s and 747s, at a cost of $183.6 mil- The national airline of Iraq continues to lion, were sold in 1981. Three other 727s were operate despite the war with Iran. Under pres- sold in 1980. In 1975, two 747s, three 727s and ent circumstances, however, it is unlikely that one 737 were supplied by Boeing at a cost of Iraq would divert capital investment or occu- $150 million. pational training (pilots and aircraft mechan- The State Organization for Civil Aviation ics) from the military in order to build up the has plans to build a comprehensive training commercial airline industry. institute. Programs in operation and mainte- Iran.– Iran Airways presently handles most nance of airports, aircraft, air traffic control, of its own routine maintenance, with the and radar equipment will be offered. Pilots and assistance of technical specialists from other cabin crew will be trained in a broad range of 75 countries. Major overhauls are carried out skills, including foreign languages. abroad. Iran’s Fifth Development Plan, (1973- Iraq has been active in developing special- 77), under the Shah’s regime, called for expan- ized manpower for its commercial aviation sec- sion of existing airports and the construction tor. Now that women as well as men are be- of new airports, including the new Teheran air- ing admitted to train as pilots at the Takrit port scheduled for completion in 1980. Author- academy, the pool of skilled labor that itative information on the current status of could be eventually drawn from military to civ- these projects and of Iran Air is unavailable, il aviation may be expanded once the although it can be assumed that military capa- is ended.76 This move is indicative of national bilities have been given priority over commer- policy to expand the indigenous labor force. cial aviation in the air transport sector. The government is not waiting for domes- As of 1982, Iran Air was reported to have tic facilities to be completed before intensify- a labor force of 5,500 trained technical person- ing training activities. In October 1981, Brit- nel. Iran carried on negotiations with Austral- ish Airports International won a $1.3 million ia to set up a training program for Iran Air. -— “’illiddfe Jjast I;conornic Digest, Apr. 10, 1982, p. 28. “,i!liddle East Economic Digest, Apr. 9, 1982, p. 5. 77Middle East Economic Digest, Oct. 16, 1981, p. 28. 274 ● Technology Transfer to the Middle East .—.— . ..— — — — .— —

About 150 commercial pilots of the national telecommunications, navigational aids, and airline would be involved in the program. lighting. Multinational corporations or consor- tia of suppliers of equipment and services gen- Iran reportedly has budgeted some $33 mil- erally offer to install, maintain, and staff the lion over the next 5 years for building a new airport. international airport south of Teheran. Design and preliminary construction were completed In order to limit the number of expatriate prior to the Shah’s overthrow. Plans have been workers who form the largest proportion of the scaled down from an annual capacity of 20 mil- technical staff in most cases, airlines in the lion passengers to 7½ million. Total cost is Middle East have the option of automating now estimated at between $100 million to $200 operations. Keeping the labor component to million. Despite the political situation, Iran’s a minimum while at the same time develop- commitment to the airport project suggests ing regional capabilities requires coordination that the government expects more internation- in telecommunications services. Perhaps the a-1 visitors and is willing to provide modern fa- most impressive effort is the joint computer- cilities for them.78 ized reservation system. ”” Based in Bahrain, it will handle an estimated 10 million reserva- Regional Efforts.–The expansion of air traf- tions a year for the 10 airlines involved: ALIA, fic in the Middle East over the last few years Domestic Yemen Airlines Co. (South Yemen), has seen considerable cooperation among re- Gulf Air, Kuwait Airways, Libyan Arab Air- gional and national carriers. One official, lines, Middle East Airlines, Saudia, Sudan Air- speaking about joint provision of air services ways Corp., Syrian Arab Airlines, and Yemen between the Middle East and North America, Airways (North Yemen). At present only Gulf summed up the general situation quite suc- Air has its own computer reservation facilities; cinctly: “At the moment we do not have the the rest lease services from outside the region. equipment, the machinery, or the manpower Iraqi Airways did join the group because it has to do it [cover demand for services] individu- a central computer judged to be adequate. ally. The idea is for a pooling of resources to benefit every body.”79 Another labor-intensive service that could be performed more cheaply through a regional In 1980 a technical consortium was formed center is the calibration of instruments. that included Middle East Airlines, Saudia, Among the Arab countries, only Saudi Arabia Kuwait Airways, Gulf Air, and ALIA (the has such capabilities. A regional air traffic con- airline). The consortium also trol system may be attractive from an econom- held discussions with other members of the ic perspective, but there is overlap between the Arab Air Carriers Organization (AACO), but military and civilian control networks so that none have yet joined. Programs being consid- such cooperation may not be politically feasi- ered or actually underway include shared serv- ble. Aircraft maintenance centers and joint ca- ices (especially telecommunications) and uni- tering services are under discussion. fied training. Unified Training. —’s experi- Shared Services.–Sharing electronic equip- ence with training Moroccan nationals for ment and technical services may be an attrac- technical flight staff shows how expensive tive option for Middle East carriers. Highly 81 training can be. In 1980, the airline an- specialized electronic and telecommunications nounced its goal of complete staffing with may cost as much as 20 percent of the total Moroccan nationals by 1982. The 1980 defi- sum required for a new airport. Elements typ- ically included in a turnkey package are radar, .————— --—. ‘[’Robert Bailey, “Airlines Plan Computer Reservation Cen- tre, ”Middle East Economic Digest, Apr. 11, 1980, p. 19. The 78Middle East Business Intelligence, vol. 2, No. 13, Aug. 15, project is estimated to cost $30 million to $40 million. 1983. “’Da\id Hawley, “RoyaI Air Maroc . . . Facing the Competi- 7“ ‘Arab Airlines Plan Atlantic Route, ” Afiddle East Economic tion, ” A}’iation: A Nfiddle East Economic Digest Business Digest, June 20, 1980, p. 16. Feature, ~rol. 26, June 26, 1982, pp. 62-63, ——.——— Ch. 7— Technology Transfers in Commercial Aircraft Support Systems ● 275 cit of $2.6 million (up from $1.9 million the PERSPECTIVES OF SUPPLIER year before) was attributed largely to training COUNTRIES AND FIRMS costs totaling $3.8 million in 1980. As of June 1980 approximately 60 percent of the techni- Commercial aircraft support systems com- cal staff was Moroccan. Nevertheless, the air- prise a variety of equipment and services line has expanded its role in regional training. needed to operate and maintain local airlines The At-ah Civil Aviation Council has consid- in the Middle East. As discussed earlier, they ered promoting Morocco as a base for a civil fall into two groups: the goods and services aviation high technology institute.82 The Royal needed to operate aircraft, and those needed Air Maroc center in Casablanca is training to operate airports. The former are usually some African airlines students (e. g., from Air supplied by other airlines, aircraft and aircraft Mali, Air Zaire, and Air Mauritania) in addi- engine manufacturers, and aircraft mainte- tion to Moroccan nationals. nance firms. The latter are supplied by a di- verse group of communications, aerospace The AAC() has met with some success in electronics, and airport construe’ti(jn firms. joint training of management-level staff. The Douglas Aircraft Co. (subsidiary of McDon- The diversity of products exported to be nell Douglas Corp., U.S.) organized a popular parts of airports and air navigation traffic con- seminar for the 18-member AACO in August trol systems, and the large services component 1981. This was followed the next year by a in aircraft maintenance and operation preclude marketing course offered to 25 executives any simple analysis of trade flows. While most from the group. Sessions included fleet plan- equipment for aircraft and ning, aircraft financing, performance assess- maintenance is exported as aircraft parts ment, and forecasting.83 (SITC 7349), a large portion is linked to the original aircraft purchase.84 In September 1981 the chairmen of several Arab airlines met to consider a unified train- A multitude of equipment manufacturers ing system as well as the joint building of a often coordinated by construction manage- large airport hangar. The airlines involved ment firms, provide the various airport sys- were Kuwait Airways Corp., Saudia, Middle tems components. For example, Bechtel was East Airlines, Gulf Air, and ALIA. There has, has the construction manager for the new however, been no reported progress in these Riyadh airport, but the equipment installation ventures. and construction was handled under a num- ber of separate contracts. The French firm There is general agreement that cooperation among Arab airlines is economically desirable and perhaps necessary to reduce staff require- “’J’h~, r]]tijc~r qulpmen[ Ittlrn+ in t hi< <(([( lr :ir(, 1 IS[ t’(1 ;I((’I )r(l- ments of individual carriers. The AACO is the lng to Standard I ndu st rial ( ‘las~l 1 IC:I t I( )r~ [ S 1(‘) :Ln(i St ,ln(iur(] most comprehensive organization, but various 1 ndu+t ri:il Trad[J (’la+sifl(.lti(~rl ~ S 1 ‘1’( (( Klt I r] (I rlll)[,r+ smaller groups of countries have participated SIC in joint programs, The notable achievement code has been the development of the Bahrain- 3662 based, centrally computerized reservation sys- tem, Joint provision of other telecommunica- tions, maintenance, and training services has been discussed rather more than implemented.

3721 3724 3718

1611 276 ● Technology Transfer to the Middle East

Thomson-CSF is supplying air traffic control 4. Daily utilization by the customer of the and navigation systems. Firms from the fleet and the route structure. The higher United Kingdom are also active, particularly the utilization rate of the aircraft, the in Saudi Arabia. Germany’s major presence more spares are needed in inventory at has been in Iraq, while U.S. firms are primar- the main base and at those locations in- ily involved in Saudi Arabia. Some recent com- cluded in the route. mercial aircraft support system contracts 5. The extent to which a customer partici- awarded in several Middle East countries are pates in pooling of inventory with opera- shown in appendix 7A in tables 7A-1 to 7A-5. tors in the same region. Aircraft maintenance and support are per- Fleet homogeneity assists in maintenance formed by the local airline, by foreign person- since the publications, training, ground sup- nel employed by the local airline, or by foreign port equipment, and spare parts needed reflect airlines and maintenance firms on a contract only the differences between early aircraft and basis. The contracts in the Middle East (and later model aircraft of the same model. Main- elsewhere) cover a 3- to 5-year period. This is tenance capabilities can be pooled, but usually done to spread the nonrecurring costs over a these capabilities and services are contracted. broader base, thus lowering the person-month There are, however, several consortiums rate.85 As mentioned previously, after the ini- whose members perform maintenance for each tial aircraft sale, there is a substantial amount other. These usually do overhaul work for the of follow-on training for flight operations per- consortium. For example, one operator may sonnel, especially for smaller airlines which do do engine and work; an- not have their own training program. Crews other hydraulics; another airplane structures. and performance engineers are trained and Regional airline spare parts pooling agree- previously trained personnel are brought up ments are administered and controlled by the to instructor qualified level. There may be a airlines-prime manufacturers are not partici- significant amount of follow-on maintenance pants. Most Middle East customers currently training in the more specialized areas, such as participate in the International Air Transport rigging and composite repair. Pool (IATP). The degree and magnitude of the follow-on Competition Among Suppliers in spare parts business is determined by many Technical Assistance and Commercial variables, including. Aircraft Sales 1. The amount of spare parts initially pur- The factors which affect competition among chased from the manufacturers and sup- firms supplying technical assistance to airlines pliers prior to delivery of the first aircraft. in the Middle East are, not necessarily in or- 2. The degree of customer expertise in air- der of importance, fleet compatibility, geo- plane maintenance and repair of parts re- graphical proximity/route compatibility, his- moved from aircraft. torical ties, and commitment to service. Fleet 3. The number of airplanes of a particular make the customer has in operation. For compatibility, or capacity for type-specific maintenance and support, and geographical example, the same quantity of certain proximity are more prerequisites than compet- high-cost repairable spare parts is suffi- itive factors. Historical ties have been an im- cient to support one or several aircraft. portant determinant of technical support rela- As a general rule, however, the larger the tionships, but they must be reinforced in order fleet, the more spares that are needed over to remain influential. Underlying historical time. ties with foreign airlines are bilateral political relations. With the exception of MEA and “’Person-month rate is the cost of employing a person for 1 Trans-Mediterranean (all cargo), Middle East- month including salary, benefits, and general overhead. ern airlines are government owned, heightening Ch 7— Technology Transfers in Commercial Aircraft Support Systems “ 277 . .— the importance of political factors. While the of $12.9 billion.86 Middle Eastern sales may be contracting of maintenance services is not nec- an important indicator for sales in the rest of essarily a long-term commitment, combined the world. Whether carriers in the Middle East with other technical services and assistance will invest in brand new aircraft, or refurbish it is an important aspect of airline operations or buy used planes in order to meet their ex- and is unlikely to be entrusted to an airline of pected growth, is a major question for supplier a country with poor or faltering political rela- firms. tionships. Price, which is always a factor, is The chief rival of Boeing and McDonnell sometimes not as important a consideration Douglas is Airbus Industrie, a multinational as quality and efficiency of service combined group of companies that are wholly or partly with commitment. It is costly and disruptive owned by European governments. Members to have aircraft grounded; airlines have been of Airbus Industrie are Aerospatiale of France willing to pay for reliability in service. (37.9 percent ownership), Deutsche Airbus of Germany (37.9 percent), British Aerospace (20 Sales of large commercial aircraft lead to percent), and Construcciones Aeronautical of sales of auxiliary equipment and services. Spain (CASA) (4.2 percent).87 Airbus Industrie Table 66 shows the large U.S. export value of was formally constituted in December 1970. sales of large commercial aircraft. In 1982, Its first plane, the A300, a short- to medium- sales to the Middle Eastern region were sur- range twin-engine wide-body transport, went passed only by sales in the European and into service in May 1974. A smaller Airbus, Asian regions. the A310, was delivered to customers begin- ning in the spring of 1983.88 The Boeing Commercial Airplane Co. hopes *“Rolwrt l]aile~, ‘ ‘Boeing Strikes Ilackl ” ,Ifiddl[’ 1,’ust Fjco- to sell aircraft valued at $600 million to $800 nomic Dig~~st, F’et), 3. 1984, pp. :34-35, million to Middle Eastern customers in 1984 ‘“Th[’ French ( ;o~rernment owns more than 97 p[’rcent of alone. According to projections from Boeing, Acrospatiak, the l~ritish ( io~’ernmmt holds $~.~] Perctjnt of 13rit - ish Aerospac~~ shares with the rest held privately. CASA is the world market for commercial jet aircraft wholly owned by the Spanish Government. Deutsche Airbus between 1983-95 will be worth about $185.1 is a subsidiq’ of two commercial companies that are in the pr(x- billion at constant 1984 prices. Of this, 3 and ess of merging. ‘“Richard C’. Schroeder, “rl’r-ouhled Air Transport Industr?. ‘“ 4 percent will come from the Middle East and i;diforid Re.warch Reports, ~ol. 11, No. 20. NOI, 2f~, ] 982, p, Africa, respectively, representing total sales 882,

Table 66.—U.S. Exports of Commercial Transport Aircraft (33,000 lb and over airframe weight, 1978-82)

1978 — 1979 1980 1981 1982 Total number exported ...... 111 200 - – 237 255 121 Canada ., ., ...... 4 20 22 25 13 Latin American and Caribbean ., 14 19 31 35 13 Europe ...... , ... ., 36 68 109 108 31 Middle East ...... , . . . . 17 17 9 21 13 Asia ...... 24 60 53 34 25 Oceania ...... 6 6 7 19 8 Africa ...... 10 10 6 13 18 Total value (millions of dollars) $2,558 $4,998 $6,727 $7,180 $3,834 Canada ...... 132 373 299 584 294 Latin America and Caribbean . 187 423 640 1,027 301 Europe ...... 906 1,601 2,670 2,528 938 Middle East...... 541 582 236 841 699 Asia . . . . . 478 1,722 2,467 1,405 1,096 Oceania ...... 118 149 179 559 234 Africa ...... 196 148 236 236 272 SOURCE Bureau of the Census U S Exports - Schedule B Commodity by Country." Report FT 446 (annually), in Aerospace Industries Association of America Inc.. Aerospace Facts and Figures 1983/84 Washington, D C July 1983 p 133 278 c Technology Transfer to the Middle East ——-..—. -.

Commercial aircraft, however configured, technical success but a major financial failure; are costly, as shown in table 67. Enormous only 16 were produced.91 capital outlays are required for developing and Boeing’s newest planes are both twin-engine producing new models of large commercial air- jetliners with new, fuel-efficient engines. The craft. A new airline program can cost $2 bil- 89 767, a twin-aisle wide-body, smaller than the lion to $3 billion before deliveries even begin. 747, began flying commercially in the United This figure may exceed the company’s entire 90 States in September 1982. It has seven seats net worth. There is no guarantee that even across with a capacity of 211 passengers. The a best-selling plane will be a major revenue 757, under delivery beginning in 1983, is a earner. Of 23 models of commercial jet-pow- short- to medium-range jet with 186 seats. ered transports produced, only two are be- lieved to have been profit-earners–the Boeing Some observers note that, until recently, no long-range 707 and the medium-range 727. aircraft available on the market had 150 seats (over 1,800 727s have been delivered.) Lock- to accommodate a smaller number of passen- heed’s L-1011 lost $2.5 billion by the time it gers. This perceived gap in the market led air- was canceled, after approximately 200 were craft manufacturers in the United States and delivered. The supersonic transport , Europe to begin work on a smaller airplane. developed by the British and French, was a This size is desired by airlines for its fuel economy. “’S(v~ c’h }’ 1, ‘4rI’h(~ f:con[)mii’s oi I,:ir”gc ‘1’ransp(jrt I)LJ\L~lop- m[~n t, I ‘r( xiuc. tion, ;ind ( )p[~rat i( In in tht~ [ I ni t ed St at[~s, ..\ ( ‘fJII]- Boeing disputes that the 150-passenger air- pctiti~c’ t.~seh.nt of the i ‘..S. (’i\il .iircraft industr>. ( i ,S,craft need must be filled by a completely re- 1 )t,[);ir[ n]errt of (’omnl(r(w, I ndustr! An:il!sis 1)i\ision, ( )ffic’c {Jf I ndu \t r} .,1 sw~s~m(’nt, hl ar~.h I 9H4. ‘“ .,~nnahellti Nlti}, “(’oncorde- IIird of 1 iarnl(m~ or I’olit i{:]] ““l”ht~ (it’(>ision t{) Iwild a nt~w j~,diner ha~ lx~t’rl r~~ferred to :i~ ~lll)at ross: In F;xiimination in t h~~ (’ontt~xt of I)rltish 1~’ort~ign ‘‘}NIL L ing the c.onl~):in} .‘ S(w ,) ohn Nt’whous~~, ‘1’h(~ Sport}” ( ;:~m( l’olic~. lnt(’/7]ati(jn/~l or~wniz:ltion, Jol. ;l~l, N {), 1, 19’79, pp. 481-50H.

Table 67.—Typical Configurations and Purchase Prices of Various Competing Commercial Aircraft

Year Seating’ Costb Manufacturer/country Model available (seating range) (millions 1984 dollars) Airbus lndustrie France, United Kingdom, A300 1974 260 (250-260) 50 Federal Republic of Germany, Spain A310 1983 210 (200-210) 45 A320C 1988 150 (134-174) 24 Boeing United States 737-200 1968 115 16-20 737-300 1984 (122-149) 23-25

737-400 under review (134-161) NA 747-SP 1976 331 77-84 747-200 1971 452 86-101 747-300 1983 496 91-106 757-200 1983 186 38-42 767-200 1982 211 48-54 767-300 1986 261 56-61 7-7d late 1980’s — — McDonnell Douglas United States MD-80 1980 140(133-155) 23-24 aNumber of seats depends on seat pitch (spacing) used. First number is for a typical layout bCosts are highly variable and are given as a reference only Aircraft configuration customer needs provision of spare parts and other factors make exact numbers for aircraft or cost comparisons between companies difficult cThe Airbus A320 project received final go ahead funding from the consortium in March 1984 dThe Configuration of the 7-7 is unknown it wiII probably make greater use of Composites and may use a Iighter Weight metal skin. SOURCES The Air War Boeing Airbus Fight for Jetliner Contracts All Around the World." Wall Street Journal, Mar. 20, 1984; information provided by Boeing Com- mercial Airplane Co. Airbus Industrie and McDonnelI Douglas Corp., March 1984 Ch. 7— Technology Transfers in Commercial Aircraft Support Systems ● 279 ——. —- .— — designed (and hence very expensive) airplane. production go-ahead for Airbus Industries Their 737-300 model can accommodate a max- A320 Transport program (which will cost a to- imum of 149 seats. f]’ Under study are a 737- tal of over $2 billion) was endorsed by - 400 configuration (a stretched version of the pean governments under the condition that 737-300) with 134 to 161 seats, and a short- the consortium work to improve its profita- ened version of the 757-200 (presently 186 bility and more equitably distribute equip- seats). Boeing has recently reached agreement ment contracts among participating countries. with the Japanese for development of a new The 150-seat aircraft is expected to make its plane, presently termed the 7-7, which could first flight in February/March 1987. Certifica- end up being in the 150-seat range.’)] tion and start of deliveries are planned for spring 1988.97 The Douglas LID-80 has 142 seats and might be stretched into the 150-seat range. Government Roles in Aircraft Sales The MD-80 series plane is already selling well in the United States and elsewhere, with three Competition between Boeing and Airbus is models in production (the Super 80, MD-82, already intense and will probably become more and MD-83 seating up to about 155 passen- so once the 150-seat A320 is introduced in gers). This makes the aircraft already an ef- 1988. Each company complains that the other fective rival in the 150-seat market.94 McDon- enjoys unfair marketing advantages. Boeing nell Douglas is now studying a new version, argues that Airbus is subsidized by the partici- the MD-88, which would seat up to 164 pas- pating governments, allowing it to provide sengers and use the projected new interna- preferential financing. Boeing also contends tional V2500 engine being developed by the that nationally owned European airlines nat- multinational International Aero Engines con- urally prefer Airbus planes. Airbus refutes this sortium. 95 The latter powerplant is being de- by pointing to sales of the Boeing 757 to Brit- veloped by a group of seven companies in five ish Airways. As a response to charges by U.S. countries, with Pratt and Whitney of the aircraft manufacturers, Airbus states that aero- United States and Rolls-Royce of the United space research undertaken by the U.S. Nation- Kingdom the project leaders. The engine is ex- al Aeronautics and Space Administration pected to be available around 1988 and prob- (NASA) and made available to American ably will also be used in the Airbus A320. manufacturers, constitutes a subsidy for U.S. companies. Airbus also states that the U.S. The need for a new 150-seat jetliner was a Export-Import Bank devotes an inordinate major concern in the deliberations leading to amount of its resources to financing overseas approval of funding for the A320 by the sep- aircraft sales. Boeing has the largest exports arate members of the Airbus consortium.96 The of any U.S. company, as shown in table 68. .- ‘“[ iermain (’ham }mst, “Iheing’s 7;~7-;N)o: A Step Into the 150- One of the reasons given by the Europeans SLIaL hlarket. ” lnter:~~i:~-,lerospac’t” l{e~riew, \larch 1984, pp. for their government support of Airbus is that 240-241. European industry faces a fundamental prob- <”4 [lf)~’ing, Japan Sign J$’or-k Share I’act for 7-7, .AI ~’r’ation 11‘e(’k and S’pacv Twhndo~:\, NI ar. 19, 19/+4, p. 32, lem in its lower volume of production in com- “’~lichae] I)ixon, “hl(’I)onnell-I) (Juglas Stud~’ing N1 1)-M) Air- parison to U.S. manufacturers. According to lin[r I)(ri~ati\t’,” ~’inan(.iaJ Tim(s, Nlar. 16, 1984, p. 6. this view, long production runs give the U.S. ‘ Il)i(l,; .1 Iia[ion ll”wk and .Sp:Ict~ ‘1’echnolo~?, hlar-, 19, 1984, p. :11. manufacturers, particularly Boeing, economies “ I)uring delitwratir)ns h~’ t ht~ Ilritish, ~largarct Thatcher was . . quoted as sa~ing, ‘‘ I don’t want another Concorde. J$’here is European Airbus project which would replace existing medium- the market’? (1’eter Ridden, “ U K Aid for Airhus - I I )on’t J$’ant range aircraft. Firm orders and options for the A320 number .,lnother Concorde.” F’inanciaf Times, hlar 7, 19841. The flrit - approximately 100, It is estimated that 600 must he sold for ish (; o~’ernment finall~’ appro~ed 250 million pounds in launch break-even, or more than 700 for the British Government to aid to 13 ri t i sh Aerospace for its shartj of the ,,1320 project i n earn a reasonable return on its investment, (Ibid, Riddell.) earlJ. hl arch 1 W-1. Ilritish Aerospace argued that the A ;120 was ‘-tJeffre?’ hl, I,enoro\’itz, ‘“ I+; uropeans Endorse A320 Produc not a technological breakthrough into an untested market like tion, ’ A ~iation I!’mk and Space 77t’chnolog\, Nlar. 19, 1984, ( ‘oncorde” hut an updated and impro~(d ~cv-sion of the existing p, 29-:]0.

35-507 0 - 84 - 19 , ~JI, 3 280 . Technology Transfer to the Middle East —

Table 68.—Ten Leading U.S. Exporting Companies ——. -.— Total salesa Exportsa Percentage Rank Company ——— (in billions) of sales 1 - Boeing ...... $ 9.78 $6.10 62.40/. 2 General Motors ...... 62.69 5,72 9.1 3 .., ...... 27.24 4,34 15.9 4 Ford Motor 38.24 3.74 9.8 5 Caterpillar Tractor, ...... 9.15 3.51 38.3 6 McDonnell Douglas, ., ...... , . ., ..... 7.38 2.76 37.5 7 E. I. du Pont de Nemours , ...... 22.81 2.64 11.6 8 United Technologies...... 13.66 2.63 19.2 9 IBM ...... 29.07 1.85 6.3 10 Eastman Kodak ., ...... 10,33 1.80 17.4 a For 1981, as reported byFortune, Aug. 9, 1982, p. 68 Boldface denotes companies that are engaged wholly or partly in aircraft manufacture SOURCE Richard C Schroeder, “Troubled Air Transport Industry." Editorial Research Reports, vol. 11, No. 20 Nov. 26, 1982, p 883 of scale which are extremely difficult for the The issue of subsidization becomes more Europeans to match unless they can secure a complex if one examines only the component sizable share of the huge U.S. airplane mar- of U.S. Government support for commercially ket.98 They note that out of 353 A300/A310 oriented aeronautical R&D. The Federal Gov- Airbuses ordered to date, a total of only 36 ernment, through NASA, devotes roughly 99 have been ordered by two U.S. airlines. View- $300 million a year to these commercial aero- ing Airbus investments as very speculative, nautical R&D projects.1O1 NASA supports these observers argue that the bulk of the long-term R&D in some areas that may be funding has to come from their governments. underfunded by private firms, such as aircraft noise and safety. Other programs support the For their part, U.S. aerospace industry lead- development of more fuel-efficient and better ers point out that U.S. aerospace companies performing aircraft, goals for which some feel fund a substantial amount of research and de- private incentives may be adequate. On the velopment (R&D) themselves. A National other hand, some believe that there are no Science Foundation (NSF) analysis of indus- grounds for favoring this industry over others trial R&D shows that the aerospace industry’s also facing international competition but re- R&D funding far outpaces the average for all ceiving little R&D support. Advocates of U.S. manufacturing industries. In 1981 aero- NASA’s support argue that reductions in space company funding of R&D (civil plus mil- these programs could have a negative effect itary) was 4.2 percent of net sales, compared on the international competitiveness of the to 2.0 percent for all U.S. manufacturing in- U.S. civilian aircraft industry. dustries. Total aerospace R&D funding (com- pany plus government) was 15.3 percent of net The federally supported U.S. Export-Import sales while the comparable all-industry per- Bank (Eximbank) lends money at subsidized centage was 2.9.100 Figure 14 shows the Fed- interest rates to foreign purchasers of U.S. eral and company funds spent on aerospace products. The industries benefiting most from R&D (civil and military) from 1970 to 1983 in Eximbank’s subsidized overseas lending in the current and constant dollars. last decade have been manufacturers of com-

—— — .— — 98"The Airbus Example,” Financial Times, Mar. 5, 1984. “)’ Reducing the Deficit: Spending and Revenue Options, a Re- ‘gMichael Donne, “U.S. Airbus Protests Arouse Little Euro- port to the Senate and House Committees on the Budget–Part pean Sympathy, ” Financial Times, Mar. 22, 1984. The Euro- 111 (Washington, D. C.: U.S. Congress, Congressional Budget peans also note that Airbuses have approximately 30 percent Office (CBO), February 1984,) p. 173. CBO listed elimination [J. S. content by dollar value. of NASA commercially oriented aeronautical R&D programs ‘wAerospace Industries Association of America, Inc., Aero- as one way to reduce nondefense discretionary spending. This space Facts and Figures 1983/84, Washington, D. C., July 1983, one change. if adopted, could generate savings of $1.9 billion p. 109. over the 1985-89 period, according to CBO estimates. Ch. 7—Technology Transfers in Commercial Aircraft Support Systems ● 283

Table 70.—Export-lmport Bank Summary of Commercial Jet Aircraft Authorizations for Loansa and Guaranteesb (fiscal years 1957.82, values in millions of dollars)

Number of jets Export value Number of credits Gross authorizations Year Loans Guarantees Loans Guarantees Loans Guarantees Loans Guarantees New authorizations: 1957 C-68 ...... 322 $2,572 $ 331 58 $ 1,520 $ 274 1969 ...... 55 451 207 18 197 111 1970 ...... 142 1,749 3 38 598 79 1971 ...... 126 1,539 40 49 481 363 1972 ...... 145 1,334 9 29 475 183 1973 ...... 129 1,729 25 23 690 191 1974 ...... 189 — 2,195 — 22 895 133 1975 ...... 136 1 2,070 5 10 691 64 1976 ...... 77 6 1,017 139 11 398 87 1977 ...... 31 25 330 902 14 138 294 1978 ...... 29 5 479 253 5 189 77 1979 ...... 118 7 2,938 317 10 1,399 239 1980 ...... 136 21 3,975 901 24 1,693 1,088 1981 ...... 121 18 4,568 637 17 2,550 533 1982 ...... 13 7 441 113 2 199 78 Cumulative new authorizations ...... 1,784 187 27,603 4,064 640 333 12,208 3,853 Transfers and reversals ...... — — (8) — 4 — (24) (20) Cumulative gross authorizations (net of transfers and reversals ...... 1,784 187 27,595 4,064 644 333 12,184 3,833 NOTE: Detail may not add to totals because of rounding. aLoans are commitments for direct financing by the Export-import Bank to foreign buyers of U.S. equipment and services, including direct credits and loans authorized under the Cooperative Financing Facility (CFF) until the termination of the CFF programin 1981, but excluding Discount Loans, which are made by the Export-Import Bank to commercial banks and which subsequently may be guaranteed by the Export-Import Bank, in which case the value of the loans is included with Guarantees. b Guarantees by the Export-lmport Bank provide assurances of repayment of principal and interest on loans made by private lending institutions, such as Commercial banks, for major export transactions cFirst year of commercial jet aircraft authorizations. SOURCE: Export-Import Bank of the United States, in Aerospace Industries Association of America, Inc., Aerospace Facts and Figures 1982/84, Washington, D. C., July 1983, p. 137 grounds that they give an advantage to some factured by their competitors and not yet de- firms over others, and create income transfers livered in order to win sales.103 from taxpayers in the United States to High-level supplier government economic assisted firms and also to foreign buyers. diplomacy has frequently been employed. The These issues are complicated by the fact sale to Egypt of three Boeing 767-200 ER (ex- that complex buyback arrangements are not tended range) worth $163 million was a par- uncommon in sales. The manufac- turers do not disclose details of individual 103Michael Donne, “Why Boeing is Buying Airbuses to Win deals, but Boeing is understood to have an in- Key Orders, ” Financial Times, Feb. 2, 1984, p. 5. These buy- ventory of approximately 50 aircraft (includ- backs are reportedly sometimes at above market rates. In the ing jets of other manufacturers) that it has battle between Airbus and Boeing for a Interna- tional order for two planes, which Airbus eventually won, Boe- either already bought back, or has agreed to ing offered to purchase three old DC-8s from Thai Airways In- acquire at a future date, in order to win new ternational at $5 million each. Airbus offered $5.1 million for sales of its own jets. In another case of com- each with spare engines. The market value for DC-8s is presently $2 million to $3 million. See William M. Carley, “The Air War: petition for sales in Kuwait, it was reported Boeing, Airbus Fight for Jetliner Contracts All Around the firms were proposing to buy back jets manu- World, ” Wall Street Journal, Mar. 20, 1984, p. 1. 282 ● Technology Transfer to the Middle East — . . — mercial aircraft and heavy equipment, includ- fair competition.]”’ Table 70 gives a summary ing power generators. The large share of loans of commercial jet aircraft authorizations and for commercial jet aircraft exports from the the number of jets involved. The number of Export-Import Bank is shown in tables 69 and jetliner exports covered by these loans and 70. Table 69 lists total Eximbank authoriza- guarantees fell sharply from 1981 to 1982. tions of loans and guarantees as well as sepa- rate exports for fiscal years 1974-82. In the Supporters of the Eximbank program main- tain that it is a necessary response to the years 1979, 1980, and 1981, aircraft exports sometimes “predatory” policies of foreign represented 37.3 percent, 41.8 percent, and competitors offering advantageous financing 50.3 percent of total loan authorizations. This terms to attract and retain buyers. They also percentage, however, fell dramatically in 1982 feel that export programs stimulate U.S. to 7.8 percent of a much smaller total loan employment and promote development of authorization of $3,104 million. Total author- technology. Critics contend that such pro- izations for loans in support of aircraft exports grams are inappropriate interference in the in 1982 were less than one-tenth that of the free market causing economic inefficiency. previous year. Some of the reasons for the de- They also criticize the programs on the crease were the soft market for aircraft sales during the worldwide air transport recession, “’i’I’he F;xport-Import Bank determined that loans would only lower total Eximbank funds, and questions as be pro~’ided in cases where U.S. exporters faced direct competi- to which U.S. planes truly were up against un- tion from foreign suppliers.

Table 69.—Export-lmport Bank Total Authorizations of Loans and Guarantees and Authorizations in Support of Aircraft Exports (fiscal years 1974-82, millions of dollars) .—— Authorizations in support of aircraft exportsa Total Percent of total Commercial Other b Year authorizations—. Total authorizations jet aircraft aircraft Loans: c 1974. , ...... $3,981 $ 946.2 23.8% $ 894.6 $51.6 1975 .., ...... 2,701 710.4 26.3 691.2 19.2 1976, ...... 2,285 421.9 18,5 398.4 23.5 1977 ...... 747 139.0 18,6 137,6 1.4 1978 .., ...... 2,927 195.2 6.7 189.5 5.7 1979. ., ...... 3,825 1,427.7 37.3 1,399.4 28.3 1980 .., ., . . . . 4,087 1,710.1 41.8 1,692.6 17.5 1981, ...... , 5,079 2,555.0 50,3 2,550.3 4.7 1982. , ...... 3,104 241.4 7,8 199,1 42,3 Guarantees: d 1974 ...... , ...... $1,594 $ 154.0 9.7% $ 132.9 $21.1 1975 ...... , ...... 1,574 84.5 5.4 64.0 20,5 1976 ...... 1,661 107.6 6.5 87.2 20.4 1977. , ...... 1,021 307.5 30.1 293.9 13.6 1978 ...... , ...... 589 97.6 16.6 77,2 20,4 1979 ...... 908 261.4 28.8 239.3 22.1 1980 ..., ...... 2,510 1,131,9 45,1 1,088.1 43.8 1981 ...... 1,513 562.6 37.2 533.4 29.2 1982.— , ...... 727 104.2 14.3 78,4 25,8 alncludes complete aircraft, engines, and Parts blncludes business aircraft, general aviation aircraft, helicopters, and related goods and services c Loans are commitments for direct financing by the Export-lmport Bank to foreign buyers of U.S.equipment and services including direct credits and loans authorized under the Cooperative Financing Facility (CFF), until the termination of the CFF program in 1981, but excluding Discount Loans, which are made by the Export-import Bank to commercial banks and which subsequently may be guaranteed by the Exporf-import Bank, in which case the value of the loans iS Included with Guarantees d Guarantees by the Export-import Bank provide assurances of repayment of principal and interest on loans made by private Iending institutions, such as commercial banks for major export transactions SOURCE: Export-Import Bank of the United States, in Aerospace Industries Association of America, Inc., Aerospace Facts and Figures 1983/84 Washington, D C July 1983, p 136 Ch. 7—Technology Transfers in Commercial Aircraft Support Systems ● 283 —- — -.

Table 70.— Export-Import Bank Summary of Commercial Jet Aircraft Authorizations for Loansa and Guaranteesb (fiscal years 1957-82, values in millions of dollars)

Number of jets Export value Number of credits Gross authorizations Year Loans Guarantees Loans Guarantees Loans Guarantees Loans Guarantees New authorizations: 1957C-68 ...... 322 53 $2,572 $ 331 92 58 $ 1,520 $ 274 1969 ., ., ... 55 23 451 207 23 18 197 111 1970 ...... 142 1 1,749 3 44 3a 598 79 1971 ., 126 9 1,539 40 58 49 481 363 1972 ., 145 2 1,334 9 44 29 475 183 1973 ...... 129 4 1,729 25 60 23 690 191 1974 ., 189 — 2,195 — 79 22 895 133 1975 . ., 136 1 2,070 5 64 10 691 64 1976 . . ., 77 6 1,017 139 34 11 398 87 1977 ., 31 25 330 902 16 14 138 294 1978 29 5 479 253 18 5 189 77 1979 : : : : : 118 7 2.938 317 35 10 1,399 239 1980 ... ., 136 21 3,975 901 36 24 1,693 1,088 1981 ... ., 121 18 4,568 637 26 17 2,550 533 1982 . . . . . 13 7 441 113 5 2 199 78 Cumulative new authorizations 1,784 187 27,603 4,064 640 333 12,208 3,853 Transfers and reversals — — (8) – 4 — (24) (20) Cumulative gross authorizations (net of transfers and reversals . 1,784 187 27,595 4,064 644 333 12,184 3,833 —. ..— . NOTE: DetaiI may not add to totals because of rounding a Loans are commitments for direct financlng by the Export-Import Bank to foreign buyers of U.S. equipment and services including direct credits and loans authorized under the Cooperative Financing FaciIity (CFF) untiI the termination of the CFF program in 1981, but excluding DIScOU nt Loans which are made by the Export-Import Bank to commercial banks and which subsequently may be guaranteed by the Export-Import Bank in which case the value of the loans IS included with Guarantees b Guarantees by the Export-Import Bank provide assurances of repayment of principal and interest on loans made by Private Iending institutions, such as commercial banks for major export transactons. c First year of commercial jet aircraft authorizations. SOURCE Export Import Bank of the United States in Aerospace Industries Association of America, Inc., Aerospace Facts and Figures 1982/84 Washington D C July 1983 p. 137 grounds that they give an advantage to some factured by their competitors and not yet de- firms over others, and create income transfers livered in order to win sales. ’”’ from taxpayers in the United States to High-level supplier government economic assisted firms and also to foreign buyers. diplomacy has frequently been employed. The These issues are complicated by the fact sale to Egypt of three Boeing 767-200 ER (ex- that complex buyback arrangements are not tended range) worth $163 million was a par- uncommon in jet airliner sales. The manufac- turers do not disclose details of individual .—— ““ltlichael Donne, “W’hy Boeing is Buying Airbuses to J4’in deals, but Boeing is understood to have an in- Ke~’ Orders, ” Financial Times, Feb. 2, 1984, p. 5. These buy- ventory of approximately 50 aircraft (includ- backs are reportedl~ sometimes at above market rates. In the ing jets of other manufacturers) that it has battle bet ween Airbus and Boeing for a Thai Airways Interna- tional order for two planes, which Airbus e~’entuall~’ won, Boe- either already bought back, or has agreed to ing offered to purchase three old DC-8S from Thai Airwa~’s In- acquire at a future date, in order to win new ternational at $5 million each. Airbus offered $5.1 million for sales of its own jets. In another case of com- each with spare engines. The market value for D(73s is presentl~’ $2 million to $3 million. See W’illiam M. Carle3, “The Air W’ar: petition for sales in Kuwait, it was reported Boeing, Airbus Fight for Jetliner Contracts All Around the firms were proposing to buy back jets manu- \\’orld, 11’all Street Journal, Mar. 20. 1984, p, 1. 284 ● Technology Transfer to the Middle East — ticularly difficult one. Between the initial tenance facility. This is a limited modular fa- agreement in September 1983 and formal con- cility capable of expansion, but it is not now tract signing on January 12, 1984 (for deliv- conducting major overhauls. Similarly Rolls- ery in July and August 1984), the govern- Royce is providing Saudi Arabia with engine ments backing Airbus reportedly instructed overhaul equipment. The engine manufactur- their ambassadors in Cairo to lobby Prime ers play an important role in supplying equip- Minister Fuad Mohieddin to persuade Egypt- ment for local maintenance bases, but much Air to choose Airbus.104 In a final but unsuc- of this equipment can be supplied by other cessful effort to thwart the Boeing sale, Aer- types of firms involved in aircraft and engine ospatiale’s chairman, Henri Matre, was said maintenance. Chief among these are the ma- to have offered Egypt a role in producing the jor airlines. .105 Commercial aircraft engine manufacture It thus appears that both U.S. and Euro- and sales is a separate realm of competition. pean manufacturers of commercial aircraft are Ten years ago, the situation was fairly sim- being subsidized–but the extent of the sub- ple: Pratt and Whitney (U. S.) dominated the sidies, either direct (through subsidized loans) market and each plane model was matched or indirect (through R&D programs or diplo- with a specific engine from a specific company matic support) are difficult to gauge. Both (almost always Pratt and Whitney). Today, sides see the growth of government assistance the Pratt and Whitney Aircraft Group (a divi- as a response to the ‘‘unfair” practices of the sion of United Technologies Corp. ) has two other players. Boeing Commercial Airplane strong competitors: Rolls-Royce (U. K.) and the Co., as a private, for-profit business, must General Electric Aircraft Group (U.S.)106 G.E. compete against Airbus, an essentially state- also has a joint venture called CFM Interna- run business which is predicated on other fac- tional with the French corporation, Snecma. tors in addition to turning a profit. Today, each of the new, more efficient air- Because of continuing disagreements over planes, the Boeing 757 and 767 and the Airbus subsidies, a special aircraft sector agreement A300 series, can be fitted with engines from was established in 1981 between the United at least two of the manufacturers. In addition, States and major European countries to set a multinational consortium, International clearer rules of the game in financing exports Aero Engines, is now developing the V2500 of commercial aircraft. This common-line engine which will be able to power the A320 agreement (subject to renewal every 6 months) now under development (the A320 can also be sets a minimum interest rate and maximum powered by the CFM International CFM56-4). cover for government agencies. Thus, in the The fact that an airliner can now be built with past few years progress has been made to en- engines from different manufacturers is impor- sure that supplier governments adhere to sim- tant on two counts. First, it intensifies com- ilar rules of the game in financing exports of petition among the engine makers who may commercial aircraft. be willing to make concessions in order to win contracts for particular planes. Second, if an Aircraft Engine Suppliers aircraft manufacturer feels that its sales may suffer because it carries a particular engine Aircraft engine manufacturers have been in- (e.g., U.S. controls on exports of U.S. engines volved in maintenance facilities in the Middle East. General Electric, for example, recently assisted Egypt in setting up an engine main- ‘[’’Worldwide projected market shares for jet engines in the 1982-86 period are projected as Pratt and Whitney (36 percent ); G.E. (30 percent); CFM International (23 percent); Rolls-Royce “’’Robert Bailey, “Boeing Strikes Back, ” Middle East ECO- (9 percent); and other (2 percent), according to Forecast Asso- nomic Digest, Feb. 3, 1984, pp. 34-35. ciates, Inc. See Agis Salpukas, “Aircraft Engines: Stiff Rival- ‘[’’ Ibid., also David Marsh, “France Offers Egypt Airbus ry Pratt Loses Its Big I.cad, The New York Times, Jan. 21, Work in Bid to Beat Hoeing, Financial Times, Dec. 6, 1983. 1983, p. D1. Ch 7— Technology Transfers in Commercial Aircraft Support Systems ● 285

prevented sales of Airbuses to Libya), the com- The Airbus A320 will be powered by engines pany may opt for another engine which does produced only partly in the United States– not present those risks. the CFM International CFM56-4–or the V2500 under development by the multinational Inter- Competition among engine manufacturers, national Aero Engines consortium. These en- particularly in fast-growing markets such as gines are nevertheless subject to U.S. export the Middle East or Asia where an entry in the controls. The fact that the V2500 falls into this lucrative market is desired, has been hard category is of great concern to Rolls-Royce of fought. In competing for sales of the two new the United Kingdom, one of the members of jetliners for Thai Airways International, the the engine consortium along with Pratt and aircraft manufacturers and engine manufac- Whitney of the United States. The U.S. Gov- turing groups that initially teamed up to bid 107 ernment has agreed to working-level discus- later shifted sides. sions concerning the control of exports of the Airbus Industrie is becoming increasingly V2500 engine once it has been certificated. In cautious about using U.S.-origin engines in return, Rolls-Royce has indicated that it will their . U.S. export controls report- abide by U.S. export control restrictions on edly delayed the sale of Airbuses to Libya. 108 the engine.’” As a result, the U.S. Department The Airbus consortium therefore considered of Commerce issued export license authoriza- using engines made by Rolls-Royce as a way tion for the program on March 9, 1984. The to circumvent the U.S. ban.109 A study was car- British, however, are still concerned that U.S. ried out in 1983 by Airbus Industrie to deter- export controls that may be administered in mine what components would have to be an extraterritorial manner. Rolls-Royce offi- changed on the A300 or A310 in order to ex- cials have stressed that their agreement was port these aircraft to Libya.110 The study in- not a government-to-government one, and that dicated that Airbus aircraft include more than they agreed to abide by U.S. export controls 30 percent U.S.-built content by dollar value on the understanding that there will be seri- (much of this due to U.S. engines), and that ous negotiations on how the rules will be ap- with such a high percentage of U.S.-built plied to the V2500 engine. ” equipment, the aircraft are effectively under the restrictions imposed by U.S. export con- Airport Systems trols. Although the new A320 being developed Airports in the Middle East are being ex- may not be free of these restrictions since both panded to accommodate increased air traffic available engines are partly U.S.-built, the in the region. Saudi Arabia recently completed Europeans talk of reducing U.S.-built content airports at Jeddah and Riyadh and is planning as much as possible so as to limit [J. S. influ- 111 another major development for Dhahran, as ence on Airbus export sales. well as a number of regional airport projects. “ See W’illiam >1. (’arle}, ‘“I’he Air W’ar-130eing, Airhus I;ight for .Jetliner (’ontracts All Around the \$rorld, Jt’,alj sfree~ ,I(jurnal, hlar. 20. 19H4, p, 1 The real winner of this contest ma?who \isited w-ith go~’ernment and i~[’rt)ace Techn(~l- ““ I,ih)ran 4 irlines Negotiates Airhus I,ease, ‘“ Nfiddie I.’ast o~, ltlar. 19, 1984, p. 29. 1 ]<;ia) 1 ] 1‘ ( I S, ‘1’ri[% to Stc~nl ..lirt}u~ l]usin(~ss [xJs\, ,4 Iriaticjn J1’twk Times, 31aJT 1 i’, 19x1, p. 8: and Keith F. !LIordoff, “.!irhus ‘1’(~ and .~’pa(w ‘1’ech nolo~:i’, \lar. 1 f). J 9H4, p, 31. (’rawford E’. [3ru- off~’r \-2500 option on Ai120, A ~iation 11 eek and .Space Tech- l)ak~’r. I )ttput \ ,,4

Abu Dhabi recently opened a new airport, and The actual implementation of airport devel- major work has been underway in Cairo and opment projects, such as those in Saudi Arabia, Baghdad. Algeria has more modest plans for is normally carried out by groups of firms with upgrading and expansion. separate contractual responsibilities. U.S. con- struction firms, Bechtel and Parsons, in joint Airport development in the Middle East has venture with Saudi firms, are providing con- relied extensively on technical assistance and struction management services at Riyadh and equipment from the West. This has been pro- Jeddah. The actual work and equipment con- vided by a variety of firms including airport tracts have gone to a multitude of firms from consultants, architects, airlines, construction several countries, as mentioned above. In con- firms, civil aviation authorities, aerospace trast to this type of multicontract internation- manufacturers, and a multitude of equipment al division of labor is the French approach of manufacturers. This scattering of activity providing a comprehensive package which in- among so many different types of firms makes cludes planning and design, construction, it extremely difficult to analyze the factors equipment installation, and even financing. determining commercial success in supplying This approach has reportedly enhanced the and transferring the technical skills for the de- positions of French firms, as illustrated by the velopment of airport systems. Bechtel (U. S.) Cairo airport modernization work. This proj- had the role of construction manager for the ect began with a feasibility study by Aeroport Jeddah airport project. The firm was respon- de Paris in 1978, which included design of the sible for up to 60 primary contracts at any terminal and construction supervision. Thom- given time since 1978. Some of these contracts son-CSF supplied and installed the electronic involved extensive subcontracting; one report- equipment for the air traffic control system, edly involved 1,500 subcontracts with equip- and terminal construction was carried out by ment suppliers. Yet public information on a French/Egyptian joint venture. Some financ- most of these contracts is not generally avail- ing was also made available through official able. The bulk of the primary contracts are export credits. This size of package would not said to have gone to non-U. S. firms, but there have been sufficient to accommodate projects is no way to document this. Although much such as those in Riyadh or Jeddah. This ap- of the actual equipment orders sourced proach does, however, allow for coordination through subcontracts reportedly have been of all facets of project development and imple- won by U.S. firms, there is no way to verify mentation, which the French foster through this. this type of consortium. The civil aviation authorities of Western Technical support in the operation and main- countries have been a major source of techni- tenance of airport systems is provided by a cal assistance in airport planning. France, the wide variety of firms. The Dhahran airport is United Kingdom, and the United States have operated by a services division of the Boeing been the most active in this respect. Tradi- Co. In other areas, technical assistance is pro- tionally, such services were provided largely vided by affiliates of airlines such as British on the basis of colonial and historical ties, but Airports International, which has been active today these links are less important. France in the Gulf States, diversified aerospace com- actively seeks technical assistance relation- panies such as Lockheed, which had a contract ships, and often assumes the costs under for- for the first phase of Saudi Arabia’s air traf- eign aid. The United States responds to re- fic control system, and equipment manufac- quests for assistance, which has been on a fully turers. In Saudi Arabia, the major responsi- reimbursable basis since 1967. The United bility for operation and maintenance of the air Kingdom pursues an approach similar to the traffic control system is handled by Bendix United States, although it does occasionally under a 1980 contract from the Presidency of assume the cost of technical services. Civil Aviation (PCA). Ch. 7— Technology Transfers in Commercia/ Aircraft— —. Support Systems ● 287

The case of the Bendix air traffic control local agents or joint venture partners (espe- contract illustrates factors influencing compe- cially in Saudi Arabia), historical relations tition. Bendix won a contract in 1980, replac- with a country or firm, perhaps including the ing the U.S. firm Lockheed. Bendix has over- involvement of the civil aviation authority, all responsibility for the air traffic control and price/financing. In different countries, system, including staffing, equipment main- these factors are of differing importance: Saudi tenance, training, and advising on new equip- Arabia, for example, has been comparatively ment for expansion. Logistical arrangement less concerned with price and is increasingly of the system is an important component of attempting to diversify suppliers. the contract, due to the variety of equipment types installed and the need to replace parts Air Traffic Control/Avionics from many different countries. Bendix man- Air traffic control (ATC) in the Middle East- ages a training center in Jeddah, which has mockups of all the major systems in use. The ern countries under study ranges from Saudi Arabia’s state-of-the-art system to Egypt’s major aim of the contract is to train Saudi visual sighting. ICAO periodically publishes Arabian nationals for eventual takeover. How- ever, due to the shortage of qualified person- a status report for airport ATC throughout the world which lists requirements for raising ma- nel, complete takeover by the Saudis is still jor airports to ICAO international standards. a long time in the future, Bendix has over In this publication, Middle East airports rate, 1,000 foreign nationals under contract in Saudi as expected, from excellent to poor. Upgrad- Arabia, but some portion of these are in sup- ing recommendations are generally for airfield port services such as housing, transportation, lighting, markings, radio navigational aids, etc. AFTN (Aeronautical Fixed Telecommunica- Bendix did not have a proven track record tions Network), and AMS (Aeronautical Mo- in managing similar operations in other coun- bile Service-approach control). New aircraft tries, but the firm did have 20-years experi- such as the Boeing 757/767 and Airbus 300/ ence with NASA projects in the United States, 310 come with the state-of-the-art ATC com- Its principal competition was from Lockheed patible equipment—but these are of no use if and SEL, a German equipment manufacturer. the airport does not have adequate ground Bendix had done extensive work in Saudi ATC equipment, such as is the case in Egypt. Arabia, for the navy and army, and was well Improved ATC enhances airline efficiency and known to the PCA. Primary factors affecting safety and is thus a priority in airport mod- the contract award were reportedly price and ernization. Raytheon (U.S.), Bendix (U.S.), and the efforts of a well-placed Saudi agent. Ben- Thompson-CSF (France) are major competi- dix was the low bidder on the project, and also tors in ATC equipment. set forth an institutional arrangement and Aircraft avionics encompasses both ATC contract proposal which satisfied PCA's con- functions and aircraft systems monitoring. cerns about logistical functions and internal Collins Avionics (a subsidiary of Rockwell In- decisionmaking. Bendix met these concerns by ternational) and ARINC (Aeronautical Radio establishing an autonomous division in Saudi Inc.) are leaders in aircraft monitoring equip- Arabia capable of handling the logistical and ment. Delco and Litton Industries, also from other responsibilities. Bendix also emphasized the United States, are the leaders in general training Saudi nationals as controllers and inertial navigation systems with system managers. specializing in laser-gyro based inertial The most important factors influencing air- reference systems. Major competition for U.S. port systems contract awards appear to be a firms comes from Thomson-CSF and Aero- proven track record in the technology or tech- spatiale ATEC equipment, which supplies the nical management area, a demonstrated will- Airbus. New digital equipment also is being ingness to train nationals, the effective use of manufactured by France’s Sfena in coopera- 288 ● Technology Transfer to the Middle East .——— —. .— — . — — — —. -- ———-

tion with Great Britain’s Smiths Industries Private Aircraft and Helicopters and Germany’s Bodenseewerk Geratechnik for In addition to private travel within and out- the Airbus. Although. avionics seems an ideal side some Middle Eastern countries, general entree for Japanese electronics technology, aviation is used in air photography for oil and Japanese firms have not yet entered into this minerals, mapping, spraying, servicing of re- field. Color cathode-ray tubes for crew alert- mote construction sites and drilling rigs, and ing systems are made by Toshiba and Mitsu- for light freighting. Ownership of executive bishi, and Japan Aviation Electronics Indus- aircraft is concentrated in the Gulf area. try, Ltd., is developing a laser-gyro inertial reference system for use in the Kawasaki XT-4 The use of private aircraft is limited by local trainer. It is generally assumed that the Jap- problems. Many airports have a limited capac- anese will soon take significant steps into ity for dealing with private aircraft, which will avionics, particularly digital systems. be expanded as airports are improved. In ad- dition, because of security considerations, Avionics will become dominated by digital some governments have restricted registration systems (as opposed to analog) in the next few of civil aircraft and individual aircraft move- years, much as turbine engines largely re- 115 ments. placed piston engines in large commercial transports. Digital systems are more expen- Among the smaller aircraft used by corpora- sive but more reliable (two to three times the tions, the Gulfstrearn, British Aerospace, Can- mean time between failures) than analog sys- adair, Falcon, and Lear models dominate the tems. However, when they do malfunction, Middle Eastern market. highly trained personnel with sophisticated Helicopters are used to service oil derricks equipment are needed to service them. Man- in the Gulf, worksites for fire control and first power requirements will thus shift even fur- aid, such as at pilgrimage sites. Helicopters ther to highly skilled technicians. At present, have been used to offload cement and steel digital equipment manufacturers often give 3- pipe at Saudi ports and to lay pipe in the in- year warranties which cover microprocessors terior. Major suppliers in Saudi Arabia in- and software modification. After that period, clude: Agusta (Italy) primarily for military investing in spare parts for the equipment use, Bell Helicopter (U.S.), and Kawasaki may be less expensive than developing digital (Japan). maintenance expertise. Helicopter sales to the Middle East fell in Aircraft simulators can cost up to $7 mil- 1982, although the downturn in world sales lion each, $400 per hour to operate, and require 116 was sharper. Nevertheless, the demand for highly trained personnel. However, when com- helicopters in the Middle East has been fairly pared to the cost of actually flying a plane, the bouyant. It is estimated that 95 percent of the lifecycle cost savings are significant. Presently helicopters sold in the Middle East are for mil- simulators are available for 13 commercial itary uses. The largest helicopter sales at pres- transport types and an equal number of small- ent in the Middle East are in Iraq (primarily er regional/corporate aircraft. Helicopter sim- due to the Iran-Iraq War) and Saudi Arabia. ulators are also available, although they are not as numerous. Major manufacturers of civil aircraft simulators include CAE Electronics, Ltd., of Canada, Conduction (U.S.), Curtiss- Wright (U.S.), Thomson-CSF (France), Red- ————— .— 115 ifon (U.K.), and Singer-Link (U.S.). Demand for This assessment is found in “The New World of the Exec- utive Jet, Middle East Magazine—Aviation Survey, August simulators will grow as simulator “fidelity” 1983. (likeness to real-life) continues to improve.’” ‘i’’ ’Market Survey, Saudi Arabia” U.S. I)epartment of Com- —-———— merce, ITA, May 1981; “Building Up the Helicopter Fleets, ” 114 See ICAO Bulletin Special Issue: ATC and Flight Simula- Middle h’ast Magazine–Aviation Sur\wy, August 1983; “Sau- tors, vol. 37, No. 5, May 1982, for six articles on aircraft simu- dis Expand Kawasaki KV-107 Helicopter Fleet, ” ,4\riation M’ed lators. and Space TechnoloM’, May 21, 1984, pp. 150-151. Ch 7—Technology Transfers in Commercial Aircraft Support Systems s 289 ——— ——. —.

U.S. Export Controls our own sales performance so dismal as in the Middle East last year. Jet aircraft sales in the At the end of 1981, sale of Airbuses to Libya region climbed to $1,977 million, of which U.S. was restricted by U.S. foreign policy con- suppliers won only $259 million, or 13 percent, trols.’” The sale of ten aircraft were blocked as compared with U.S. sales of over $1.5 bil- because they were to have General Electric en- lion the year before. Airbus, in contrast, sell- gines, Six of the aircraft were not built. Four ing $1.7 billion, captured 87 percent of the completed Airbuses destined for Libya report- Middle Eastern market. . . . [Our] regional civ- edly remain at the Airbus production head- il air attache in notes that the enormous quarters in Toulouse, France. decline in U.S. fortunes was not likely due to technical considerations, a lack of effort on the Table 65 shows the fleets of Middle East- part of our manufacturers, not even to the ern airlines, including aircraft on order. While quality of the airbus (sic). Rather, pivotal fac- there is a preponderance of Boeing and Lock- tors most mentioned by his contacts were: fi- heed aircraft, reflecting the historical U.S. nancing, political considerations, including dominance in commercial aircraft, most air- foreign policy controls; high-level political sup- craft on order are Airbuses. Indeed, Boeing port for Airbus; and the U.S. Foreign Corrupt Practices Act. has sold only three of its new generation air- craft (757 and 767). Airbus has made almost New orders for large U.S.-origin transport all sales of twin-engine, wide-bodied aircraft aircraft destined for the Middle East dropped sales in the Middle East. from a peak of $1.1 billion in 1979 to $186 mill- ion in 1980,$380 million in 1981, and $89 mil- Opponents of foreign policy controls believe lion in 1982 (through September). On the other that these controls have strongly contributed hand, Airbus orders for the same countries to U.S. market losses in commercial aircraft were $289 million in 1979, $1.2 billion in 1980, sales in the Middle East. Potential buyers in- $484 million in 1981, and $661 million in 1982 clude countries designated as supporters of (through September). Airbus orders for the terrorism—currently Libya, Syria, and the Middle East totaled $2.3 billion during the People’s Democratic Republic of Yemen—as 1980-82 period, compared with $655 million for well as other countries in the region that may U.S. aircraft. turn to non-U. S. suppliers out of resentment of controls used for political purposes. Kuwait, Undoubtedly, various factors explain this for example, has urged other Gulf States to shift in market sham, including differing avail- seek alternative suppliers of aircraft, in direct abilities of export finance as well as a desire response to U.S. antiterrorism controls. The in the Middle East to diversify sources of sup- U.S. Department of Commerce cites such reac- ply for civilian aircraft. Because U.S. export tions as a partial basis for the reduction in controls in this area were uniquely restrictive, sales of U.S. aircraft and avionic equipment they contributed to the decline in the position in one of the largest and fastest growing mar- of U.S. firms. The U.S. embargo of spare parts kets in the world. sales to Libya, especially, further added to the reputation of the United States as an unrelia- In testimony before the House Foreign Af- ble supplier. For Middle Eastern countries fairs Subcommittee on International Econom- whose positions differ with the United States ic Policy and Trade on March 19, 1981, Mr. on issues such as the Palestinian problem, Harry Kopp, Deputy Assistant Secretary for such controls present a real potential risk that Economic and Business Affairs in the Depart- they may be denied access to U.S.-produced ment of State, stated that: aircraft.1‘g The recent modification of controls —— — — -.—— In no other area of the world were the suc- 118 A Saudi manager recently said: “Another element [for Air- cesses of the competition so spectacular and bus selling so well in the Middle East Persian Gulf area] is the political climate thew days. !vlany Middle East countries want 117 David Marsh. ‘‘A irt)us (’omponent + I)lans Face I)rotf’sts to reduce their reliance on the LJ. S, This should not be P’t-om ( ‘,S., ” J’inancia] ‘1’ime.~, Nlar. 21, 19H4, p. 1. underestimated in e~aluating Air buses sales success in the re- 290 . Technology Transfer to the Middle East .— by U.S. officials to permit sales to scheduled a problem, in most cases airlines assemble airlines represented an effort to mitigate the mixed feets. adverse impacts of these controls. In airport systems development a multitude of equipment manufacturers provide the va- Summary of Supplier Perspectives rious system components, often coordinated Sales of large commercial aircraft are impor- by construction management firms. For exam- tant both for the large dollar volume of aircraft ple, Bechtel has the construction management sales and for the sales of auxiliary equipment, contract for the new Riyadh airport, but the which includes testing and maintenance equip- equipment installation and construction is be- ment, avionics packages, and spare parts. ing handled under a number of separate con- Planning, building, or operating airports, air tracts. traffic control, and navigation systems in the Supplier firms such as Thompson-CSF of Middle East normally entail consulting or France have special strength in supplying management contracts, a major area of ATC and navigation systems. The United strength for U.S. firms. Kingdom is active in the Middle East commer- U.S. firms have led in commercial aircraft, cial aircraft systems market, particularly in avionics, and airport management. However, Saudi Arabia. West Germany’s major pres- the stiff competition afforded by West Euro- ence has been in Iraq. The United States is pri- pean firms in each of these subsectors in- marily involved in Saudi Arabia. dicates that U.S. firms cannot count on con- Official diplomatic support (involving the tinued technical superiority as the key to ef- use of official negotiating leverage to influence fective sales. Other factors such as low-cost contract awards) is a factor in commercial air- bids, on-site support, and reputation for long- craft support systems. However, relations term supplier reliability may be critical in con- among airlines such as the 30-year TWA-Sau- tract awards. dia relationship, or the previous -Iran The main competition for aircraft sales in technical assistance agreements, may carry the Middle East presently is between the Air- more weight. The importance of government bus 310 and the Boeing 767. Industry experts support has some relevance in airport systems note that neither one has a clear technical ad- contracts, but strong links are often estab- vantage over the other. While Airbus Indus- lished through technical assistance provided trie claims an edge in its avionics (aviation by civil aviation authorities. electronics), Boeing claims superior fuel effi- Technological differentiation is limited ciency. Both planes compete in the medium- among firms supplying equipment and serv- range market, covering flights of 1½ to 5½ ices for commercial aircraft support systems. hours, which account for about 37 percent of The technologies and equipment are fairly departures worldwide. In the Arab world, this standard; many firms from several countries sector is expected to be worth $20 billion over can provide adequate support. The basic tech- the life of this generation of aircraft.119 nologies (although constantly improved) are Commonality of aircraft and engine type relatively mature and well dispersed among within an airline fleet is an important but not the major industrial countries and even some overriding consideration. If the price and fi- newly industrializing countries such as Hong nancing terms offered by suppliers are simi- Kong (aircraft overhaul) and South Korea (air- lar, and future availability of spare parts is not port construction). Indeed, India and have been involved in airport construction in the Middle East (see tables in app. 7A). The gion, ” quoted in “Middle, Near East Airlines Increase A300/ standing and experience of the supplier firm A310 Use, ” Aviation Week and Space Technology, May 14, is sometimes important, although aircraft 1984, pp. 47-49. ‘ “’”NO Holds Barred in the Airbus–Boeing Battle, ” Aliddle operation and maintenance relationships are East Magazine-Aviation Survey, August 1983. based more on initial provision of aircraft. Ch 7— Technology Transfers in Commercial Aircraft Support Systems ● 291

The use of local agents is an important, guishes the policies of supplier governments sometimes required, means of winning aircraft is the absence of export controls in Western support contracts throughout the Middle Europe, and their greater use of high-level eco- East. This has been especially the case in Sau- nomic diplomacy. di Arabia and Kuwait. While in the past, local agents have been used solely to garner politi- cal influence in bidding contracts, their role FUTURE PROSPECTS has generally expanded to involvement in as- suring contract performance and maintaining In the short-term, the recipient nations will continuing client relationships. Hiring well continue to carry out their commercial aircraft placed agents has been an important means plans incorporated in their 5-year plans. For of penetrating new markets for firms with lit- Iran this may be difficult; for Iraq, almost im- tle prior experience in a country. possible. Saudi Arabia has the most ambitious plans and can be expected to complete its pres- Price is important in aircraft operation and ent airport infrastructure goals without major maintenance, because of the routine nature of problems. Algeria has a fairly well-developed these services and the fact that the-y are cur- airport system, and its needs are more in the rent, not capital expenditures. Price and fi- area of modernization and expansion than nancing are becoming more important in the building new airports. Kuwait, with one ma- traditional oil-surplus countries, as the exten- jor airport, will continue to consider a second sive development plans conceived in the 1970’s airport. Egypt, despite major financing diffi- progress into implementation while surpluses culties, will attempt to improve its existing from oil revenues have diminished. Pricing and airports and ATC systems. particularly financing arrangements have been important in commercial aircraft sales. Stiff In the long-term the world airline industry competition for aircraft sales in the Middle is expected again to prosper, and increased air- East and the large future stakes believed to line traffic worldwide in general and in the be involved have led suppliers to use, along Middle East in particular, will provide a cli- with attractive financing, purchase incentives. mate conducive to improved profitability. These include buy-back of competitors’ planes, Freight transport in particular is expected to package agreements for spare parts, training, increase dramatical. All of this will place in- or engine maintenance centers, or promises of creased demands on Middle East air traffic assistance to the buyer’s aircraft or even non- control, airport management needs, and air- aircraft industries. These purchase incentives craft service. The Middle East countries will seem likely to continue in aircraft sales in the build on their positive experiences with tech- Middle East. nology transfer in this sector, and will even- tually fully staff their commercial aircraft sup- The expansion of foreign policy controls on port systems with indigenous workers. U.S. exports of aircraft along with other types of export controls and regulations on U.S. U.S. firms can be expected to maintain their business, have affected U.S. exports negative- leadership in the civil aviation sector in cer- ly. West European governments have subsi- tain countries in the Middle East for the near dized the Airbus consortium; at the same time, term—however, U.S. firms can no longer rely the U.S. Export-Import Bank has supported on technological superiority. Aviation technol- sales of U.S. aircraft with loans. What distin- ogy. is becoming increasingly international. 292 ● Technology Transfer to the Middle East —. —. — —

IMPLICATIONS FOR U.S. POLICY The importance of supplier reliability is es- Europeans in the form of trade missions by pecially evident in commercial aircraft support high-ranking government officials in order to systems due to spare parts compatibility and promote sales, a route the United States does training needs. The United States has gained not often pursue. the reputation of being an unreliable supplier, Boeing and Airbus are engaged in intense in large part because of U.S. export controls. competition, as illustrated by the Thai case U.S. export controls govern sales of commer- mentioned earlier. In the Middle East, where cial aircraft, in that sales can be restricted if many major purchasers of aircraft are less con- countries are seen as supporting terrorist ac- strained by financial considerations than most tivities. These controls are used to impose developing countries, political factors have sanctions on countries supporting terrorist been particularly important in influencing acts. The military applicability of civilian tech- sales. While it is often difficult, if not impos- nologies is, however, limited. sible, to identify the precise effects of politics Equipment that can be used directly for mil- on a particular sale, it is clear that the Euro- itary purposes includes radar capability, troop peans have in some instances benefited from transport airplanes (e.g., C-130 S), dual-use run- their political support for Arab States. In con- ways, and fuel storage and maintenance facil- trast, strong U.S. support for and the ities. Concerns have been raised regarding ap- use of foreign policy export controls has un- plicability of commercial aircraft maintenance doubtedly served as an irritant to potential to military aircraft maintenance. However, buyers in the Middle East. As a result, com- maintenance, diagnostic tools, and training are petitors are able to argue that the United vastly different for military aircraft that are States maximizes politics above trade, and re- not derivatives of commercial aircraft. While cipient governments can point to purchases it provides a general base of knowledge in of comparable aircraft from non-U. S. firms as maintenance and repair, commercial aircraft evidence of support for Arab positions. training is not directly applicable to nonderiv- The Airbus Industrie consortium, in its ative military aircraft such as the General short 14 years of existence, has become a sig- Dynamics F-16 air combat fighter or the nificant supplier. Although the consortium Northrop F-5G. Military equipment, as com- wants its aircraft to be profitable, motivations pared to civilian, is built to different standards other than profits (employment, diversifica- and requires different spare parts, and differ- tion of supply, technology development, pres- ent maintenance training. Civilian helicopters tige) are important, thus ensuring their con- are not easily used as military equipment, ex- tinued support even if investors do not realize cept for simple surveillance and transport. a favorable rate of return. U.S. policymakers Thus, technically, there is little overlap be- must recognize that competition between Air- tween civil and military technologies and bus and U.S. aircraft manufacturers, when car- equipment. Some aircraft, however, do have ried out on fair terms, can be a good thing (for both civilian and military uses, such as the the companies and consumers alike). En- U.S. C-130, or can be modified for military use. hancing, or even maintaining, U.S. market Subsidies for manufacturers of commercial presence in commercial aircraft and aircraft aircraft exist for both the United States and support in the Middle East will be increasingly European rivals, either in the form of support dependent on cost, financing arrangements, for aircraft development, or subsidized loans. diplomatic support, and especially, consistent Diplomatic channels are often pursued by the policies regarding export controls. Ch. 7—Technology Transfers in Commercial Aircraft Support Systems . 293 ——.— — —

SUMMARY AND CONCLUSIONS

Each of the countries under study has a civ- tious. Most major new airport construction is il passenger airline (Kuwait Airways Corp., complete or near completion. Future plans em- Saudi Arabian Airlines Corp., EgyptAir, Air phasize upgrading existing airports rather Algérie, Iraqi Airways, and Iran Air) with the than initiating new, expensive projects. Up- longest route miles being covered by Saudia grading of a regional airport to handle inter- and the shortest by Kuwait Airways. Operat- national (wide-body jet) flights is planned for ing statistics of these airlines (e. g., revenue Saudi Arabia, Algeria, and Iraq. Upgrading passenger kilometers flown, revenue passen- of air traffic control is also planned for all but ger loads, and average daily aircraft utiliza- the newest airports. Major airport design- tion) are comparable, in most cases, to those ers/prime contractors are all from the West of other national flag carriers operating inter- and include Bechtel, Aeroport de Paris, and nationally. Hochtief. Actual construction work is, how- ever, increasingly done by Korean firms. The airlines of the Middle East have a pre- Future work will emphasize improvements in ponderance of Boeing aircraft (707, 727, 737, freight handling, airport access, runway ex- and 747 in several variations), a smaller num- pansion and strengthening, and construction ber of Lockheed L-1011s, and an increasing of maintenance facilities. number of Airbus A300s and A310s. The air- lines also have smaller planes such as the Fok- Commercial aircraft support thus involves ker F-27, De Havilland DHC-5, and Hawker fairly well-defined, well-established technol- Siddeley 748. The average age for Middle ogies and technological processes which can, Eastern jet aircraft is much lower than the and have been, increasingly performed by in- world average for nonjet planes. All air car- digenous personnel in the Middle East. The riers can perform routine maintenance and fact that the process of training indigenous checks at their own facilities. Saudia, which personnel takes so long demonstrates that, had a comprehensive maintenance facility even for moderately complex systems, tech- completed in 1979, can perform major over- nology absorption can be difficult and requires hauls as well. Aircraft engines for large com- considerable efforts on the part of both recip- mercial aircraft are manufactured by Pratt ients and suppliers. Despite the moves and Whitney, General Electric, Rolls-Royce, towards self-sufficiency in this sector in the and CFM International. Middle East, in some countries all aircraft op- erations may never become fully staffed by na- All of the airlines rely on expatriate labor tionals. This is, however, not due to lack of ca- to some extent, with Kuwait and Saudi Arabia pability on the part of local workers, but to being the most dependent and Egypt and Iran a shortage of indigenous manpower willing to being the least. The airlines are making efforts perform certain tasks, such as engine mainte- to reduce expatriate labor (e.g., Saudia has nance in Saudi Arabia or Kuwait. These two been successful in making one-half of its pilots countries should be able to complete the ex- Saudi nationals) but in the near term complete pansion of their commercial aircraft support self-sufficiency will be difficult if not impos- systems but will have to continue to use for- sible to achieve-particularly among mainte- eign workers at some levels. For Algeria, nance and overhaul personnel needed for Saudi Egypt, Iraq, and Iran, the local labor force Arabia’s and Kuwait’s airlines. Thus, Middle could support an expansion of commercial air- Eastern airlines will continue to need techni- craft systems. Attention will have to be paid cal support in aircraft maintenance and oper- to the training of aircraft mechanics, in par- ation from foreign sources. ticular. Civil air traffic expansion is unlikely The six countries under study have carried in Iraq or Iran while their war continues. Tech- out significant airport development, with the nology absorption in the commercial aircraft efforts of Saudi Arabia being the most ambi- support systems sector can be expecte to be- 294 ● Technology Transfer to the Middle East —. —. come more extensive in the years ahead, due firms have been active. Indigenous personnel to expanded facilities and training programs are being trained and will increasingly take currently underway. over these operations. The fuller absorption of commercial aircraft The United States is generally acknowl- support systems technology by the recipient edged as a leader in avionics and aircraft en- Middle Eastern countries compared to other gines. Increasingly, however, adequate substi- technologies in this study stems mainly from tutes are available for U.S. technology. The three factors: 1) a commitment on the part of United States has recently been perceived as the recipient governments to develop this an unreliable supplier in the Middle East due technology for transportation infrastructure to U.S. export controls, and more Middle East- needs and for prestige; 2) the fact that train- ern countries are attempting to diversify sup- ing and performance in this sector are well de- pliers. The Airbus, for example, uses U.S. en- fined by international standards; and 3) the rel- gines and hence deliveries to Libyan Arab atively long experience with these technologies Airlines have been delayed due to U.S. foreign which are in some respects not as demanding policy controls on exports to Libya. The Air- as nuclear power or certain types of telecom- bus consortium was considering recertifying munications systems. the Airbus with Rolls-Royce engines (despite Commercial aircraft support worldwide is the considerable cost) in order to avoid such becoming increasingly sophisticated and will delays. That the new Airbus A320 will contain require more highly trained personnel in the less U. S.- manufactured equipment appears future. The heavy responsibility which comes certain, partly in response to concerns about with commercial airline support services with U.S. export controls. regard to human lives, invested capital, and A major concern for U.S. aircraft manufac- reputation is a continued impetus to maintain turers is the inroads the Airbus 300 (and po- high standards. The increased complexity of tential inroads of the Airbus 310 after 1984) avionics systems, simulators, and air traffic have made in the Middle Eastern market. The control will ensure expansion of training new fuel-efficient Boeing 757 and 767 have not throughout the world, not just in the Middle been purchased extensively by buyers in the East. Middle East. Some say this is not because of Airline operations in the Middle East are the technical superiority or better after-sale generally on a par with internationally ac- service of the Airbus, but because the United cepted standards except for air traffic control. States does not support aircraft sales finan- Egypt is considered to have one of the least cially or politically in the manner that the effective ground ATC systems in the world al- French sell the Airbus consortium. Through though it is now being improved. The ATC U.S. Government support for aerospace R&D system of Iraq is also poor. Increased passen- in the form of export credits, however, the U.S. ger and freight traffic will require modernized aircraft industry has been promoted. systems to maintain and improve airline effi- U.S. export controls are also often cited as ciency in the Middle East. a reason for lack of new U.S. sales of aircraft Airport planning and construction has been in the Middle East region. Future sales of U.S. performed primarily by expatriates, both civil aircraft, and perhaps of aircraft engines working for private firms and international in the growing Middle Eastern market are hin- organizations such as ICAO and IATA, Con- dered by these controls, despite the aggressive struction has been managed by Westerners, sales techniques of U.S. manufacturers and with construction crews often from the Far the high quality of their products. Sales of ex- East. Airport management in the Middle East port aircraft, plus their long-term attendant has often been performed by nonnationals, support services and spare parts, are a signif- particularly in the Gulf States where U.S. icant factor in the U.S. balance of trade and Ch. 7— Technology Transfers in Commercial Aircraft Support Systems ● 295 . — —- — in U.S. employment. Other large markets account the commercial costs and the evidence which may eventually develop in Latin Amer- that foreign policy controls do not appear to ica and Africa could also be affected by the have by themselves resulted in change in the fear of potential purchasers that they might policies of foreign governments. Modification be subjected to future controls. While support- of present U.S. foreign policy control policies ers of export controls see them as a means to concerning commercial aircraft sold to foreign exert pressure on countries supporting terror- commercial airlines deserves serious consid- ist activities, policy makers must also take into eration. 296 ● Technology Transfer to the Middle East

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.-: .-—.. Table 7A-2.—Major Projects and Sources of Investment, 1971-81: Commercial Aircraft Support in Egypt . Foreign nations Year Level Source of funds Project Involved Contractors Produce started expenditures Comments — Cairo airport expansion – $150 million Not a U S company World Bank Luxor airport — — Study — — . — Imbaba airport (Cairo) United States Upgrade to USAID feasibility international study requested capabiIity — EgyptAir engine shop United States General Electric Overhaul aircraft $14 million Turnkey project engines French government 8-9°0, Commercial aircraft France Thomson-CSF Radar control 1981 Expected to be 10-year term radar system system signed soon U.S. foreign military sales credits Benha Factory (No. 144) United States Westinghouse TPS-63 military radar — — Licensed production under discussion

SOURCE Off Ice of Technology assessment

Table 7A-3.—Major Projects: Civil Aviation in Algeria, 1979-82 . . Description of projects Clients Contractor Location Value of contract Year 1. Design of pilot training centers Ste. Metal-urgique Tractional Thenia Not stated 1981 Rias-Bajas (Belgium) 2. supply of Boeing 737s and 727s Air Algérie Boeing Co. — $35 million 1981 with Pratt and Whitney engines (United States) 3. supply of six C-130 Transport Air Algérie Lockheed — $100 million 1981 aircraft (United States) 4. Design of airport with 3,000 meter Air Algérie Uvaterv Tiaret Not stated 1981 runway (Hungary) 5. supply of three Hercules L100-300 Air Algérie Lockheed — $30 million 1981 aircraft (United States) 6. Turnkey contract to design and Air Algérie International Setif and Batna $100 million 1982 build airports Airport Authority —— . (India) SOURCE Off Ice of Technology Assessment 298 ● Technology Transfer to the Middle East — ——.— — -- —. —

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