CHAPTER 7 Technology Transfers in Commercial Aircraft Support Systems Contents Page INTRODUCTION . 247 COMMERCIAL AIRCRAFT SUPPORT SYSTEMS IN THE MIDDLE EAST. 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 Airlines for 1982 . 253 63. Employee Totals for Representative Airlines, 1982 . 253 64. Airport Traffic Statistics for Representative Airports . 254 65. Commercial Airline 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 Jet Aircraft Authorizations for Loans and Guarantees . 283 7A-1. Selected Recent Commercial Aircraft Support Systems Contracts in Saudi Arabia . 296 7A-2. Major Projects and Sources of Investment, 1971-81: Commercial Aircraft Support in Egypt. 297 7A-3. Major Projects: Civil Aviation in Algeria, 1979-82 . 297 7A-4. Selected Recent Commercial Aircraft Support Systems Contracts in Iraq . 298 7A-5. Selected Commercial Aircraft Support Systems Contracts in Iran ....,... 299 Figure Figure No. Page 14. Aerospace Industry Funds for Research and Development . 281 Map Map No. Page 5. Airports in the Middle East and North Africa . 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, construction, 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 (airframe and powerplant) overhaul; the world average.1 The number of passengers 5) passenger reservation and cargo routing carried by Saudia 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, Kuwait 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. Military aircraft 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 Airbus 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, Gulf Air, 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 France (37.9 percent ownership), trols in affecting competition among suppliers. Deutsche Airbus of Germany (37.9 percent), British Aerospace (20 percent), and Construcciones Aeronautics of Spain (CASA) (4.2 percent). ‘The Gulf Air crash of a Boeing 737 near Abu Dhabi on Sept. ‘Bahrain, Qatar, Oman, 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.