Cobham Aviation

It is bringing together such disparate operations as Australia’s Coastwatch surveillance operation, interstate cargo services and passenger flights to regional centres and remote outback mines with British and NATO air warfare training and conversion of Airbus A330 aircraft to tankers for the RAF, as well as aerospace engineering and flight inspection services for civil and military airports.

Among the hopes for the combined units are a re-entry to Australian defence work, based on the British arm’s expertise, and using the Coastwatch contract – the world’s biggest maritime surveillance operation – as a springboard to win border protection business in Asia, the Middle East and Europe.

The Aviation Services division of listed British aerospace and defence group Cobham Plc increased its 2012 interim revenue from £150 million (A$230m) to £164 million (A$253m), a bright spot for the company which reported in August that its overall revenues for the six months to June 30 had slipped 5. 4 per cent to £843 (A$1. 3bn) million, largely on declining US and flat European defence spending. Profit before tax was down 9. 2 per cent to £90. 2 million (A$140m).

Directors reported “a strong contribution from surveillance and commercial aerospace businesses” and Cobham Plc’s new managing director, Bob Murphy, signalled greater emphasis on commercial aviation activities to reduce the reliance on dwindling US defence spending, where the group has a significant presence.

The company would continue to pursue its drive for greater efficiency, he said.

That drive includes the merger of its aviation services operations, a process which Cobham launched in January 2011, with Peter Nottage – then head of Cobham Aviation Services Australia – taking charge of the two units to forge a single entity.

“It’s been a challenge,” he admitted to Australian Aviation. “We’ve had huge geographical and strategic issues to overcome. ” It’s been tough going for the chief executive, who has spent markedly more time in the UK than Australia this year, with long stints away from his home base and family as he grapples with the integration issues.

But he is pleased with progress and already the work is sufficiently advanced to enable the unit to assess potential new areas of business.

He also is happy with steady growth in Australia, where the company has extended contracts with Qantas, oil and gas producer Santos and nickel miner Minara, worth a total of $568 million, and gained new work from miner Xstrata and a group of four Kambalda gold miners in the past year.

But his preoccupation has been the merging of the aviation services units.

Apart from seeking to combine two business units with different operations and cultures, Nottage was charged with developing closer co-operation within the combined businesses and finding synergies in such areas as sharing platforms, technologies and even methodologies to form an efficient, cost-effective global aviation services operation and take the company into new markets.

The combined Cobham Aviation Services has about 2,000 direct employees – about 20 per cent of the Cobham group’s total employment – with 1,150 staff in Australia, and about 70 aircraft including 48 in Australia.

In addition, it has a 50/50 FB Heliservices joint venture with Bristow Helicopters, which has a fleet of about 65 helicopters used for military training of all Royal Navy, RAF and British Army pilots in the UK, and recently gained a four-year extension of the program, together with a contract to provide helicopter training to the Albanian Ministry of Defence.

And there’s another joint venture in which Cobham holds a 45 per cent stake with a French company which is focused on European defence training and maritime surveillance.

In Australia, which accounts for almost 70 per cent of the division’s revenues, its operations include the $1 billion Coastwatch maritime surveillance contract for the Australian Customs and Quarantine Service; QantasLink regional jet services, with a fleet expanded by two to a total of 13 Boeing 717 aircraft this year; the Australian air Express overnight cargo services linking Sydney, Melbourne, Brisbane and Adelaide with BAe 146s; and a range of resources industry services, flying workers and cargo to remote sites.

The 12-year Project Sentinel contract for Customs, which runs until 2020, involves 10 Bombardier Dash 8 surveillance aircraft and two smaller Reims F406s, which have been kept busy searching for people smuggler boats this year, as well as watching for illegal fishing boats and such activities as drug smugglers and ships dumping waste at sea.

“Border protection remains a priority for the federal government and the Coastwatch operation has been highly successful.

We are finding the boats,” Nottage said.

The aircraft are clocking up about 17,000 hours a year, and Cobham has the capacity to “sweat the assets harder” if required.

In the sea search for asylum seeker and fishing boats, particularly, Cobham has been studying options which include the potential for unmanned aircraft.

The terms of the Customs contract allows for new technologies and capabilities to be employed and Cobham has been working with General Atomics to adapt a military Predator unmanned aerial vehicle (UAV ) to a civilian role, carrying similar enhanced radar and electro-optical and infrared sensors to those aboard the Dash 8s.

The US Customs and Border Protection Agency has employed seven Predators, in MQ-9 Reaper form, to patrol the 3,200km Mexican border and last year at the Paris Airshow unveiled a maritime surveillance version, Guardian, which it now uses to patrol the Caribbean, Gulf of Mexico and Pacific seaboard, and which has been cleared for export.

Cobham officials have attended US demonstrations of the civilian Predator.

Nottage says the UAV has much longer endurance than manned flights, and the US Customs version is credited with a 30-hour flight envelope. Earlier this year General Atomics announced modifications with additional fuel pods to further extend mission times.

“We have submitted concepts on how they could be applied to the Coastwatch operation,” Nottage said.

“They wouldn’t replace manned aircraft, we would still need people to eyeball targets, but they could be a potent addition to the border protection force. ” Among its UK-based operations, Cobham Aviation Services has gained an eight-year surveillance contract to detect oil pollution, and Nottage believes there are opportunities to expand this segment of the business to other parts of the world.

And there is potential to add search and rescue capabilities to the maritime role. At its own expense, Cobham has modified a Dash 8 with a larger door to facilitate search and rescue operations.

“It’s something we’ve been looking at for some time. We think it would make a tremendous platform for cost-effective S&R work in Australia and overseas. ” Meanwhile, in the past year the division has extended its arrangement with QantasLink until 2018, following the signing of a new $500 million contract last October which incorporated intrastate jet services in Queensland for the first time, and finalised a $50 million contract with Santos to continue serving the Cooper Basin oil and gas fields until 2018, bringing in a 99-seat Avro RJ100 to replace 81-seat BAe 146s. Its takes the

RJ100 fleet to five, with the other four based in Perth.

The resources industry is proving to be a fruitful sector, accounting for about a third of Australian revenues.

Nottage hopes the new ‘gravel kit’ will help to expand the business, with the special protective treatment to enable BAe 146s to operate safely from unsealed strips which are limited to 50-seat turboprop aircraft at present.

The kit, developed by BAE Systems, includes a nose wheel stone deflector, Kevlar undercarriage shields and rubberised paint to protect the underside of the fuselage from flying gravel.

“The kits could be a boon for us,” he said, with three treated 146s operating now and a potential demand for up to a dozen regional jets to service mining companies which want larger aircraft for fly-in/fly-out (FIFO) services without the cost of sealing runways.

Cobham has started services for Swiss mining giant Xstrata for its Bellevue nickel and gold mine in WA and for a consortium of four gold miners in the Kambalda area with the treated jets and is working on another two or three prospects, but Nottage will not reveal the companies involved in the talks.

The experience in supporting remote resources projects could be applied to markets beyond Australia but at present the company is concentrating on expansion prospects at home.

Among its business targets is an expansion of defence work. Apart from its A330 conversion and support role, the British unit of Cobham Aviation Services provides support for the RAF’s Sentry E-3D fleet of seven extensively modified Boeing 707s which operate as early warning aircraft with advanced, long-range sea and air surveillance equipment, as well as having command-andcontrol, weapons control and communications roles, and the division plays a significant part in electronic warfare training.

Nottage would like to see some of the UK military expertise applied to Australian Defence business, particularly in the field of warfare training – such as simulating aircraft or missile attacks on ships to enable naval crews to test defences.

Cobham’s predecessor in Australia, National Jet Systems, held a contract for such work from 1991 to 1996 and Nottage expects to bid for any new contracts.

He also harbours hopes for gaining Australian work for the maintenance and support of military aircraft, which the UK arm undertakes.

As he continues the work to bring together the Australian and British units into one integrated, global business, Nottage sees opportunities emerging to expand the existing Cobham operations and take the division into new markets.

“We are trying to grow in Australia, the UK and internationally,” he said. “Already we’re looking at new areas of business. ” According to London’s Financial Times, Cobham – which it calls “a company in transition” – has issued cautious guidance for the second half of the financial year, with uncertainty about US military spending, which accounts for 40 per cent of its revenues, expected to weigh on the business.

That’s a factor adding further importance to a successful merger and diversification of its Cobham Aviation Services division.