Three unfamiliar tubes poked out from the tip of an Eitan unmanned air vehicle’s (UAV’s) distinctive tail booms, inviting closer inspection.
This Eitan happened to be a desktop-sized scale model placed conspicuously down the hall from the office of the chief executive of Israel Aerospace Industries (IAI).
The mysterious piping — two extending from the left-hand boom, one from the right-hand boom – were canted downward by a 15° angle and much too long for pitot tubes. There was only one logical explanation: they were not harmless tubes at all but rifle barrels.
In a country with no official acknowledgement of an armed UAV programme, the discovery on a mid-December visit by this journalist to IAI headquarters near Ben Gurion airport in Tel Aviv offers a tantalising clue. As much as is publicly known about Israel’s extensive UAV operations and export dealings, so much more may lie beneath the surface.
The significance of Israel’s UAV sector to the country’s aerospace sector is no mystery to anyone.
If Israel did not precisely invent the concept of the UAV – a distinction that more accurately belongs to the Americans – then it was certainly the first country to realise and embrace the potential of this technology to change modern warfare and perhaps eventually the commercial aviation market.
Israel’s conquering of the unmanned market began in the early 1970s with the Tadiran Mastiff and the IAI Scout, which were merged into a single production stream within IAI’s Malat division in the following decade. In the 1990s, Elbit Systems entered the market with the Hermes family, becoming the most successful of a host of UAV start-ups still operating in Israel. Meanwhile, IAI has fielded the Heron, the Eitan and a diverse mix of smaller UAVs over the past decade.
As a result, Israel is now the world’s largest UAV exporter, amassing $4.62 billion in deals between 2005 and 2012, according to a 2013 study by Frost & Sullivan. Exports generally represent 80% of Israel’s aerospace industry revenues, which implies another roughly $920 million in domestic UAV sales over the same period.
Unlike many sectors in the defence market, UAVs are still a thriving growth industry. The US-based Teal Consultancy concluded in a 2013 study that worldwide annual expenditures on UAVs will more than double over the next decade to $11.6 billion.
The key for Israeli companies to maintain or even grow their market share over the next decade is the export market. Israel’s military contributes a fraction of the country’s aerospace revenues. The US defence market, meanwhile, has several established competitors. Instead, the key will be sticking to Israel’s ongoing strategy to diversify its defence revenues across many markets, particularly in Asia, Eastern Europe and Latin America.
“We're not going to be an AeroVironment and we're not going to be a General Atomics providing hundreds if not thousands of systems for one specific customer,” says Nir Salomon, manager of business development for IAI’s Malat division.
A diverse clientele breeds a rich and almost eclectic portfolio of UAV capabilities. IAI and Elbit offer a multitude of UAVs spanning nearly all classes of technology, including several different mechanisms for launch and recovery.
“We try to make our systems fit the main purpose, which is to carry out the mission,” says Danny Israeli, vice-president of business development for Elbit’s UAS division.
Elbit’s Hermes 90 is a small tactical UAS (STUAS), for example, but provides 15h of endurance.
“The main purpose of the UAV system is to provide good, real-time intelligence to the commanders in the field to make decisions and find targets, know what’s happening and obtain situational awareness,” he says.
Such capabilities and a proven track record have made Israeli UAVs increasingly popular on the export, especially as the US government has tightened export controls and restrictions on autonomous technology. Israeli UAVs have proliferated over the world, in climates and operating environments ranging from India to Brazil.
“We are going to sell less systems to many more customers, so we have to be adaptive,” Salomon says. “We have to be innovative. We have to change. And it probably costs a little bit more because we're not just taking something off the shelf.”
It’s a business model that also relies on forming deep partnerships with local industry. In the 1980s, IAI partnered with AAI Corp to export the Scout and Pioneer UAV to the US defence market. In the last decade, IAI established a standalone subsidiary in the US called Stark Aerospace, with the task of selling the Heron and Heron TP – also known the Eitan – to US government and military customers.
Elbit has made similar moves in other countries. The Harpia joint venture with Embraer and Avibras in Brazil shows how far Elbit will go to compete in high-growth markets.
Embraer and Elbit established Harpia in September 2011 as a 50-50 joint venture to market the Hermes 450 and other UAVs in the Brazilian market. Two years later, Brazil adopted a new law offering special tax breaks to defence companies with at least 60% local ownership. So Elbit agreed to sell a 10% share of the joint venture to Avibras, which is developing the Falcao UAV as a local competitor to the Hermes 450.
“Avibras is part of Harpia now,” Israeli says. “They bring their Falcao into the equation. Our job now is – beyond selling the systems – to develop the variants for the Brazilian market and we can use either Hermes 450 or Falcao for this. It’s a merging of the technology and experience that we bring and let’s say the beginning of development of the Falcao.”
The Brazil market offers a special test case for another growth opportunity in the next decade. As host of the World Cup this year and the Olympics in 2016, Brazil will deploy dozens, if not, hundreds of Israeli UAVs in civil surveillance roles. Many of them will come from Israeli suppliers. Besides the Harpia conduit, IAI has also supplied Heron 1 UAVs to the Federal Police in Brazil.
Tapping the wider commercial UAV market as it evolves may interest some in the Israeli start-up community, but not the large contractors such as IAI.
To make his point, IAI chief executive Joseph Weiss cited a recently publicised concept by Amazon.com to use quadcopter UAVs to make package deliveries.
“That’s not what we call a UAV,” Weiss says. “It’s a toy. It’s a nice toy. Somebody will make money from it. IAI is focused on top and cutting-edge military technology.”
Maintaining Israel’s perch atop the global UAV market over the next decade will also require an influx of new products and capabilities.
Over the past decade, IAI has introduced the 4,500kg (9,900lb)-class Eitan and Elbit has fielded the 1,180kg-class Hermes 900. While both companies have fielded a range of much smaller UAVs, neither has announced a project in development on the scale of either the Eitan or the Hermes 900.
There has been a detectable trend by Israeli UAV makers in the rotorcraft market. Although Israel has no heritage of manned helicopter manufacturing, the UAV market has opened up new opportunities.
Aeronautics attempted to convert the Belgian Dynali H2S kit helicopter into an unmanned system, but abandoned the project. More successful, so far, has been Steadicopter, a UAV start-up that has flown a 35kg-class helicopter called the Black Eagle. IAI, meanwhile, has fielded the tandem rotor Ghost micro-UAV. Now, Elbit’s Israeli confirms that his company is also considering an unmanned helicopter.
Israel’s UAV industry is full of mysteries – like the possibly armed Eitan desk model inside IAI’s headquarters. One of the biggest omission in the Israeli UAV portfolio is the lack of a stealth UAV in service or even on paper. Each of the world’s existing or even aspiring UAV producers have such an aircraft, ranging from the Lockheed Martin RQ-170 to the Mikoyan-Gurevich Skat.
But Israel’s government prefers to keep that part of their UAV industry a mystery for now.
“I can tell you, as a UAV leader we have interest in every area you can think of,” Salomon says. “We know everything that is going on around the world and we are trying to be as involved as we can. But in the stealthy area we have nothing to talk about.”