Leonardo aims in the next two months to reveal much more about two significant pending partnerships.
At the Paris air show in June, the company expects to disclose details about a pending joint venture with Turkish unmanned air vehicle manufacturer Baykar Technologies.
Then in July, Leonardo hopes to announce more about an in-the-works aerospace-focused tie-up with a still-unconfirmed partner.
“The joint venture will very likely [be] presented at the international show in Paris, in Le Bourget,” Leonardo chief executive Roberto Cingolani says of the pending deal with Baykar. “Speed is as important as money… We have to be extremely fast. This is a growing market. Europe is rather behind.”
Speaking during Leonardo’s first-quarter earnings call on 8 May, Cingolani also said his firm and Baykar will likely “present some prototypes” at the Paris show, which runs from 16-22 June.
Leonardo and Baykar in March revealed plans to form a joint venture that would see them integrate Leonardo’s defence electronics into Baykar’s UAVs.
Then on 29 April, the companies moved the project forward by signing a “head of terms” sheet – a type of agreement that lays out broad terms but tends not to be binding.
Three teams are now working on the venture, including a technical team tasked with ‘integrating…payloads and flying technologies”, an industrial group focused on “optimisation of the production lines”, and a marketing and sales group, Cingolani says.
Leonardo has also “identified” three production sites in Italy where it will perform integration work. It aims to have drones produced under the programme certified by EASA, which would open the aircraft to European sales, Cingolani notes.
“The technology is absolutely complimentary. There is a fantastic chemistry with the partners,” he says.
Leonardo is also seeking to strengthen its loss-making aerostructures business through a tie-up with a still unnamed partner – while at the same time progressing with an internal overhaul of its aerostructures work. That work includes producing Boeing 787 composite fuselage sections and horizontal stablilisers in Grottaglie in southern Italy.
“We expect the… partnership agreement to be defined and finalised by before the summer – by July,” says Cingolani, adding that he expects the partners will sign their final agreement before year-end. “We plan to give you the master plan by July.”
Leonardo has not named the partner, but Bloomberg reported that the entity is Saudi Arabia’s sovereign wealth fund, saying the fund has been contemplating investing in the Italian firm.
Cingolani declines to confirm that report but gives clues.
“We are dealing with partners that own important airlines,” he says. “They are massive customers of aircraft… They represent big customers.”
Saudi Arabia’s wealth fund owns start-up Riyadh Air and holds interest in aircraft lessor AviLease, according to the wealth fund’s website.
Leonardo and the unnamed partner are working with an “international advisor” to complete a due-diligence review. Three days ago, a “team of experts” from that prospective partner visited Leonardo’s four primary aerostructures facilities to evaluate the company’s production capabilities, Cingolani says.
“We are now entering the real analyses of the industrial capability,” he says. “Preliminary results [are] very encouraging.”
Cingolani insists Leonardo’s search for a partner has not distracted it from an internal project to right its listing aerostructures division.
“There is no change of strategy whatsoever for the loss-making aerostructure division,” he says. “We are working very seriously. We are very committed in fixing this problem.”
Toward that end, Leonardo is reorganising its facilities to improve efficiency, and “restructuring” its supply chain, including by “identifying” new suppliers in countries with lower-cost labour. Leonardo is also seeking to boost “digitisation and optimisation” of its production plants.
Leonardo reports a €70 million ($78.6 million) first-quarter adjusted loss for its aerostructures business, which generated €150 million in revenue during the period, down 14% year on year.
The company says revenue dipped because it slowed 787 component production for the purpose of ridding itself of undelivered finished components.
“We plan to produce fewer fuselages than the number of the fuselages that Boeing will pick up for us, so that the inventory will go down,” says Leonardo chief financial officer Alessandra Genco.
Leonardo plans to boost 787 component production in the second half of this year, aligning with a plan by Boeing to hike its 787 output from five to seven jets before year-end.
