Paul Hickox, ARINC's senior regional director for the Middle East and Africa, tells Aviation Business about establishing the software and IT technology developer in this region.
ARINC started its operations in Europe, the Middle East and Africa in 1999. From there, we focused on growing our business in Europe, with some major airport wins in Heathrow and Manchester, as well as other large cluster business growth areas.
We had set our sights towards the Middle East in 2004, winning the Dubai International Airport (DIA) Terminal 3 (T3) project in 2005 and that was our first major project out here.
That contract win allowed us to start cementing the company's growth in this region. Having established an office here in 2004, I formally set the company up as ARINC Middle East last year and it has grown to about US$65 million-$75 million revenue.
We established operations here to serve our customers in this region. There is huge growth in the airlines and airports sector and ARINC's management wanted to be a part of that.
Emirates Group was part of that launch; we signed an airport contract with the airline to provide messaging and networks in 2004 for its check-in systems. It basically involves host-to-host communications across all Emirates' worldwide check-in systems.
ARINC is also responsible for the specialist airport systems that will be running DIA, not only T3 but the whole airport. The T3 systems will be replicated throughout the airport.
Our systems will take over the airport structure, which includes resource management, flight planning and information systems, public address technology and the entire hub network. We are also building integration systems, so the airport will be using ARINC's new resource management system.
This technology will allow the hub operator to control - through automated means - all of its staffing, resources, aircraft parking, equipment, check-in desks and baggage belts through our IT systems.
Training for these systems, which have been installed at T3, has already begun. While that's ongoing, we are also talking to the Dubai Civil Aviation Authority about working on Al Maktoum International, but nothing has been concluded.
We are always looking to win these types of contracts and feel the company is well positioned to do so.
The work we do at T3 will speak for itself. The new systems that the airport will have are next generation technology, which will add value to its operation in Dubai.
Developing airport systems is a big market in this region for us but we also produce air and ground communications. We made some pretty significant investments in 2007, with more planned this year.
ARINC is rolling out a complete infrastructure to cover the Middle East and we will have communications installed at every major airport in the region by the end of 2008. This strategy helped us win the Emirates VHF contract back in 2007, so we will be providing all the satellite and ground aircraft communications for the company.
There are other potential contracts, with one major deal expected to conclude soon. We can't announce anything at the moment, but it's with one of the three major carriers here. The airline is thinking about transferring to ARINC for certain services. Establishing a Middle East operation has allowed us to service all carriers coming out here, as well as customers that fly through the region.
For example, our major customers in this region are Emirates and Etihad Airways. For Etihad, we provided a competitive pricing structure for new messaging systems and brought the airline onto new technology platforms. It's the standard IATA messaging service for the airlines, and we are providing that for Etihad while transferring the company away from its current supplier.
It means all stations across the airline's route network will be using ARINC messaging services to communicate. It's for ground-to-ground communication, which includes departure, movement and air and ground messaging.
The deal took about three months to negotiate, which is a short period. Messaging and aviation solution contracts can be long or short but when we have an offering like that, which is different to our competitors in terms of price and technology, it's easy for the customer airlines to sign up to.
We also have other contracts with Saudi Arabian Airlines, providing the carrier with ACAS services, so we are not just focusing on airports.
Another airline we work with is Egypt Air, where we provide airport connectivity products. We are a straight company and do business in a straight manner. We deliver on our promises and generally that's how we get more business.
In terms of our global operation, ARINC's interests in the Middle East are growing every year. It was relatively small two years ago but it's now a significant percentage of the business. This is a huge growth area for us as a company and we are focusing hard on it.
We have deployed a number of people to this region to make sure the operation grows successfully in the Middle East and North Africa. It's important to do this, especially with competitors based in the region.
That said, we seem to be doing pretty well in that respect. We have secured the last three major airport contracts and signed one of the three major carriers out here. The plan is to hopefully sign the second one, so we are doing very well out here in terms of competition.
To maintain our leading market position, we are looking to invest a large amount of capital. If we focus on the airports for a moment, we injected significant amounts of cash to bring new technology to the area, such as biometric and resource management systems.
On the biometrics side, ARINC has installed security systems in Cairo.
Maybe it's something we'll do more of throughout Middle East airports in the future, but not at DIA because it already has biometrics in place.
To develop new systems, such as biometrics, we have a centralised R&D operation to provide technology globally. Our stakeholders help finance this by investing capital when we tell them what we need.
Such investment is important because demand is pushing us to invest out here. To cope with that growth and development, I've tripled the workforce here during the past 18 months and we will continue to do so. We are investing ahead of the curve and making sure we can service our customers.
If we continue to grow this way, the Middle East will become a significant part of ARINC's business. Back in 2007, we installed two major underground Middle East nodes (wide area network and cabling) that run though Russia and Egypt, which nobody else has done, to support our infrastructure.
Since then, there have been cable cuts in this region and we have been totally unaffected. Our clients at DIA and other hubs have also suffered no disruptions to their check-in desks and communications. Establishing solid foundations is one of the reasons why we won the Etihad contract.
Demand is on the rise, but we have to be careful we don't stretch too far. We want to service the customers we have while making sure we grow at the right rate to keep up with demand.
We are getting a lot of support from ARINC's headquarters in the US to continue developing and investing in the people here. And how do we gage we're growing at the right rate? Profitability is one way, with the company generating strong revenues.
Our main plans for the future are to secure more business with the airports. Abu Dhabi midfield terminal is coming up in 2009 and we will be tendering on that. We will also be closely monitoring Al Maktoum in Jebel Ali and other projects across the region in the next two to three years.
It usually takes around three years preparation before the tender comes out, so we'll have been looking at the airports' designs, as well as major players and stakeholders.
The information is relatively easy to get hold of, with the government making it available. Once the tender comes out, we're fully prepared to make a bid after years of preparation.
Apart from airport tenders, we will also roll out further air ground infrastructure at these hubs following a recent increase in demand. If you look at Emirates, Etihad and Qatar Airways, all three are doubling their fleets in the next three to five years, so we will be following those closely and making sure we provide them with support and services.
Within the next two years, we expect this region to contribute 10% to the company's overall revenue.