Strata takes on the world
Al ain may seem like one of the sleepier corners of the UAE, but in the desert just outside the ‘garden city’ a revolution is taking place. International consensus on the Gulf’s most famous exports tends to centre, rightly, on the black stuff that is located underneath the region’s shores, but there has now been evidence for some time that local countries are using their hydrocarbon wealth to position themselves as world leaders in some of the most complicated manufacturing sectors on the planet.
One of those industries is undoubtedly aerospace, which has long been associated with older, more traditional economies in the West. But Abu Dhabi’s Mubadala sees the sector as a vital route to diversifying the UAE’s economy, and is spending considerable sums to build a network of companies that it hopes will outmatch ageing international competition. A key facet of Mubadala’s aerospace programme is Strata, a company that builds aerostructures — that’s aircraft parts to you and me — from its new plant in Al Ain.
As airlines the world over opt for newer and newer jets, which are more economically viable, the chances are that in just a couple of years time, the aircraft in which you take your next business trip will have a vital part that has been built in the UAE. “Our strategy is to become the global leader in wings and empennage [the tail section],” says Ross Bradley, CEO of Strata. “All the work packages that we have contracted for and are currently negotiating complement that strategy. They start off with relatively simple products building up to fairly complex products.”
Bradley sounds bullish, but is his confidence justified? The figures alone seem to tell a promising tale. Despite the fact that the 21,600 square metre plant only swung into full operation last year, the firm already has well over a billion dollars of business lined up. Its first product, flap track fairings (streamlined pods that protect flap-operating mechanisms on the underside of commercial jet wings) for Airbus aircraft, began to be shipped out of the Al Ain facility in the last quarter of 2010.
But that package is just the start. Strata will also build ailerons (hinged control surfaces on the wings that allow an aircraft to turn) for Airbus A330 and A340 aircraft. In addition, the firm will also build flap track fairings for Airbus’s A380 ‘superjumbo’ aircraft, as well as constructing the entire empennage for Italian outfit Alenia Aeronautica’s fleet of ATR short-haul airliners.
“Over the course of the next twelve months, we will bring in twelve work packages from different partners — mainly from Europe and the US — and those packages will basically fill our plant,” adds Bradley. “We will then be discharging around a million man hours from our quite large workforce.”
Given Strata’s youth, the size of the contracts it has already won — not to mention the reputation of the clients with which it is doing business — is pretty impressive. By focusing entirely on composite aerostructures, the company is bidding to capitalise on a key trend that is already taking hold in the aviation sector. Composite parts weigh less than conventional metal parts, as well as having a longer lifespan, all of which winds up in huge savings for an industry where margins have faced a tight squeeze in recent years.
That trend has been crystallised by Boeing’s lengthy and delayed production of the 787 ‘Dreamliner’, the first commercial aircraft to use composite materials for most of its construction. Media headlines may have focused on the Dreamliner’s slow progress to market, but there’s no doubt that airlines are itching to see what sort of benefits such a modern aircraft can bring. Strata hasn’t yet confirmed a deal with Boeing, but negotiations are ongoing.
The US manufacturer’s close relations with Mubadala Aerospace also seem to indicate that a final contract is more a question of when rather than if, and Bradley has specifically earmarked the 787 as a project on which Strata can offer its services. “Of course we are very motivated to looking at how we can satisfy Boeing and other big companies of our capability, so that we can participate in the new generation of aircraft,” he says. “We do not want to be an organisation that is working on legacy aircraft. We want to be working on the 787, we want to be working on the A380s, A350s and the next generation that replaces single-aisle aircraft.”
A billion dollars worth of business for Strata means a billion dollars taken away from the firm’s rivals. Even taking into account the focus on composites, the deep pockets of parent firm Mubadala and the brand new facility, it’s still hard to work out exactly how Strata has managed to win so much work so quickly.
Aerospace is considered a mature industry, with correspondingly mature players, and thus a tough one to break into. When questioned on this, Bradley — perhaps unsurprisingly — is quick to praise the team that he has built up around him. As he points out, anyone with money can buy a plant, but Strata’s ambitious business plan and opportunity for innovation has already managed to attract 22 nationalities to the UAE.
“It’s highly unusual for a company like Strata in a country like the UAE to enter this market, but it’s also a strength, because — in my parlance — we don’t bring baggage,” he points out. “We bring the best of what’s available today, in one organisation. There are challenges, but you tell me anyone else in the world — certainly in aerospace industry — that in the period of time that we’ve had, has procured a significant and very envious orderbook, a very clear strategy, that has recruited a world-class workforce and that has built a world-class facility. I can’t think of anybody and I’ve been in this industry all my life.”
In fact, Bradley says, the age of the company is a specific advantage, especially in terms of recruitment. Although the aerospace industry is thought of as one that is at the forefront of innovation, in reality, it can still be quite conservative due to the high standard of the products being built. That results in some personnel finding it tricky to implement new ideas, which the Strata executive says is welcome at his company.
That quest for innovation is likely to come in handy in the near future. At the moment, Strata is producing what is known in the industry as ‘made to print’ technology, which means items that have been designed elsewhere, and which the firm will copy using an existing manufacturing process. Further on down the line, Bradley hopes to improve on that technology, developing research and development (R&D) skills in the process.
“Within Mubadala, there is an intention already in the aerospace group to establish an R&D and design capability — that is already well underway, and we’re looking at potential partners and how that’s acquired, and how we can link to universities in the UAE and abroad,” the CEO says. “What I would like to do with Strata is to complement that by having part of our plant looking at what are the technologies that we need to develop. As an example, how can we produce products in a quarter of the time? How can we do things faster, cheaper and better?”
What is likely to help Strata in that field is the fact that competitor facilities tend to be labour-intensive, with local workforces depending on local plants for much-needed jobs. That prohibits a streamlining of processes. “One of our advantages is that there isn’t a big population here — a lot of labour is brought in from overseas,” Bradley says.
“So there’s a real drive there to look at how we can take technology and levels of automation, and see how they can be adapted to aerostructures. We don’t see that in any of our competitors — we certainly see improvements, but we’re talking about going a step beyond that. We’re also talking about looking at how that technology can be financially economical in the aerospace industry, which is a cyclical industry, with peaks and troughs.”
That drive towards more automation is likely to place during what Bradley calls ‘phase two’. The first phase involved the completion of the Al Ain plant, together with all the equipment the firm needs to build the business packages that Strata has picked up in recent months.
Capital investment on that first phase tails off into next year, and the company is already in negotiations with original equipment manufacturers for a second tranche of work. But Bradley is keen to dispel notions that the Abu Dhabi authorities have handed him a blank cheque.
“There’s no subsidies here, absolutely none,” he says, rapping his hands on the table. “The commercial conditions we operate in are just the same in Europe or the US. We take a loan out, we repay that loan with interest and based on performance, and generating revenues so we can grow into that next phase.”
Looking forward, the range of applications for Strata’s ware seems to be endless. The technical know-how needed to develop composite parts of military aircraft is exactly the same as it is for civil aircraft. Bradley, who has spent much of his career with British aerospace giant BAE Systems, says that if defence aerospace provided a business opportunity that made sense, Strata would not differentiate.
The company’s growth also blends in with Mubadala’s stated ambition to build a home-grown aircraft from scratch within the next decade or so. As yet, the jury is still out on what that type of aircraft will be. Conventional wisdom would state that it would be safest to start with an executive-jet-type, rather than an intercontinental airliner, but whatever the product, Strata will have a close hand in its manufacture. For now, however, the focus is on winning packages, and becoming what the CEO refers to as “the supplier of choice” to the major aircraft makers.
Alongside Boeing and Airbus, there are also significant opportunities in Europe, Brazil, Canada and the Far East. If Strata can corner the market in what is likely to be the material of choice for aircraft manufacturing in the next 50 years or so, then the sums invested by Mubadala could soon start to pay a considerable dividend. “We’re talking to everybody where there’s an opportunity for growth,” Bradley says. “This industry is a long-term business. So you’ve got to be looking 25 years out — and that’s the horizon we’re looking at. Anybody around the world where we see a business opportunity that we can work with — we want to talk with them and, thankfully, they want to talk to us.”