Indra has conspired to gain more size in the area of air traffic (ATM). The Spanish company claims to be the second player outside of more ‘closed’ markets such as Japan and the United States and seeks to take a new step in some places. To do this, it contemplates purchasing more capacities with the objective not so much of obtaining new technologies or of obtaining revenue share. These acquisitions would come after two that have had a more strategic nature: the recent one by Park Air and the one by Selex, which has made it possible to put a pike in American territory. “High double digit” growth is expected in this US territory, where they are already part of the bidding process for several significant contracts with the country’s aviation regulator, the FAA.
“When one reaches, like Indra in Air Traffic, the quota we have; organic growth is very good and it is in double digits,” the head of ATM Strategy for the Indra group, Ramón Tarrech, explains to La Información. But at that point, acquisitions are a faster route to grab more of the pie. The portfolio of technologies for air traffic management, ranging from communication with aircraft, beacons, surveillance or control centers, is relatively complete. The ‘star’ product is ManagAir, which is used to automate management and optimize routes and trajectories to reduce emissions.
Therefore, the logical thing is that those acquisitions that are studied within the semi-public company are more oriented to obtain more clients and income in geographic markets. “We sell product capabilities all over the world; it is the same product and the same technologies but in different markets and there may be different ways of doing business or specific needs,” says Tarrech, who insists that the post-pandemic air market is in some important levels of activity and you have to be prepared for certain transformations that you will experience in the coming years. The Spanish has to see the faces with old acquaintances such as Thales, BAE Systems and others in this segment.
The company’s CEO, José Vicente de los Mozos, was clear during his speech at the general meeting of shareholders: “We need to grow; Thales or Leonardo have more scale.” One of the ways to grow is through acquisitions. And in this sense, the company has a more positive financial situation, which is fertile ground to get the checkbook. The year 2022 closed with a net financial liability of practically zero, which has been reached with a strategy of “investment prudence” that would be replaced in this new phase by one with more international ambition.
Indra, to USA
An example of this inorganic growth strategy is the acquisition that took place months ago in the United States. The Spanish company pays around 50 million euros for the air traffic business of the Italian Leonardo, Selex ES. These billed about 35 million dollars. -around 10% of the turnover of this division in the 2022 financial year- It is not a giant size but it does “give a base”, as Tarrech acknowledges. It was a way to solve the ‘hole’ that the American territory implied in the Spanish map. He was not present there and this addition represented that first pike. In this country there are twenty control centers -compared to 80 in Europe- and there is only one client, the FAA -compared to 28 in the Old Continent-.
Indra paid about 50 million euros for Selex, which represents its entry into the American market and which already bills about 32 million a year
This is a large market, “with an order of magnitude much higher than the European one”, but complex, due to those entry barriers and also due to the long sales cycles. The life of the technologies usually includes between 10 and 15 years from the time there is a product renewal. And when it does occur, the headline often becomes strong, making it difficult to navigate, Tarrech notes. That is why buying a company that already has the FAA as a customer in a product segment is key. With the pike already set in the country, they are looking very closely at the effects that the infrastructure law will have, with strong airport investments “from which we want to benefit modestly.”
In the short term they already have several fronts on which they are working. They’ve made a triple-digit millionaire offer on a project to replace all FAA radios. In a year or a year and a half you will see the result. There are others that are also being worked on. But they are programs with very long previous procedures, in which there are requirements for information or dialogue with the administrations to learn about the product. “These are tenders with horizons of two or three years,” precisely Tarrech, who adds that other purchases of companies carried out in the past will allow synergies that will accelerate the plans.
With this growth in the US and with the possibility of acquisitions on the horizon, the company seeks to accelerate the ATM business, which will see an “impact in two or three years.” The global Covid pandemic was especially hard on this segment. “We held up relatively well but it was terrible,” says Tarrech. Now, the rebound “has been broader, except in China, than expected.” International airlines are achieving great results and there is a growing demand for air traffic infrastructure systems. There was latent demand. Companies and customers demand even more speed of implementation and reduction of deadlines in view of this growth in activity.
the single european sky
In this context, with this growth horizon, the backdrop of operations is the progress of the single European sky and what it can represent for the business. This is a concept that serves to describe the progressive coordination of all countries in their air traffic management. The war in Ukraine has been one of the acid tests. Thanks to the elements of collaboration between the different country systems, it has been possible to redistribute traffic to avoid the conflict zone for all types of flights. “Despite the disruptions experienced, the resilience of the global network of traffic infrastructures has been reasonable”, describes the director of ATM Strategy.
Asked about the current situation in terms of coordination between countries for that European sky, the manager assures that in the years of the great crisis of the 90s “we were at zero”. “Now we are at 50% or 60% and we lack real interoperability; the other 40%, a note. Indra has the role of coordination to reach an agreement to implement improvement projects. This will be another great challenge in a segment, the of ATM, which today represents almost 25% of the Defense and Transport area, key to the future of the semi-public company.
