AgustaWestland to expand Brazilian subsidiary to meet local demand
is preparing to go it alone in a bid to break into the lucrative Brazilian oil and gas market.
The Anglo-Italian helicopter manufacturer has long held ambitions to secure increased market share in Brazil and Latin America. Earlier this year, in a bid to capture some of it, the company signed a memorandum of understanding (MOU) with Brazilian aerospace and defense giantto explore the potential of producing AgustaWestland helicopters in-country to meet Brazil's increasing needs for rotorcraft to serve its burgeoning energy and security sectors.
“Before you go into a market, you start with two business plans, one with a partner and one without,” said Roberto Garavaglia, vice president of marketing at AgustaWestland at the time the MOU was signed.
Now it seems AgustaWestland will resort to that Plan B.
In April when the negotiations between the two parties broke down, AgustaWestland was still in the midst of the turmoil caused by the allegations of corruption over a VIP helicopter deal in India. The company then decided to enlarge its facility in Sao Paulo.
Announcing the plans at the recent Latin American Business Aviation Conference and Exhibition, also in Sao Paulo, CEO Daniele Romiti, said subsidiary AgustaWestland Do Brasil would undergo a major expansion to include a warehouse, workshops, training facilities and new hangars with space that could “accommodate a helicopter final assembly line.”
A greater presence in Brazil would represent the final piece in the company's plan to enhance its presence in the the world's four major emerging economies: Brazil, Russia, India and China. While Brazil's civil rotorcraft market is actually easily accessible, and indeed AgustaWestland already has a fair share of the private and general aviation market with its range of light twin and single-engine helicopters, the company wants to secure orders from the military and security agencies as well as the state-run oil company Petrobras. They present steeper barriers to entry.
Assembly in Brazil is a requirement if AgustaWestland wants to succeed in those markets. Brazilian law requires that any defense procurement worth more than $5 million have domestic content of around 50%. At the same time, Petrobras looks more favorably at contractors who use Brazilian-sourced products.
A larger Brazilian facility also is expected to help ease access to the rest of Latin America, a market which, according to market surveys, is competing with Asia with the highest fleet replacement and expansion expectations. In Brazil alone, helicopter demand has been growing by 20% annually.
The company has identified the AW139 medium twin and the AW189 super-medium twin as ideal candidates for the oil and gas support market.
Expansion of the Sao Paulo facility is scheduled to be completed by the end of 2014.