Israel, Italy Exchange Multi-Billion Dollar Defense Contracts

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Israel will receive 30 Italian Alenia Aermacchi M346 as part of a US$1 billion arms pact signed with Italy yesterday. Photo: Alenia Aermacchi
The agreement was signed by the Italian Secretary General of Defence / DNA, Gen. S. A. Claudio Debertolis and the Director General of the Ministry of Defense of Israel, Gen. D. (Ret) Udi Shani.

The Italian defense group Finmeccanica announced yesterday it has signed contracts worth approximately $850 million under a collaboration agreement between the Italian government and the Israeli governmentAmong the Group’s beneficiaries are Alenia Aermacchi, Selex and Elsag Telespazio. The main element in the contract is the supply of 30 M-346 advanced jet trainer aircraft by Alenia Aermacchi. The aircraft will be delivered starting 2014, over a period of two years. This agreement has a total value of about one million US$, including aircraft, engines, maintenance, logistics, and training simulators. Approximately $600 million are attributable directly to Alenia Aermacchi. The agreement was signed by the Italian Secretary General of Defence / DNA, Gen. S. A. Claudio Debertolis and the Director General of the Ministry of Defense of Israel, Gen. D. (Ret) Udi Shani.

The Israel Air Force will receive 30 Italian M346 jet trainers beginning 2014, under a $1 billion defense pact signed yesterday in Italy. Photo: Alenia Aermacchi

Elsag Telespazio was selected to act as prime contractor for the Italian Ministry of Defense, supplying a military satellite system for the Italian Government. The OPTSAT-3000 high-resolution optical Earth observation, is worth more than $200 million. Telespazio will be responsible for supplying the entire system including the satellite, payload and ground segment, launch services and launch into orbit, the preparation and execution of operations and logistics. The company will also support the mission with in-orbit testing and commissioning. The satellite will be delivered in 2015, by the company Israel Aerospace Industries / MBT Space Division acting as subcontractor. Telespazio has awarded IAI a contract worth $182 million for the development and production of the satellite. IAI has been developing the OPSAT-3000 platform for several years for the Israeli Ofek 10 satellite. This program is likely to expedite now with the Italian contract in place setting a firm goal for the program.

Israel Aerospace Industries MBT Space will build the OPSAT-3000 reconaissance satellite under subcontract by Elsag Telespazio, the prime contractor for the Italian MOD satellite programs. Photo: IAI

Another Finmeccanica group company to benefit from the Israeli-Italian pact is SELEX Elsag, which supplies identification systems, communications and computers for the 30 trainers and delivery, and standard NATO communication link and identification systems for the two Conformal Airborne Early Warning (CAEW) aircraft IAI ELta will deliver to the Italian Air Force under the $750 million contract signed yesterday. The worth of new business for SELEX Elsag are approximately $41 million from the two programs.

“This agreement represents an important statement not only of the operating companies Finmeccanica and Alenia Aermacchi, Telespazio and Elsag SELEX, but entire national economy,” said Giuseppe Orsi, President and Chief Executive Officer of Finmeccanica. “The agreement by which Finmeccanica expresses special thanks to Ministry of Defence, is the result of a fruitful collaboration between the Italian government, the Israeli government, the corporate world and various other institutions. It testifies to the high competitiveness of made in Italy technology worldwide, of which Finmeccanica is important garrison, and demonstrates that investments in technology are, for the Group and the Italian industrial system, the best way to ensure sustainable development that further increases in industrial capacity, making them more competitive on a global scale.”

Two US companies will also benefit directly from the Israeli-Italian package. Gulfstream will deliver two G550 business jets, and Honeywell, providing the engines for the M346, will deliver at least 60 F124-GA-200 engines plus spare engines, spare parts and logistics to power the Italian aircraft. The aircraft and other ground equipment and simulators will be operated and maintained in Israel by the TOR corporation, a Joint Venture company established by IAI and Elbit Systems. Earlier this week the Israeli ministry of finance approved the MOD to commit 6.35 billion Israeli Shekels (about US$1.5 billion) from future defense budget to secure the M346 procurement and support, allocating about $600 million for the outsourcing of through life support over the next 25 years. TOR may end up with more revenues, as part of the program suopprt is already included in the aircraft procurement cost.