TEL AVIV (MarketWatch) – Flying under the radar is helping to put Israel’s defense firms very clearly on the map.Stealth technology, including unmanned aerial vehicles, is a specialty for Israeli military technologists, who will be displaying these intelligence-gathering devices, along with other wares, at the Paris Air Show starting Monday.”For the past 60 years, Israel has been a combat laboratory,” said Yossi Ben Hanan, a retired major general and head of Sibat, an Israeli agency that coordinates defense-related exports and cooperation for the government.Yechiel Assia, director-general of the Israel Export & International Cooperation Institute in Tel Aviv, says innovation has been born out of the country’s conflicts.”Since its establishment in 1948, Israel has faced both traditional military threats and cross-border terror,” Assia told MarketWatch in e-mailed comments.”As a small country with a very limited budget, Israel’s defense industries have had to develop innovative, creative and cost-effective solutions to deal with a situation where most of its defense systems are unfortunately and often tested in battle.”Israel is the world’s fourth-largest exporter of aerospace, defense and security technology, behind the U.S., Russia and France, estimates the institute, which is a trade group representing the country’s exporters.Who’s showing whatAt a recent news conference, David Arzi, chairman of the institute, said the 11 Israeli companies exhibiting at the Paris Air Show could sign as much as $800 million in new contracts there.The companies are Aeronautics Defense Systems, Bental, Elbit Systems and its Tadiran Communications subsidiary, Israel Aerospace Industries, Orbit Technology, Plasan Sasa, Rada, Rafael, SGD Engineering, and Star Defense Systems.Ben Hanan valued Israel’s total delivered defense exports in 2006 at $3.4 billion, compared with about $2.9 billion in 2005. Israeli companies in 2006 signed about $4.88 billion in new contracts to deliver defense technology versus $3.5 billion a year earlier, he estimated.In the past 25 years, Ben Hanan said, Israel has swung from procuring 80% of its military output internally and exporting 20% to just about the reverse of those percentages. By comparison, he said, press reports indicate that France exports 30% and the U.S. just 14% of their output.Politics has also changed Israel’s customer base dramatically over time, with focus countries and areas now including Latin America, India and the U.S. “All of you remember that in the 1970s, one of our biggest customers was Iran,” Ben Hanan said at the news conference.Among new products and technologies to be displayed in Paris, Elbit Systems is highlighting two advanced payloads for UAVs, the DCompass and MicroCompass. Payload systems carry the high-resolution cameras and other equipment that enable UAVs to gather images and intelligence, jam signals, send flares, and more.Elbit will also display a modified version of its Hermes 450 UAV. The model has been configured to the requirements of the Watchkeeper intelligence-gathering program in the U.K., which is Europe’s largest UAV program. Elbit is a subcontractor to Thales of France on Watchkeeper.Elbit also recently said that its joint venture with Thales, UAV Tactical Systems Ltd., received a $110 million contract to supply Hermes 450 systems, training, maintenance and support to the U.K. military.A newcomer to the Paris Air Show is Bental Industries, based at Kibbutz Merom Golan in northern Israel. It makes motion technologies for UAVs and other military and industrial applications.Michael Armon, vice president of marketing and sales, said the company’s new hybrid UAV propulsion system combines a quiet electric motor and an internal-combustion engine. They work together to minimize the amount of heat and noise generated during a mission, and thus to minimize the chances that the UAV will be spotted.With the goal of reducing UAV size, Bental will be displaying what it says is the industry’s smallest payload, the MicroBat 275, measuring just 2.75 inches (7 centimeters) in diameter.How small do UAVs get?Israel Aerospace Industries says on its Web site that its Mosquito UAV, originally introduced early in 2004, is 0.3 meter – about a foot – long and its takeoff weight is half a kilo, 10% more than a U.S. pound. Bental’s propulsion system for micro UAVs like the Mosquito weighs 56 grams, or two ounces.IAI won’t talk about new projects until the air show gets under way, says Joe Weisman, marketing manager. But IAI has “identified [UAVs] as a national and international growth area,” he says.At the air show, a spokesman for IAI said, the company’s displays will focus on airborne intelligence systems, radars and satellites.IAI has turned around its operations. It reported 2006 profit of $130 million from 2005’s $2 million as sales rose 20% to $2.8 billion from $2.34 billion. First-quarter 2007 profit more than doubled to $60 million from $24 million as sales rose 37% to $828 million.And earlier this month IAI closed its first public offering of securities, a $250 million bond issue on the Tel Aviv Stock Exchange.Beyond the watchtowerLooking at equipment outside UAVs, Orbit Technology of Netanya is introducing an audio-management system for small and medium-size boats.Orbit, which is traded on the Tel Aviv Stock Exchange, is also introducing a voice-over-Internet interface for its current air- and ship-communications systems. Orbit’s director of sales and marketing for avionics, Prince Dallal, says the interface would enable a pilot or ship’s captain using, say, TDM mobile technology, to communicate with someone on land using an Internet phone or personal digital assistant.In a recent deal, Orbit contracted to supply Canada’s Western Avionics, based in Calgary, Alberta, with an audio-management system for a special-mission Bombardier aircraft.Another first-time presenter at Paris will be SDS, chaired by retired Major-General Giora Eiland.The company consists of Radom, which provides system-integration, upgrade and design services for aircraft; NewNoga Light, which produces optical equipment including night-vision and day-night video systems; and Magam, which produces safety and survivability gear, inflatable rafts and decoy targets, and self-sealing liquid-storage tanks.Also at the show, Tel Aviv Stock Exchange-traded SDS, in partnership with the government defense contractor Rafael, will be presenting a new electronic system to help planes in flight avoid attacks.Nasdaq-traded Rada focuses on avionics systems – including video and data recorders and navigation equipment – as well as ground data-management systems and test equipment.The Netanya-based company is displaying a miniature inertial navigation system in Paris. Marketing Manager Gili Galili says such systems measure a plane’s location by calculating acceleration and other maneuvers. What distinguishes Rada’s system, he says, is that software performs a number of functions that hardware otherwise would do, reducing weight, physical space, power consumption and cost.The company recently received a third order from NFF Avionics Services of Alquippa, Pa., for its CATS test equipment. NFF uses the system to test and repair Boeing 777 avionics, Rada said.Israel’s wars have provided “lessons and conclusions” about military situations, says Sibat’s Ben Hanan. And its military technologists have had to continually stay a step ahead.In Israel, Ben Hanan says, “homeland security is a real daily issue.”Robert Daniel is MarketWatch’s Middle East bureau chief, based in Tel Aviv.
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