Algeria & Leonardo will jointly manufacture helicopters

The Algerian Ministry of National Defence (MDN) recently signed a memorandum of understanding (MoU) with Leonardo Helicopters, formerly known as Finmeccanica and the owner of AgustaWestland, to locally manufacture a range of transport helicopters in Algeria’s Sétif province (IHS Jane’s).

Under the joint venture, Leonardo Helicopters will help raise a new facility in Ain Arnat, which in turn will assemble light and medium-lift helicopters (potentially the AW109, AW139 and AW101).

According to the South African defence publication Defense Web, the Government of Algeria inducted as many as 78 AgustaWestland helicopters in recent years. These include eight AW101a, which is capable ferrying of carrying 45 standing troops or over 5,000 kg of external cargo.

The Ain Arnat facility will be jointly-owned by the Algerian government (51%) and Leonardo (49%). While the Ain Arnat facility will service future Algerian helicopter purchases, Algeria’s prime minister – Abdelmalek Sellal – expressed hope that his country would also become an exporter in the global helicopter market.

Comment and Analysis

Analysts have viewed this agreement as a push on the Algerian government’s part to diversify its economy, which is highly dependent on the export of oil and gas (Aviation Weekly). This new facility will not only assemble helicopters, but it will also provide after-sales maintenance, repair, and overhaul (MRO) and training services. In the short and medium-term, the Ain Arnat facility should help Algeria accrue a degree of cost-savings as well as serve as a conduit for valuable technical employment in the country.

For the long-term, it is likely that the Algerian government is hoping that the Ain Arnat facility will secure contracts involving Leonardo’s other export customers (e.g. sales in Asia and the Middle East). Such a scenario would enable Algeria to draw positive foreign exchange flows, and in turn, enable Ain Arnat to operate without fully being dependent on the Algerian government’s purchases.

Whether Leonardo is of the same view remains to be seen, but since it did agree to co-own the facility, it is possible that it is keeping an eye on utilizing Ain Arnat as a means to reduce costs in its overall supply chain. In fact, its competitors – Airbus Helicopters and Lockheed Martin – have taken steps to essentially do the same.