RTwr: Digital Deal

Earlier this month, NATS, the UK based air traffic management company, launched a landmark partnership with Nav Canada with both parties taking an equal 50 per cent shareholding in the Canadian firm Searidge Technologies.

Searidge works with airports around the world, providing technology that helps reduce delays, increase efficiency, and overall safety. Importantly, its technology expertise includes the delivery of digital tower solutions which allow air traffic controllers to manage aircraft from remote facilities instead of in traditional airport towers.

Air Traffic Management was present at the signing of the historic deal on May 5 at Searidge’s Ottawa headquarters. In a wide-ranging CEO media briefing with Moodie Cheikh, chief executive, Searidge; Martin Rolfe, chief executive, NATS; and Neil Wilson, president and chief executive, Nav Canada – which had previously owned a 70 per cent stake in the business – the executive team explained the significance of the acquisition.

Can you tell us more about the rationale behind the 50:50 deal with Nav Canada?

Neil Wilson We saw the future of Searidge and where Moodie and Alex (Sauriol, Searidge chief technology officer) were going with their vision of the technology several years ago and we supported them at that point. We’ve seen them grow and we see that there is enormous potential for Searidge going forward in the use and development of the technology in places around the world where we are not active.

We have also had a very strong technology partnership with NATS for some 15 years whether through collaboration agreements or joint work on various systems. We see them as a tremendous strategic partner and as a strategic means to facilitate future growth in the very exciting area of ATM and tower technology.

How long did the deal take to mature?

Neil Wilson We have been talking for the better part of eight or nine months. All in all, it took around six months to complete so it was a relatively quick turnaround.

With that in mind why did NATS strike a deal with Saab at the latest World ATM Congress to install one of the Swedish supplier’s remote tower demonstrator suite in the UK?

Martin Rolfe It actually all fits together as far as we are concerned. NATS has always tried to be at the forefront of technology whether in airports, in en route airspace, oceanic and this was an opportunity.

We had been following Searidge for some time and looking at the future potential of digital towers, artificial intelligence and clearly all the things that Searidge are into absolutely fit into what we want to be able to offer our customers.

We are in the unusual positon in the UK in that we have a lot of competition so one thing we did want is to be in a position where we could offer the whole range.

There could not be two operational air navigation service providers (ANSP) that have more in common. We actually have a joint boundary at 30 degrees West so we talk to each other literally every second of every day.

In addition, we have technology partnerships across the board so this was an opportunity to increase what we can offer; it was an opportunity to take a company that has been hugely successful in a relatively short space of time and build on an area which is clearly the future of air traffic particularly the towers and beyond. This partnership with Nav Canada and Searidge allows us all to do so much more around the world.

So essentially, we are offering choice. If customers want one technology, then we are happy to offer it but we think that Searidge with the combined investment of Nav Canada and NATS can provide a fantastic offering that we have not been able to do in the past.

Will the partnership with Searidge with its capabilities form part of your standard pitch to potential remote tower customers ?

Martin Rolfe I don’t think we have a standard pitch because the customers don’t have a standard need. If you look at London Heathrow’s needs compared to Cardiff’s needs or the needs of Birmingham or the Highlands and Islands, they’re all so different.

That is part of the rationale here: to make sure we have solutions and offerings that are compelling for everyone. In some cases they have an absolute focus on what they want from the operational perspective or what they want from the technology perspective. In other cases, there are requirements in terms of financial outcomes, or there can be a whole range of other things.

Will we always be looking at when we can use Searidge technology? Absolutely but this is not about us investing to buy Searidge technology for the customer we work with but about how to help Searidge do even more across the world in term of the opportunities for digital towers.

Does NATS have a war chest to make more acquisitions?

Martin Rolfe We are an ANSP and as an ANSP I would say we are appropriately cautious about what we invest in and the fact that this is our first investment is in a core business around tower controlling, so from that perspective it has been very carefully considered.

Are we on the lookout for other acquisitions? Absolutely, it’s just that none have fitted with the specific criteria we have in place. Do we have a specific war chest? No, but if there is the right opportunity, then absolutely, but we don’t have some grand plan to go after this and this and this.

It is more about investing in companies that have a solid foundation, a solid future, ones that have profitable prospects and where we can add value – which is exactly what we saw in this investment. With the partnership with Nav Canada, the investment feels to us like much more than its parts.

How was the deal structured?

Martin Rolfe We effectively bought 50 per cent of the equity through NATS’ unregulated company NSL which now owns it. The transaction will be reflected in 2017-2018 finances that will be published in June 2018 – but we can say that in terms of value, it is some number of millions but not tens or hundreds of millions.

It reflects a good healthy vibrant business that Moodie has created and which has great potential for the future.

We are not investing in this company to take it over or to change the way Moodie and his team change the way they do business. It’s about making sure we bring the combined might of probably the two best ANSPs in the world being able to help Moodie to go out in the world and achieve more with the reach that we have, the places we are already in. This is about Searidge being Searidge and doing what they do best.

Neil Wilson The direction in which NATS wants to go with Searidge matches with us identically to where we want to go philosophically and that is why we are happy to partner with NATS. We are looking at doing things that are core, we are not interested in buying condominiums in the Caribbean. Here we are taking something that is quite strong in its field and make it even stronger.

Will Searidge be needing an injection of capital to enable to go and do new things?

Moodie Cheikh No, at this point we will continue to operate as we have been. There are certain gaps in our offering that we are going to look at. As three organisations working together, we fill many gaps nicely so we have a more cohesive offering especially in the remote tower space which we will be taking to our customers.

Will you be able to spend more of your turnover on R&D as a result of the new arrangement?

Moodie Cheikh R&D has always been important to us and over the last six years we have continued to increase our spend on R&D and that’s not something that we see changing. We are known as disruptor in the industry, something of an innovator. Nav Canada has supported us in that and I would expect NATS to continue to do that too.

You say the digital or remote tower has the potential to completely transform the industry – how do you see the market evolving? Where and what sort of services will be central to Searidge’s business going forward?

Neil Wilson We do see this as a worldwide opportunity. We don’t see remote and digital towers here in Canada perhaps in the same way as in other parts of the world. We have a lot of Searidge installations in our facilities and we do remote services in a number of different ways.

But we do realise that around the world there are far more opportunities for digital towers and that really is the reason why we are interested in partnering with someone who can bring that worldwide exposure and allow Searidge to grow into that market around the world.

Martin Rolfe I genuinely believe there is no good reason to build a physical tower anywhere around the world. Sometimes it is about putting something on an asset base – sometimes there is a lot of pride involved in having one due to the iconic nature of towers but from a practical perspective there is no valid reason to build a tower.

The technology exists to be able to do this providing there is the connectivity, security and camera technology but really this is about moving data around. It’s about the ability to do things more efficiently for the airport.

I don’t think it matters whether you are talking about low volume towers where there is an opportunity to save money through the consolidation of a number of remote towers into one facility or whether this is about providing incredibly high fidelity back-up in an emergency or whether it is used as a primary capability at a busy airport, it is about integrating this into the digital nature of aviation.

The idea of someone looking through a window with a pair of binoculars. Really? Ultimately,why wouldn’t you want to look at a screen which contains every single data point about that flight?

There is so much richer information that you can get from this mechanism. Most of the airports we work with care mostly about on-time performance – how can you extract everything from the data to deal with whatever upsets occur, a whole chain of events which is incredibly complicated.

What about cultural acceptance from your customers in a highly conservative industry?

Martin Rolfe It is a conservative business until someone does it but really, when you think about it, it’s not such a big switch. Our people in our centres are controlling 2.5 million flights a year with no binoculars. So what we are doing is simply bringing our towers up to the technology level we have in the centres. It is simply the en route philosophy – but more so – as you are integrating with the airport. It’s only difficult because it is different.

Moodie Cheikh Yes, essentially we are turning every single airport and tower into a potential customer for Searidge. We are not simply looking at remote towers but looking at all different applications that can work.

And will you be able to expand fast enough?

Moodie Cheikh We are lucky here in Ottawa that it is a hi-tech centre for Canada so we are able to attract very good talent. We have a very low turnover of staff – many of whom who joined us in 2007-2008 are still with us. That’s not common in a small technology company but something that we have been able to do.

You do seem a lot bigger than a business with only 50 people.

Moodie Cheikh Thank you. In truth, Nav Canada gave us a level of credibility. You know, back in 2006-2007, the first show I went to was ATC Global – the last time it was in Maastricht – and nobody wanted to talk to us.

We were getting laughed out of the place and the idea of using video for anything was ludicrous. The Federal Aviation Administration (FAA) had just put out a report saying video would never be a sufficient technology for the tower. There we were in 2007, Alex (Sauriol) and I, all we were thinking was that we had really screwed up in having started a company in this space.

When Nav Canada came on board, that sent a huge message to the industry that a Tier One ANSP would support us, a small technology company. Today, we are at 30 customers with many of them Tier One airports including London Heathrow, Dubai, Abu Dhabi.

Neil Wilson Needless to say, we are not only excited to be partnering with NATS but are also excited to be staying on with Searidge. Moodie and Alex run this business in a smart and very appropriate way and they deserve a lot of credit for that.

Is one way that remote towers could become mainstream through the privatisation of airports where the operator offers a service with remote towers with all the benefits of the cost efficiencies they offer?

Moodie Cheikh Certainly in the US there is a huge opportunity for sites which have nothing right now. You don’t have to go so far as constructing a tower and staffing it and if you can take a number of remote towers and provide a consolidated service you have a level of service you never had before. The US is an especially interesting market for that. Obviously, we are following what Saab is doing in Virginia and talking to the FAA on our side.

The Fort Collins-Loveland contract is about to be announced next month is it not?

Moodie Cheikh Yes, that will be very like what is happening right now in the state of Virginia [Leesburg] and we are obviously pursuing that.

How important is it that Budapest turns out well?

Moodie Cheikh It has turned out well. The reports that have come out from that have been excellent. The hours that have been spent on it by the controllers has provided some excellent feedback. We continue to make enhancements to the system purely based on controller input. There is a phase two and HungaroControl is on track in terms of getting a fully certified operation so it has been very successful.

Is that the world’s showcase for remote tower technology, would you say?

Moodie Cheikh It is right now in terms of terms of an airport with 140,000 movements. It has two runways and from the tower to the runway, you’re talking almost 4km. It is just a vast airfield with a huge number of sensors and allied to the fact that we have had to integrate with technology that is already there, it is as complex a solution as you are going to see at any airport.

Where will your focus be going forwards – the community airport or the huge complex international hub?

Moodie Cheikh Where we have focused on the large complex integrated digital solution, our competitors have focused on the low volume airfield. Going forward, I think we will focus on where our strengths have been. We will look at those low volume opportunities but in terms of what guides our strategy, we are always going to lean more to more complex projects and solutions.

Is there potential for the military to use your solutions?

Moodie Cheikh It is not something that we have pursued aggressively. In fact, I would say it has been more opportunistic. We have had interest from NATO. One of our European customers has been working closely [with NATO] so we have done several demonstrations for that customer. There has also been some work in the US with the Department of Defense.

Martin Rolfe Over the last year we have separate discussions related to that with the Royal Air Force about where remote tower technology is going and I think it’s fair to say they want to keep a very close eye on the technology. Most military operators tend to be in the second wave of adoption on these things and don’t want to be trying this out for the first time but it’s easy to see where the applications could be.

It is not currently part of Project Marshall but considering that the project will run for the next 22 years, it’s hard to imagine the conversation will not come up at some point. What Project Marshall is doing essentially is hubbing, if you like, of wide area networks, WAM and grouping clusters of airfields. It’s not a great leap to start to think about how remote technology may be applied to support that.

Where do the typical gaps exist which NATS as a new partner can help fill?

Moodie Cheikh When I think back to a couple of years ago at World ATM which was the pinnacle of interest in remote towers, everybody was talking about them at that point and any ANSP that did not have a remote tower programme had a remote tower programme the day they got back from the show.

When I think about what is involved about a remote tower programme it is very complex and it is not about buying an Advanced Surface Movement Guidance and Control System (A-SMGCS) or surveillance. It’s about building operational  concepts; looking at requirements; really looking at the ‘soft’ pieces of that sort of programme.

That is not really the area in which we have expertise and if you look at what NATS does around the world and how they are walking ANSPs through becoming more innovative in procedures development. for example, those are things that Searidge has no experience in. To extend that further and bring in some of Nav Canada’s technology, I think the offering is going to be full scale with no gaps. I think an ANSP can look to us and we can go ‘from soup to nuts’ in our ability to support the whole cycle from requirements to implementation to training to support.

Martin Rolfe You just have to look at the range of operations we manage between us. It’s oceanic, it’s low density, it’s high density. It is literally everything.

Neil Wilson It’s complex, it’s every possible mix of traffic you could have in terms of volume and complexity. Between Nav Canada and NATS, we do it all.

Photo showing Alex Sauriol, chief technology officer, Searidge; Moodie Cheikh, chief executive, Searidge; Martin Rolfe, chief executive, NATS; Neil Wilson, president and chief executive, Nav Canada

Alex Sauriol, chief technology officer, Searidge; Moodie Cheikh, chief executive, Searidge; Martin Rolfe, chief executive, NATS; Neil Wilson, president and chief executive, Nav Canada

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