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Elbit Systems, headquartered in Israel, has been experiencing steady growth amid a tense geopolitical environment in the Middle East, Europe and the Indo-Pacific. In 2023, Elbit Systems’ revenue increased 8% to $6 billion, driven by strong demand for its defense technologies. On the sidelines of the recent Wharton Aerospace conference in Philadelphia, Luke Savoie, president and CEO of the company’s U.S. subsidiary, Elbit Systems of America, spoke with Aviation Week’s Matt Fulco about Elbit America’s evolving business strategy.
There has been a lot of concern in Washington about security in the Indo-Pacific region in the past few years, but conflict has not broken out there. Instead, Russia invaded Ukraine, and Hamas attacked Israel. What are your thoughts on this turn of events? There are some aspects of geography that disincentivize certain types of behavior. The Indo-Pacific is a neighborhood dominated by state actors that are peer competitors, while in the Middle East and North Africa there are many nonstate actors involved. From the standpoint of a decision calculus, there is less at risk economically in the Middle East. It’s primarily one commodity, oil, which has not been significantly affected post-Oct. 7 [the day in 2023 on which the conflict between Israel and Hamas began]. In the Indo-Pacific, there are a lot of important microelectronics and finished goods that would be at risk.
The U.S. defense market is not growing as fast as some others. How does that affect Elbit America’s business strategy here? Post-COVID-19, the U.S. market has been growing for us at a consistent and absorbable rate. From a market perspective, the U.S. remains important for several reasons. Usually, the U.S. is an early adopter, so they not only purchase [defense systems], they also set the example for allies to adopt similar capabilities. The U.S. pays its bills on time, so it’s very easy to work with U.S. government counterparts. It’s predictable in terms of how contracts are abided by, arbitrated and executed. So while things are complex in the U.S. and we have a lot of rules, the goalposts don’t change. That helps to provide a level of stability which allows us to be agile in some of our markets that may have a bit more volatility on the international front.
Do you see any especially promising opportunities in the U.S. market? In the U.S., we’ve seen a return to the production of things. We went through a phase in the mid-2010s when there was a lot of sustainment and not a lot of new weapons system procurement. With what has happened in Ukraine, there is delivery to Ukraine. But there is also replenishment, which has led back to production, especially in the U.S. Army on the ground vehicle side and on the soldier side. The Army for us has been a very important customer because of soldier-borne night-vision devices. The Marine Corps is one of our biggest customers in that regard as well. Our relationships with the platform OEMs has also been very strong. They have seen growth, and we have made sure to keep up our capacity to follow suit.
For which of Elbit America’s products have you seen the highest demand in the U.S.? Laser-guided seekers on air-dropped weapons have seen very high demand, weapons kits that you put on general-purpose bombs, night-vision devices and sonobuoys. The demand for sonobuoys is incredibly high, as you can imagine with the situation in the Indo-Pacific. Underwater situational awareness is a key aspect.
Mergers and acquisitions (M&A) activity in aerospace and defense is expected to pick up as interest rates moderate. How does Elbit America view M&A opportunities, and are you eyeing any acquisition targets? We’ve done inorganic growth. We bought the night vision business from Harris when they merged with L3. From private equity, we bought our Sparton sonar buoy business. Last year, we did a small acquisition, Pacific Electronics. We continue to do small and large evaluations. While the M&A environment is complex because of interest rates, we are out there in the game.
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