Aeronautics Ltd., the company under investigation by Israeli police, is the country’s fifth largest defense firm and one of its leading drone makers in an industry in which Israel is the undisputed world leader. Since 1985, the country has sold over 60 percent of drones purchased worldwide.
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Aeronautics, established in 1997 and based in Yavne, is a veteran player in this field, with 70 clients in 52 countries. Its biggest client — accounting for some 20 percent of company revenues last year — is thought to be Azerbaijan, which since 2011 has had local production lines manufacturing various Aeronautics drones.
In August it was reported that the company had attempted to bomb the Armenian military on behalf of Azerbaijan while demonstrating one of its suicide drones. According to Armenian military officials, two soldiers were lightly wounded as a result of the live-fire test in the disputed Nagorno-Karabakh region on July 7. Following the claims — denied by Aeronautics — Israel’s Defense Ministry suspended the company’s license, banning it from exporting the Orbiter 1K model – a suicide drone - to “a significant customer,” widely understood to be Azerbaijan.
Until then, Aeronautics had been on a hot streak, culminating in June in a large initial public offering on the Tel Aviv Stock Exchange, which raised 460 million shekels ($130 million). It marked the country’s largest IPO since 2011 and reflected a company value of over 1 billion shekels.
But two months later, after the company’s export license was suspended over the Armenian allegations, its shares tumbled 17 percent.
On its website, Aeronautics notes that its systems “are operational in conflict zones in Africa, Iraq, Afghanistan, Chad and more, ” adding that its leading system, the Aerostar Tactical UAS, is a “combat-proven system” characterized by a large payload bay. It is used by 15 customers on four continents.
Aeronautics reports show that 35 percent of its revenue in 2016 came from Europe, 30 percent from Asia, 18 percent from Israel, 10 percent from the United Sates, and 7 percent from Africa. Of its 70 customers, Azerbaijan is considered its main one. A second major client reportedly accounts for another 13 percent of the company’s revenues.
In September, the Mexican government began using the company’s Aerostar unmanned aerial system, in an estimated $15 million deal.
Eitan Ben Eliyahu, a former commander of the Israeli Air Force serves as chairman of the board of the company, which has 660 employees. Its CEO is Amos Mathan, who previously served as the CEO of Soltam Systems.
In 2004, the Israel Police investigated Aeronautics on suspicion of violating Defense Ministry export regulations and transfering classified know-how and technology to a Russian company, but no charges were ever filed.
Aeronautics was founded by Zvika Nave, Moshe Caspi and Avi Leumi in 1997 as a start-up called NETS Integrated Avionics Systems. Its focus has been on developing low cost, miniature unmanned aerial systems. Even in Israel’s crowded drone market – which includes some 40 startups – it has stood out. In 2000, the company introduced the world’s smallest avionics system, which eventually evolved into the Orbiter 1 kg UAV, the drone at the heart of the Armenian affair.
In January 2017, as part of a deal with Aeronautics, Azerbaijan’s Azad Systems began manufacturing the Orbiter 1K suicide drone under licence as the locally named “Zarba,” according to Flightglobal.com.
The drone can fly for two to three hours carrying its warhead and an electro-optical/infrared sensor before engaging a target.The company claims that its very low acoustic signature means the Orbiter 1K is not detectable until two seconds before starting its attack dive. However, if the target has moved or cannot be attacked, an operator can bring the aircraft back to make a safe landing.
Aeronautics is one of a number of Israeli companies with close ties to Azerbaijan. The country has purchased nearly $5 billion-worth of defense equipment from Israel, Azeri President Ilham Aliyev said in December, 2016.
“So far the contracts between Azerbaijani and Israeli companies with respect to purchasing defense equipment have been close to $5 billion,” Aliyev said. According to foreign reports, Israel sells Azerbaijan radar systems and drones, and handles the collection of intelligence against Iran from the Asian nation.
In September, Aeronautics signed a $6 million agreement to acquire the California-based Chassis Plans, a private company that develops, manufactures and integrates operating stations for unmanned systems. Most of the company's operations are focused on the U.S. military market and its customers include several defense giants such as Boeing, Lockheed Martin and General Dynamics. In 2016.