June 19, 2012 / 7:40 PM / in 5 years

Iridium, Nav Canada JV to track planes by satellite

(Reuters) - Satellite communications company Iridium Communications Inc (IRDM.O) and air navigation service provider Nav Canada plan to offer air traffic authorities the ability to track aircraft around the globe in real time, potentially saving billions in airline costs.

The joint venture, to be named Aireon LLC, will enable airplanes to fly longer in better weather, saving airlines $6 billion to $8 billion in the North Atlantic and the North and Central Pacific alone, Russell Chew, former chief operating officer of the U.S. Federal Aviation Agency, said at its launch.

Currently, air traffic authorities need to keep aircraft widely-spaced due to the lack of radar visibility over oceanic airspace and mountainous terrain. This leads to longer flights, higher fuel costs and larger carbon emissions.

“(The new service) isn’t to replace ground-based surveillance systems. This is to augment them,” said Chew, a managing partner at Nexa Capital Partners LLC and a consultant to Iridium.

“Ground-based systems can do things in congested areas that space-based systems can‘t.”

Privately held Nav Canada, which manages air traffic over Canada, will be Aireon’s first customer, Iridium Chief Executive Matt Desch said.

“I hope the FAA is our second customer,” Desch told Reuters.

The FAA is already looking to implement a satellite navigation system to allow planes to fly shorter, more precise routes that will help decongest the airspace around airports.

Reuters reported earlier this month that Iridium was in talks with aviation authorities such as the FAA to offer them such services on its new satellite system.

Aireon’s service will use receivers built into 66 satellites in Iridium’s second-generation constellation, due to be launched from 2015.

Aireon will pay Iridium about $200 million by 2015 to get hosted payloads, which allow customers to have their own dedicated space on a satellite, into space.

Melbourne, Florida-based Harris Corp (HRS.N) will build the payloads for Iridium, CEO Desch said.

He declined to say how much Aireon will add to Iridium’s revenue after 2015, but said the amount “will not be insignificant.”

The joint venture is expected to generate about $200 million in one-time hosting fees for the integration and launch of the payloads between 2014 and 2017.

Desch said he expects to draw in other investors for Aireon over the next two to three years, with Iridium retaining a 40 percent to 50 percent stake in the joint venture by 2015.

Aireon will be headed by Iridium’s Executive Vice President Donald Thoma, Desch said.

Shares of Iridium, which has a market value of about $650 million, were trading marginally down at $8.91, after rising as much as 2 percent earlier on the Nasdaq.

Reporting by Sagarika Jaisinghani in Bangalore; Editing by Roshni Menon, Anthony Kurian

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